Fresh from a spate of health care deals totalling more than $7 billion, German conglomerate Siemens AG will take a break from mergers and acquisitions and focus instead on results, the chief of its medical division said on November 28.
Siemens, a fierce competitor in the diagnostic imaging market, took a bold turn this year when it entered the in vitro diagnostics market, a segment that includes a wide range of lab-based tests.
In July, Siemens closed a $1.86 billion deal for Los Angeles-based Diagnostics Products Corp Late last month, European regulators approved Siemens' $5.33 billion deal to buy the diagnostics division of drugs and chemicals group Bayer AG.
The deals make Siemens one of the largest health diagnostics providers by sales, along with Switzerland's Roche Holding AG and Abbott Laboratories Inc of the United States.
Siemens Medical Solutions Chief Executive Erich Reinhardt said his No 1 priority now is results.
"We have to justify the acquisitions and that means profitability," he told Reuters in an interview at a radiology conference in Chicago.
Siemens' rivals, which include Philips Electronics NV and General Electric Co's GE Medical unit, have focused on imaging equipment, such as large CT scanners and Magnetic Resonance Imaging, or MRI machines, and the development of chemical agents that enhance images captured by the machines.
Last month, Reinhardt said the Bayer and DPC deals would help create the "world's first full service diagnostics company," incorporating the imaging technology with a range of laboratory tests for cardiovascular disease, kidney disease, infections, cancer and diabetes.
Reinhardt sees rival imaging companies following as they work to develop gene-based diagnostic tests that can identify disease at the molecular level - before they actually show up as an illness in a patient.
Reinhardt believes the move to in vitro diagnostics is the next logical step. "I'm sure others will follow because it makes a lot of sense," he said.
Siemens, GE and Philips are working to expand their capabilities in molecular imaging, which uses chemical agents to enhance scans to detect the early stages of diseases.
The company's foray into more traditional test-tube based diagnostics follows GE's $10.7 billion acquisition in 2004 of British bioscience company Amersham Plc, which is developing molecular agents that could enhance PET scans and other advanced tests.
Reinhardt said his company is working to develop new molecular targets that will help identify the early stages of diseases.
"We are not going into pharma, but we do have cooperation with pharma," he said, adding that the company has several partnerships with drugmakers, but declined to name them.
Siemens' medical unit is one of the most successful divisions of the group, which makes products ranging from turbines to light bulbs.
The diagnostics deals follow the company's acquisition in March 2005 of CTI Molecular Imaging Inc, Siemens' long-time scanner partner, for about $1 billion.
Prior to the CTI deal, the companies had been operating under a joint venture dating back to 1987 to manufacture PET CT systems - advanced scanners that are used to diagnose conditions such as cancer and heart disease. Reinhardt does not expect any new deals soon.
"Basically, we new feel we have the portfolio we need to implement our strategy. Any further type of acquisition would be to strengthen our technology position," he added.