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Siemens Takes Next Step in Integrated Dx Plan with Bayer Buy; Will GE Healthcare, Philips Follow?

In the latest step in its ongoing strategy to provide integrated in vivo and in vitro diagnostic offerings, Siemens announced last week that it would acquire Bayer Diagnostics for €4.2 billion ($5.26 billion).

The acquisition, which Siemens hopes to close by the end of the year, comes on the heels of its April agreement to acquire Diagnostic Products Corp. (DPC) for nearly $2 billion. By acquiring Bayer Diagnostics, Siemens will immediately become a top-three molecular diagnostics player and will undoubtedly put pressure on other molecular imaging players, such as GE Healthcare and Philips, to respond, even though both rivals currently occupy a small slice of the molecular diagnostics space.

"The acquisition of Bayer Diagnostics is part of our targeted strategy to create the healthcare industry's first integrated diagnostics company by combining the entire imaging diagnostics, laboratory diagnostics, and clinical IT value chain under one roof," said Klaus Kleinfeld, Siemens president and CEO, in a statement.

"There is no doubt in our minds that molecular medicine specifically will be important going forward," said Erich Reinhardt, president of Siemens' Medical Solutions Group, during a conference call last week. He said that molecular diagnostics presents "a great opportunity [and it is] where we see the highest growth rate."

"There is no doubt in our minds that molecular medicine specifically will be important going forward."

Bayer Diagnostics had 2005 sales of roughly $1.75 billion, of which approximately $120 million came from molecular diagnostic products, according to industry estimates. The acquisition also will add 5,400 employees to Siemens' ranks. It is unknown whether Siemens intends to retain all of the employees of Bayer Diagnostics.

Building a Presence in Molecular Biology and Diagnostics

Siemens has been working on molecular imaging technologies as part of a broader "patient-centric" approach. Company officials told BioCommerce Week a year ago that the firm was considering a tie-in between its in vivo imaging products and in vitro diagnostics (see BioCommerce Week 6/30/2005).

Siemens began developing a presence in the molecular biology field in 2001 when it penned an alliance with German firm november to develop a DNA-based electrochemical diagnostic system. Since then, Siemens has partnered with Biomax Informatics on gene-expression modeling and simulation, and it also has been collaborating with Sequenom for a couple of years to develop molecular diagnostic platforms based on Sequenom's MassArray technology.

Last year, the firm acquired CTI Molecular Imaging for approximately $1 billion with an eye on participating in the pharmacogenomics and drug development markets. It followed that move with its agreement to acquire Diagnostic Products, an in vitro diagnostics firm with 2005 sales of $481.1 million, and a roughly 3 percent share of the diagnostics market — though the firm is not considered a molecular diagnostics player.

That deal is expected to close this summer, and Siemens believes the combination of DPC's and Bayer Diagnostics' product lines will make the firm the third largest player in the overall diagnostics market with a 13-percent market share, trailing Roche, which it estimated holds 20 percent of the market, and Abbott, with 14 percent of the market.

Siemens last year also purchased the biochip technology division of Infineon — a German semiconductor firm that is itself a spin off of Siemens — furthering its patent estate and development activities in the molecular diagnostics field. Infineon's chip technology is incorporated into Siemens' Quicklab, a handheld diagnostics device that runs DNA- or protein-based experiments on a smart card. The system has not been commercially launched yet, but it is clearly a part of Siemens' strategy to play a greater role in the molecular biology field.

Following the closures of the DPC and Bayer Diagnostics acquisitions, Siemens will offer clinical chemistry, immunodiagnostics, hematology, urinalysis, lab automation, near-patient testing, and molecular diagnostic products. It will pair those products with its X-ray, magnetic resonance, computed tomography, ultrasound, and molecular imaging products.

Competitive Response?

Siemens' two major rivals in the molecular imaging field, GE Healthcare and Philips, have not been as aggressive in pursuing the in vitro diagnostics space, though both have dipped their toes in the market — GE, through its 2004 acquisition of Amersham, and Philips, which has a molecular medicine group focused on molecular diagnostics.

In addition, GE last fall began collaborating with University of Oxford researchers in studying the use of medical imaging and genomic profiling to improve the treatment of colorectal cancer (see BioCommerce Week 9/29/2005). The partnership might be the first of similar collaborations that the company could forge that focus on pairing in vitro and in vivo technologies for drug and diagnostic development, which was a key reason for GE's acquisition of Amersham.

To Siemens, molecular diagnostics presents "a great opportunity [and it is] where we see the highest growth rate."

"We expect to develop a very deep understanding of the clinical and biological nature of colon cancer — imaging, molecular diagnostics, and informatics," Jonathan Allis, vice president of technology and medical diagnostics at GE Healthcare in Amersham, UK, wrote to BioCommerce Week in an e-mail message at the time.

"We believe that the future of healthcare is about integrated approaches to the early diagnosis of disease, and provision of maximum information from in vivo (imaging) and in vitro (gene) tests, all integrated by clinical informatics software," Allis wrote in the e-mail. "To this end, we continue to seek out collaborations, be that with industry or academic institutions."

It remains to be seen whether Siemens' acquisitions of DPC and Bayer Diagnostics will push GE Healthcare toward an in vitro diagnostics acquisition of its own. Even if it does pursue such an acquisition, there are relatively few players that would offer the breadth of Bayer's diagnostic offerings. Due to the July 4 holiday, BioCommerce Week was unable to get comment from GE Healthcare by press time.

Meanwhile, Philips has pursued collaborations in the molecular imaging field and has an ongoing bioinformatics initiative that could mark the firm's entry into the molecular diagnostics field.

"Philips is looking at the broader stroke of molecular medicine and developing expertise in both molecular diagnostics as well as in molecular imaging," David Rollo, chief medical officer of Philips' nuclear medicine group, told BioCommerce Week last June (see BioCommerce Week 6/30/2005).

He noted that Philips has a molecular medicine group employing roughly 100 people that are focused on molecular diagnostics. According to Rollo, the firm has been collaborating with academic institutions on biomarker development and expects that products from some of those collaborations would be further developed by Philips' cardiac monitoring services division.

— Edward Winnick ([email protected])

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