Continuing its emphasis on healthcare information technology, Philips Medical Systems parent Royal Philips Electronics has signed a deal to acquire PACS vendor Stentor for approximately $280 million in cash.
The acquisition will allow Philips to sell its own radiology PACS offering, and be able to equip electronic health records with images that can be viewed throughout the hospital and over the Internet, according to Philips Healthcare IT group CEO Stan Smits.
"It was critical for us to have in-house intellectual property for radiology PACS," Smits told AuntMinnie.com.
Philips of Andover, MA, has had a nonexclusive partnership since 1997 with Swedish PACS vendor Sectra for radiology PACS. Philips still has long-term contracts in place with Sectra, and will continue to support its current PACS customer base, including furnishing yearly upgrades, Smits said. New customers in North America and other English-speaking countries, however, will be switched rapidly to the Stentor product line.
In the next nine to 12 months, Philips hopes to bring the Stentor technology to other international markets, Smits said. Philips also aims within the next two years to base its cardiology PACS activities on Stentor's iSite platform, Smits said.
"We would like to create a homogenous radiology and cardiology image management system," he said.
For Stentor, the deal allows the firm to further participate in the expansion of image management and distribution to other specialties besides radiology, said Stentor President Oran Muduroglu.
Philips and Stentor also have complementary geographic footprints, allowing for more rapid deployment of Stentor's products into Europe and Asia, according to Stentor. Stentor's U.S. customers will also gain a greater choice of medical equipment, Stentor said.
Stentor was founded in 1998 to commercialize image distribution technology developed by Dr. Paul Chang at the University of Pittsburgh. The firm's core technology, called iSyntax, utilizes a wavelet-based scheme to facilitate on-demand delivery of image data.
In 2000, the firm formed a high-profile technology partnership to provide its PACS technology to healthcare informatics firm IDX Systems. In November 2004, the companies extended their relationship until 2015.
Stentor doesn't anticipate any changes in its partnership with IDX Systems as a result of the Philips acquisition, Muduroglu said.
"We hope (the deal) will have a positive impact on the IDX relationship," he said.
Upon closing, Stentor will be incorporated into the healthcare IT business of Philips Medical Systems, and its Brisbane, CA, location will be the global headquarters of Philips' overall PACS business. Muduroglu will stay on to serve as general manager of the global PACS unit, he said.
Philips will be continuing Stentor's support and service delivery model, including its "pay-per-click" approach, Muduroglu said. Stentor said it expects 2005 sales to grow to approximately $50 million, with 2006 sales annual growth projected to reach 50% based on its pay-per-study business model.
The combined company will have a global PACS installed base of over 1,600 installations, according to the firms. The deal is subject to receipt of regulatory approval. Stentor's shareholders have approved the agreement.
In related news, longtime Philips PACS partner Sectra said that it has several project agreements with Philips that extend up to 10 years, which will successively be terminated. The termination will have an impact on the vendor's sales and earnings in its current fiscal year, although it's difficult to provide a reliable view of the financial effects until the company knows how much time the termination will require, said Sectra President and CEO Jan-Olof BrĂ¼er.
Sectra said it would use the opportunity to review its sales channels. Part of the sales for which Philips is currently responsible will be taken over by other partners, BrĂ¼er said. Sectra said it would also increase its focus on its own PACS sales efforts in important key markets.
By Erik L. Ridley
AuntMinnie.com staff writer
July 6, 2005
Related Reading
Philips installs first Panorama MRI in Europe, June 27, 2005
Philips opens 7-tesla MRI research center, June 21, 2005
Stentor inks Scripps deal, June 16, 2005
Stentor hires new CFO, April 21, 2005
IDX, Stentor extend PACS partnership, November 18, 2004
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