Philips trims nuclear from portfolio

October 9, 1991

Philips Medical Systems has halted manufacture of nuclear medicineimaging systems to concentrate on better business prospects inother modalities. The firm will focus on MRI, ultrasound, CT,x-ray, and radiation therapy, according to Hans van Bree,

Philips Medical Systems has halted manufacture of nuclear medicineimaging systems to concentrate on better business prospects inother modalities. The firm will focus on MRI, ultrasound, CT,x-ray, and radiation therapy, according to Hans van Bree, presidentand CEO of PMS.

"We do not think we should invest an enormous amount ofmoney in that area," van Bree said. "A nuclear medicineline would likely not give us the results our shareholders require.We are in a better position to license our knowledge to othercompanies."

Philips licensed technology for its round nuclear camera toADAC Laboratories of Milpitas, CA, and for both its round andrectangular cameras to Digital Design of France. ADAC will mergethe technology with its own processing systems in developing futurenuclear cameras (SCAN 7/31/91).

Digital Design has been licensing the Philips nuclear technologyfor nearly two years, although it has not produced a camera basedon the know-how (SCAN 2/14/90). Philips has an agreement to workwith Digital Design in selling the smaller firm's camera. TheDutch vendor is mainly concerned with providing for the needsof its installed nuclear customers.

"We will use them (Digital Design) as a supplier wheneverwe need them and support our customer base in nuclear medicine,"van Bree said.

Philips' decision to concentrate on core medical technologieswith solid profit potential is part of parent NV Philips' overalldrive to improve efficiency and profitability. The NV Philipsboard of management has made a commitment to PMS as a core business,van Bree said. The board has stated in writing that it does notintend to sell the medical business in its restructuring process.

PMS has in excess of 3 billion guilders ($1.6 billion) in annualmedical systems revenue and is "getting close" to itsinternal target of a 10% return on total assets, he said. Itsparent has promised a substantial investment in Philips Ultrasoundto build a leadership position in that growing modality (see story,page 2).

While Philips' prospects for nuclear medicine profits werenot considered adequate, there is less chance of success in theexpensive and still limited positron emission tomography market.Philips explores all imaging modalities in its research effortsbut has no intention to enter the PET field at this time, vanBree said.

If PET reimbursement grows and the clinical market gains sufficientvolume, Philips might conceivably develop or acquire a PET businessat a later date, he noted.

"I have not seen a single success among those companiesinvolved in PET today. It is a money-loser," van Bree said.