Siemens, CTI set up collaboration to sell PET and PET/CT scanners

May 18, 2004

In a move aimed at addressing the changing PET market, CTI Molecular Imaging and Siemens Medical Solutions are realigning their PET and PET/CT sales and marketing organizations. Under the agreement, all PET and PET/CT scanners sold will be marketed under

In a move aimed at addressing the changing PET market, CTI Molecular Imaging and Siemens Medical Solutions are realigning their PET and PET/CT sales and marketing organizations. Under the agreement, all PET and PET/CT scanners sold will be marketed under the Siemens ECAT and Biograph labels.

Calling the agreement "very important" for both organizations, Ronald Nutt, president and CEO of CTI, said the alignment will enable the companies to jointly solicit PET sales in a much closer arrangement.

"This brings together the resources of CTI Molecular Imaging and Siemens to make products manufactured by our joint venture CPS (CTI PET Systems) a more significant force in PET," Nutt said. "We're more powerful working together with Siemens than competing separately."

Through the partnership, CTI gains access to Siemens' broad product line and marketing staff along with its strength serving hospitals. Siemens gains access to CTI's PET product line and its strength in the entrepreneurial market.

Siemens' Markus Lusser, vice president of worldwide marketing and sales for nuclear medicine and PET, said aligning the two companies' sales forces makes good business sense.

"Instead of fighting against each other, instead of going after the same customers, we want to be able to address more customers and increase our market share above the current level," he said. "Right now, the growth opportunity is shared between the two companies. We're jointly aligning them to more effectively work on both sides."

PET consultant Marvin Burns said the realignment will allow management to use its resources wisely.

"This should give potential customers more confidence and provide a better sales platform in a competitive market," he said.

Under the agreement, the two companies will combine their PET and PET/CT sales and marketing teams in the U.S., Europe, and parts of Asia for equipment manufactured by CPS. In so doing, the two companies will reduce component prices for their LSO and CT technology sold to CPS.

The CTI sales team will act as an agent for Siemens, and CTI will no longer be an independent distributor of CPS scanners. Siemens will license CTI's Mirada MVS software and incorporate it in all PET workstations bundled with Siemens' PET scanners. The German company will market these and other CTI technologies and services worldwide as part of an integrated product offering that includes cyclotrons and doses of FDG obtained through CTI resources.

"We will be able to increase the financial bottom line and our market share. With one joint effort, we'll be able to convince more customers that our solution is the most sophisticated one on the market," Lusser said.

Siemens will assume all costs for CTI's sales team in the U.S. The service and maintenance organizations for both companies will remain separate, with future service contracts shared equally in the U.S. Nutt noted, however, that there are limits to the collaboration.

"We're not abandoning our multiple distribution strategy. In fact, we continue to expand our existing relationship with Toshiba and Hitachi (in Japan) and have some new product initiatives under way with them," he said. "We look forward to these relationships growing and prospering."

In making the announcement, Nutt cited several shortcomings in the way the two companies previously operated. Market segments served by them have blurred, causing conflicts. Inefficiencies and redundancies in the previous direct distribution strategy were negatively affecting CTI's ability to profitably address the market.

"This agreement better aligns the sales and marketing resources of CPS through its two largest distributors (Siemens and CTI)," Nutt said. "It eliminates the possibility of channel conflict between CTI and Siemens that has recently arisen. It also removes overlapping layers of resources under the CTI umbrella and saves money."

Additionally, marketing efforts by CPS, CTI, and Siemens for the same equipment have caused customer confusion, preventing CTI from maximizing its market position. The newly crafted partnership streamlines and unifies the message to customers, Nutt said.

The announcement came as CTI reported a strong second quarter, ended March 31, reflecting a hot PET market. Net revenues totaled $106.3 million, up 30% over the $81.9 million in net revenues reported for the same period a year ago. Net income totaled $5.8 million compared with $4.5 million during the second quarter in the previous year.

During 2Q 04, CTI sold 45 scanners and booked orders for an additional 38. Of those, CTI's direct distribution arm, CTI Solutions, shipped nine scanners and booked orders for another 15.

While scanner shipments for CTI Solutions were below plan, the segment experienced strong growth in FDG sales. Doses increased 60% over the same quarter a year earlier.

"Scanner sales were below our expectations by several units," Nutt said. "That was the result of the major effort undertaken by both companies to align the distribution capabilities, which occurred at the expense of near-term sales. Additionally, we expect the implementation stage of the agreement to cause disruption to our normal sales pattern in the third quarter."