German manufacturing titan Siemens (Munich) has launched an aggressive push into advanced imaging technologies, with its report on Friday that it will acquire CTI Molecular Imaging (CTI; Knoxville, Tennessee) in a deal valued at about $1 billion.

The acquisition – seen as a move that will challenge both General Electric (Waukesha, Wisconsin) and Philips (Andover, Massachusetts) in the medical imaging sector – gives Siemens all the businesses of CTI, including, it said, CTI PET Systems, PETNET Solutions, CTI Mirada Solutions, CTI Molecular Technologies and CTI Concorde Microsystems.

Siemens Medical Solutions USA (Malvern, Pennsylvania) said it will launch a cash tender offer within 10 business days to acquire all of the outstanding stock of CTI for $20.50 a share. Following the completion of the tender offer, any remaining shares of CTI stock will be acquired in a merger at the same price.

LuJean Smith, a communications representative for Siemens Medical Solutions, said that the acquisition appeared to be "a natural transition" for the two companies after formation of an agreement for scanner sales under their long-term joint venture.

That agreement was made in May of last year, and the potential merger then became "more and more clear," she told Medical Device Daily.

The two companies' boards have approved the agreement, which is expected to close in the second quarter.

With this acquisition, Siemens Medical Solutions said it "continues and strengthens" its commitment to "molecular imaging development, technological innovation and the creation of dynamic new technologies that will revolutionize the diagnosis and treatment of disease."

Erich Reinhardt, PhD, president and CEO, Siemens Medical Solutions, termed the acquisition a "progression in our long-time association with CTI, and reflects Siemens' overall strategy to transform the delivery of healthcare by developing trendsetting innovations that improve patient care while reducing costs."

In an interview with Bloomberg.com, Michael Reitermann, president of Siemens Medical Solutions Nuclear Medicine Division, noted that Siemens has been working with CTI in a joint venture arrangement over the past 17 years, not too much later than the smaller imaging firm was formed. That venture, CTI PET Systems, was formed in 1987 to combine CTI's expertise in PET imaging with Siemens' global distribution network.

Established in 1983, CTI Molecular has focused on PET and molecular imaging and then extended its business into research, development and the distribution of PET tracers and probes.

In a company statement, Reitermann said: "Molecular medicine will result in more individualized and more effective diagnosis and therapy. CTI Molecular Imaging has been actively engaged in next-generation molecular diagnostics research and the development of new imaging technologies and biomarkers." He added that the acquisition of CTI "will define new standards within the industry."

Ronald Nutt, PhD, president and CEO of CTI, said, "This acquisition represents the combination of two companies that are innovation leaders. It will benefit PET imaging's continued advancement as well as enhance the future of molecular imaging."

Siemens Medical Solutions employs about 31,000 worldwide and operates in more than 120 countries. For FY04 it reported sales of EUR 7.07 billion, orders of EUR 8.12 billion and a group profit of EUR 1.05 billion.

CTI in FY04 reported sales of $402 million and income from operations of $58 million.

The acquisition is a major milestone for Klaus Kleinfield, installed as Siemens' CEO in January. Kleinfield's background with the company has been primarily with its imaging units.

And the merger clearly gives Siemens a strengthened position in medical imaging, especially in the PET sector, a category that has been fairly slow to develop against the heavily entrenched modalities of X-ray and MRI and the growing uses of computed tomography.

But the worldwide market for PET scanners has expanded rapidly since 2000, now at about $1 billion annually and likely to see double-digit expansion for the next several years, according to analysts.

Driving this growth has been a series of Medicare reimbursement expansions for PET – with several more likely in the near future – giving it considerably more market heft. These reimbursements have included, most recently, imaging for cervical cancer and selected clinical studies for new cancer drugs (MDD, Feb. 1, 2005), and before that Alzheimer's assessment (MDD, June 17, 2004), thyroid cancer and potential cardiac disease (MDD, April 18, 2003), management of breast cancer (MDD, March 1, 2002), and imaging of the heart to determine appropriateness for angioplasty or bypass surgery (MDD, Feb. 22, 2002).

Those CMS decisions, importantly, have been based on a growing range of clinical studies supporting PET's advantages.

The PET imaging sector emphasizes that this modality images the biology of diseases at the molecular level, often before anatomic changes are visible or, in some cases, before symptoms appear. Thus, these systems are able to examine the initial and ongoing biological processes of disease formation, offering possibilities for earlier intervention and ongoing modifications in therapy, if necessary.

PET's whole-body imaging capability helps physicians improve their ability to detect and determine the location, extent and stage of cancer, neurological disorders and cardiac disease. PET/CT is an imaging that combines the biological examination of patients by PET with the CT images of the body's structural detail, thus providing, according to Siemens, "precise anatomical landmarks associated with the disease condition as determined by PET.

PET has caused the treatment to be changed for 15 to 50% of patients, depending on the specific clinical question. In addition, PET and PET/CT provide both the patient and their physician with a degree of certainty that is often unavailable through other imaging methods.

Siemens' medical division, which also makes hearing aids and respiratory equipment, was the most profitable of the company's 12 divisions last year.