GE Medical Systems (GEMS; Waukesha, Wisconsin), the healthcare products unit of General Electric (GE; Fairfield, Connecticut), put a loud exclamation point to the year's dealmaking the week before Christmas in reporting its intention to acquire Instrumentarium (Helsinki, Finland) in what was far and away the largest announced consolidation in the medical technology sector for 2002. In this blockbuster deal, GE will initiate a tender offer to acquire all of the outstanding Instrumentarium shares for EUR 40 per share, payable in cash, for an estimated value of EUR 2 billion ($2.05 billion). The companies said the offer, which was approved by both boards, is expected to commence within 30 days and close sometime in 2Q03. Upon completion of the offer, GE said it will combine the operations of Instrumentarium with GEMS, and Helsinki, Finland, will become the European headquarters for the GE Medical Systems Information Technologies (GEMSIT, Milwaukee, Wisconsin) business.

Just before confirming the deal, GE had said it would raise between $5 billion and $10 billion from asset sales next year as part of a shift into higher growth technology and consumer finance businesses, and this deal, if consummated, enables achieving such a goal. Besides expanding its presence in the medical products field in Europe, it potentially could drive several competitors out of the market. Bottom line, this was probably the most significant acquisition in the med-tech sector in 2002. If consummated, it will dramatically impact the U.S. monitoring and electronics business for the coming decade.

GEMS, already one of the largest medical electronics companies, has been an avid acquirer of smaller competitors, increasing market share via acquisition rather than internal R&D. Prior to Instrumentarium, it had scooped up Danica Biomedical AS (Rodovre, Denmark), another European monitoring company; SEC (Ann Arbor, Michigan), a clinical information systems company; Critikon (Tampa, Florida), a supplier of low acuity, general ward monitors and developers of the original noninvasive blood pressure monitoring technologies; and Marquette Medical (Milwaukee, Wisconsin), to mention just the monitoring-related acquisitions.

Recently, Instrumentarium also had been a busy acquirer, grabbing Spacelabs Medical (Redmond, Washington), then the No. 3 competitor in the U.S. monitoring market. Indeed, reorganization and integration of the Spacelabs group into Instrumentarium's Datex-Ohmeda (Madison, Wisconsin) has been conceived but not yet executed. Now, with the Instrumentarium buy, GE's share will climb to close to one-third of the U.S. market. That makes it a much closer competitor to Philips (Best, the Netherlands), whose Philips Medical Systems division commands an impressive 43% of the overall U.S. market and has been achieving much higher market shares during the last three years.

"Our vision, and why we were so attracted to Instrumentarium, is that we saw an opportunity to really integrate what today are disparate technologies into a more seamless solution," said Greg Lucier, president and CEO of GEMSIT, during a conference call on the deal. "With Instrumentarium, we'll be able to combine our great patient monitoring technology, our information systems [and] their anesthesia delivery technology into one complete solution for the operating room that we think will be safer, and ultimately, save more lives."

He added that combining the patient monitoring technology acquired in the Marquette Medical deal, along with Instrumentarium's technology, "will allow us to be an enterprise-wide patient monitoring company." In the past, he said, "GE Medical was very strong across the entire hospital except for one area, the operating room and that is where Instrumentarium was very strong." He cited the example of an integrated vital signs monitoring system/ anesthesia delivery system as the first major product integration that the company hopes to develop.

During the conference call, Lucier expressed confidence that the transaction will go through without any regulatory hitches, saying his company does not see the need for any critical care monitoring divestitures. "We don't see any regulatory overlap that would cause any problems; we're totally bullish that it will happen." He added that even after this combination with Instrumentarium, GEMS still would have only a 40% market share in the vital signs monitoring sector. "We believe there will be plenty of competition in the market," Lucier said.

Panel turns down CTI's breast imager

In a narrow decision tipped by the vote of its chairman, an FDA advisory panel last month recommended against approval of a breast imaging device aimed at reducing the number of biopsies performed on suspicious masses. The Radiological Devices Panel voted four to three against recommending market clearance of the Breast Cancer System 2100 (BCS 2100) from Computerized Thermal Imaging (CTI; Lake Oswego, Oregon).

