A Diagnostics & Imaging Week

Royal Philips Electronics (Best, the Netherlands) reported that it would acquire Stentor (Brisbane, California), a provider of picture archiving and communication systems (PACs), for about $280 million in cash.

Philips said that with the merger it could offer its customers "a complete package of state-of-the-art medical scanners, along with Stentor's best-in-class PACS products to handle the large volumes of imaging data generated by medical scanners."

Stentor is projecting 2005 sales to grow to about $50 million and sales growth in 2006 is projected at 50%, saying the estimates are based on its "pay-per-study" model by which customers pay a fee to view, distribute and store medical images rather than purchase a PACS system.

Jouko Karvinen, president and CEO of Philips, in a statement called Stentor "an exceptional company with very talented people and unique technology that will significantly strengthen our position in healthcare IT [HIT]. The merger of the Stentor Radiology PACs ... and the Philips Cardiology PACs ... gives us exactly what we want: world-class technology already recognized and appreciated by our customers, clear and immediate synergies with our imaging business and an opportunity to leverage Philips' worldwide resources."

Oran Muduroglu, president of Stentor, said that with the acquisition by Philips, "We can now extend Stentor PACS outside of the radiology department and into other areas of the hospital where conditions like cancer and heart disease are treated."

Stentor said that its technology can transmit medical images "with full resolution, four to 16 times faster than any competitor, and with significantly less hardware costs for hospitals" and that its delivery model and customer support system "is well-aligned with Philips' overall strategy of designing the solution around the customer ..."

Stentor's shareholders have approved the transaction, with the purchase subject to regulatory approval.

Ralph Reyes, senior vice president of KLAS, an independent evaluator of HIT vendor performance, said that the Stentor PACS solution "has consistently been rated as a leading PACS solution, with No. 1 PACS positions in KLAS Top 20 end-of-year reports for 2003, global PACS category, and 2004, large acute-care PACS category. In addition, the 2005 mid-year KLAS HIT Top 20 industry report noted Stentor No. 1 with a rating of 90.55 out of a possible 100 points for the ranked PACS applications."

He said that the KLAS HIT performance data "originates from only one source: the healthcare provider executive who has been personally interviewed by KLAS."

The companies reported having "complementary geographic footprints, allowing for more rapid deployment of Stentor's products into Europe and Asia, while providing Stentor's U.S. customers with a greater choice of medical equipment."

Combined, the companies will have PACS installed at more than 1,600 healthcare institutions around the world, and will be "second largest in the global PACS market."

The companies said they share a focus on creating "a digital hospital environment with electronic health records [EHRs] that provide physicians with on-demand access to all patient data, anytime, anywhere."

According to an October 2003 report by the General Accounting Office, fewer than 10% of hospitals have replaced paper charts with EHRs, and the Center for Medicare & Medicaid Services (CMS; Baltimore) estimated that in 2004 less than 5% of U.S. healthcare spending went into HIT.

In 2003, Philips Medical Systems allied with Epic Systems (Madison, Wisconsin) to create an EHR and said that with the Stentor purchase, it will be able to equip EHRs with diagnostic-quality images that can be viewed throughout the hospital and via the Internet.

Through its iSyntax technology, Stentor has created iSite PACS for image distribution, radiology reading and online long-term storage.

In another consolidation, Tyco International (Pembroke, Bermuda) reported that Valleylab (Boulder, Colorado), a division of Tyco Healthcare (Mansfield, Massachusetts), has acquired Vivant Medical (Mountain View, California), a developer of microwave ablation technology, for about $66 million in cash, at close. Up to another $35 million in milestones may be paid in the future.

Vivant is developing what it calls "the anticipated first-to-market" microwave ablation technology, a minimally invasive procedure for treating various forms of cancer. Vivant's VivaWave Microwave Ablation System, for soft tissue treatment, was developed, it said, "to achieve more predictable procedure times, with greater accuracy and increased safety."

It said that this technology has been used successfully in clinical applications since late 2004 and that it will release the product commercially "soon."

Ed Breen, Tyco chairman and CEO, called Vivant "an excellent strategic fit with our ... focus of introducing the latest medical technologies to the market, improving patient results and healthcare efficiency" and part of the company's strategy "of purchasing proven technology where we can leverage our global distribution capability."

Scott Drake, president of Valleylab, said that the combination "offers interventional radiologists, surgeons and cancer patients the most comprehensive portfolio of technology and therapies to improve clinical outcomes."

The boards of both companies have approved the transaction.

Tyco Healthcare manufactures disposable medical supplies, monitoring equipment, wound closure products, advanced surgical devices, medical instruments and bulk analgesic pharmaceuticals, under brands such as Autosuture, Kendall, Mallinckrodt, Nellcor, Puritan Bennett, Syneture and Valleylab.

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