Siemens to buy CTI Molecular Imaging for $1 b

Julie Steenhuysen

CHICAGO: Siemens AG said it will buy CTI Molecular Imaging Inc. for about $1 billion as it moves to bring its longtime PET scanner partner in house.

The German conglomerate Siemens and CTI have operated a joint venture since 1987 for manufacturing PET CT systems, advanced scanners that focus on the biology of diseases and are used to diagnose conditions like cancer.

Siemens said the deal will allow it to expand its capabilities in molecular imaging, a focus shared by rivals General Electric and Philips, which both compete in the medical imaging space.

"It's a growth market. Siemens is closing a very important gap with this acquisition," said Frank Rothauge, an analyst who follows Siemens at German private bank Sal. Oppenheim.

Imaging companies are increasingly investing in molecular imaging, which uses chemical agents to enhance scans and potentially could detect the early stages of disease.

"In terms of the product portfolio, it fits very well, although I find the price a bit on the high side," Rothauge said.

Under the terms of the deal, Siemens Medical Solutions USA, will begin a cash tender offer within 10 business days to buy all of the outstanding shares of CTI stock for $20.50 per share. The deal represents a premium of about 17 percent over CTI's closing price of $17.53 Thursday on Nasdaq.

Shares of Knoxville, Tennessee-based CTI Molecular rose $2.80, or 16 percent, to $20.33 at Friday midday on the Nasdaq. In Frankfurt, Siemens shares fell less than 1 percent.

After completion of the tender offer, any remaining shares of CTI stock will be acquired in a merger at the same price per share. The deal is expected to close in the second quarter of 2005. CTI had net sales of $402 million in 2004.

Siemens said the deal will give it full control over CTI PET Systems, its joint venture with CTI, which is responsible for PET and PET/CT scanner research, development and manufacturing. Siemens previously had a 49.9 percent share in the venture, known as CPS.

Kate Sharadin, analyst with Pacific Growth Equities, said the deal solidifies Siemens' No. 1 position in the market for PET scanners. She estimates that Siemens and CPS together have 43 to 45 percent of the PET scanner market, followed by GE with about 40 percent.

"I think the two together as one will really be able to take full advantage of the outlook for molecular imaging," Sharadin said.

Sharadin said while most of Wall Street considers CTI an imaging systems maker, she believes the real value will be the company's potential for developing molecular probes and radiopharmaceuticals that will help expand the PET scanner market. That was the impetus behind GE's $10.7 billion purchase of British imaging agent Amersham Plc last year.

The deal also gives Siemens access to CTI's PET NET Solutions, a network of 40 centers that distribute the specialized radiopharmaceutical agents used to enhance PET scans.

Most of CTI's centers are located in the United States, but CTI also operates centers in Britain and Korea.

The deal also gives Siemens access to CTI Molecular Technologies, a research and development unit focused on the development of future molecular biomarkers, CTI Concorde, a unit devoted to scanners for small animal imaging systems used in preclinical research and CTI Mirada Solutions, a maker of software applications for molecular imaging.