The thumbs-down vote was a shock to CTI, which for several months has been bannering the panel meeting, with expectations of a positive recommendation. Aside from the turndown, the panel's secondary message to CTI was to return with new and improved clinical data. The negative vote also was slightly surprising since it followed an earlier motion at the meeting to approve the device, with conditions. But that motion had failed, based on a variety of reservations raised by panel members. "Before we allow half a million women to be subjected to this, let's make sure the benefit is real. That's why I voted to disapprove it," said panel Chair Minesh Mehta, MD, associate professor and interim chairman of human oncology at the University of Wisconsin (Madison, Wisconsin), in explaining his deciding vote.

CTI's device provides a thermal image of the breast in women who are recommended for a biopsy following a mammogram, a very frequent occurrence given the many inaccurate positive readings provided by mammography. The device was shown to prevent between 5% and 7% of women from having to undergo a biopsy. That would be a relatively large applicable patient pool since more than 1 million women in the U.S. have biopsies to determine if a mass is malignant. In 80% of the cases, the biopsy shows that the mass is benign, according to FDA radiologist William Sacks, MD, who reviewed the supporting data. He said the device didn't miss many cancers, but will miss between 1% and 6% of cancerous lumps, based on the clinical data.

Most of the panel members were supportive of the device, but they too raised a variety of concerns about the data presented. "You have a great technology with great possibilities," said Harry Genant, MD, professor of radiology, medicine, epidemiology and orthopedic surgery in the department of radiology at the University of California, San Francisco. "Now you can design a prospective study addressing our concerns and ultimately get the device approved for patients."

In closing comments prior to the panel's vote, Richard Secord, CTI president and CEO, apparently had foreseen the result. "I must say that I'm confused about your discussions," Secord said. "We worked with the FDA and they agreed to the amendments and the clinical trial protocol. The product is noninvasive and adjunctive to existing procedures." Referring to a past approval by the agency, he said, "You should consider your earlier decision. The CT [computed tomography] scanner in 1982 was considered equally innovative, and there's no doubt the technology has changed a bit since that first device, but the technology was allowed to enter the radiology field."

The panel's decision could set a precedent other device manufacturers cannot meet, warned Yuri Parisky, MD, associate professor of radiology at the Keck School of Medicine at the University of Southern California (Los Angeles, California), one of the physicians involved in the clinical trial. "I feel you are setting a threshold that's too high," he said. "There's no modality out there that can meet what you are expecting. Ultrasounds can't meet it and mammograms can't meet it. If you only allow the existing technology to continue, you'll pull the rug out from innovative technology."

Panelist Alicia Toledano, assistant professor at the Center for Statistical Sciences at Brown University (Providence, Rhode Island), also stated her problems with the final decision. "I do not agree with the decision of the panel,"" she said. "I feel the effectiveness and safety of the device could be determined if we deemed that additional data were needed, which we could have asked for."

Non-voting panelist Marilyn Peters, patient health education coordinator at the Department of Veterans Affairs Medical Center (West Los Angeles, California), also voiced support for the technology. "Were I able to vote, I also would have been in favor of the device. It's a noninvasive alternative that would alleviate anxiety associated with the idea of surgery and would help alleviate some of that concern for many women," she said.

The company issued a statement following the panel meeting: "With the solid clinical results and seven years of research and development on our breast imaging system, we are deeply disappointed by the panel's recommendation. However, we are encouraged by the positive comments of all the panel members and we will proceed to better understand how to ultimately earn FDA approval for this device and decide on the most appropriate course of action."

Inhale to reduce work force by 10%

Drug delivery firm Inhale Therapeutics (San Carlos, California) reported last month that it will make a workforce reduction of 10% of its employees about 75 people it said, "to enable hiring personnel and devoting more resources to several targeted growth areas." The growth areas identified include its PEGylation manufacturing capacity "to meet higher than anticipated demand," development of its next-generation pulmonary technology, scaling up of its supercritical fluid technology and "delivering on its current partner programs such as Exubera inhaled insulin."

What it called a staffing "realignment," it said, "is consistent with the company's strategy to be the leading provider of drug delivery technology, including molecule engineering, particle engineering and inhalation systems."