Siemens Medical Solutions has bid $1.86 billion cash to buy Diagnostic Products, a Los Angeles-based immunodiagnostics firm specializing in automated body fluid analyzers and in vitro diagnostic tests. Shareholders of Diagnostic Products will receive $58.50 per share, a premium of about 20% over the closing price of $48.45 April 27, the day before the deal was announced.
The board of directors of each company has approved the merger, but the deal must meet the approval of Diagnostic Products shareholders, receive regulatory approvals, and pass Siemens' due diligence. A special meeting of Diagnostic Products shareholders to discuss the deal will be held in mid-2006.
The deal would dramatically expand Siemens' healthcare portfolio, bringing new expertise and technologies in diagnostic imaging, healthcare information technology, molecular biology, and biochemistry to the German company, while advancing its strategic move into personalized healthcare. The diagnostic tests are for cancer and cardiac disease, as well as hormonal and allergic conditions.
In vitro diagnostics would complement Siemens' positions in medical imaging and healthcare IT solutions, according to Erich R. Reinhardt, president and CEO of Siemens Medical Solutions.
"This acquisition will support our strategic objective: first, to detect disease at a very early phase, and then to come up with an individualized treatment plan," Reinhardt said. "With in vivo and in vitro diagnostic procedures, including the IT solution, we have an excellent portfolio to optimize workflow and improve efficiency in healthcare."
Reinhardt framed the deal as the logical next step after the acquisition of CTI Molecular Imaging, which last year brought PET hardware and molecular imaging agents to Siemens. Reinhardt described in vitro diagnostics as the gatekeeper to patient management and critical to understanding the implications of different diagnostic and therapeutic cycles.
"We are convinced that a biomarker sensitive and specific to breast cancer, for example, could have significant impact on the imaging part," he said. "It is important to understand and adapt the concept of integrating these solutions so as to optimize the interests of the patient."
Diagnostic Products, founded in 1971, has developed diagnostic tests to help detect and manage adrenal/pituitary dysfunction, allergy, anemia, bone metabolism disturbances, cancer, cardiovascular disease, diabetes, and reproductive and thyroid disorders.
It produced the Immulite series of immunoassay systems and a wide selection of specific allergens and allergy panels that run like other immunoassays. The company also designs and manufactures automated laboratory instrumentation. In the last fiscal year, ending Dec. 31, Diagnostic Products reported sales of $481 million and income from operations of $96 million.
The company is growing faster than its competitors in a market that may ultimately be worth $5 billion annually. A solid R&D pipeline will keep it at the top of the industry, Reinhardt said.
"We are convinced it is important to add in vitro diagnostics to our in vivo capabilities," he said. "Over the long term, we see that if you have an early stage of tumor, and you have a biomarker for that tumor, maybe this knowledge of biomarker helps you develop the in vivo biomarker. That's why it is important to enter this space now - to build it up to utilize and develop the whole strategy."