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Diagnostic imaging

Philips to acquire PACS specialist Stentor

AMSTERDAM and BRISBANE, Calif. – Philips Electronics announced that it intends to acquire Stentor Inc., a leading provider of picture archiving and communication systems (PACS) used for storing, managing and distributing digital radiology images throughout hospitals and healthcare facilities.

Philips will pay approximately US$280 million in cash for Stentor Inc., subject to regulatory approval. Stentor’s shareholders have approved the agreement and transaction.

Stentor expects 2005 sales to grow to approximately US$50 million and 2006 sales annual growth is projected at 50%, according to a news release.

Stentor will be incorporated into the Healthcare IT business of Philips’ Medical Systems division. From its headquarters in Brisbane, Calif., Stentor will become the global centre of Philips’ PACS business.

Jeff Vachon (pictured at left), director of medical IT sales for Philips Medical Systems Canada, noted that the acquisition provides Philips with leading-edge technology that’s completely web-enabled. The technology will be further developed by Philips and will provide existing Philips PACS customers with a powerful upgrade path, he said.

Vachon observed that the Stentor acquisition, when combined with Philips’ existing customer base, “gives us a greatly expanded market share worldwide, making us the second largest PACS provider.”

Philips, he said, is able to offer top solutions in virtually every major area of healthcare IT, including radiology PACS, enterprise HIS, and cardiology image management solutions. It also produces top-tier radiological equipment, such as 64-slice CT scanners, MRI, ultrasound, digital radiology, and PET/CT machines.

In commenting on the merger, Oran Muduroglu, president of Stentor, said: “In the healthcare industry, Philips is known for its high quality medical equipment and for its commitment to customers – an approach we value. We can now extend Stentor PACS outside of the radiology department and into other areas of the hospital where conditions like cancer and heart disease are treated.”

Mr. Muduroglu added: “We are very excited about what this means for all of our current and future customers, as we combine our strengths in image and information management.”

Stentor’s PACS technology can transmit medical images – with full resolution 4 to 16 times faster than any competitor, and with significantly less hardware costs for hospitals, the company said.

In addition, Stentor’s proven service delivery model and commitment to customer support is well aligned with Philips’ overall strategy of designing the solution around the customer and making it easy for the user to experience.

“Stentor is an exceptional company with very talented people and unique technology that will significantly strengthen our position in healthcare IT. The merger of the Stentor Radiology PACS, the number one in multiple KLAS ratings, and the Philips Cardiology PACS, the “Best Overall Cardiology PACS Vendor” in the June 2005 KLAS report, gives us exactly what we want: world-class technology,” said Jouko Karvinen, president and CEO of Philips Medical Systems.

By merging with Stentor, Philips – the market leader in patient monitoring systems and the second largest global manufacturer of medical diagnostic imaging and monitoring equipment – can offer hospitals and other customers a complete package of state-of-the-art medical scanners along with Stentor’s best-in-class PACS products to handle the large volumes of imaging data generated by medical scanners.

In addition, Stentor and Philips have highly complementary geographic footprints allowing for more rapid deployment of Stentor’s products into Europe and Asia, while providing Stentor’s US customers with a greater choice of medical equipment. Combined, Philips and Stentor will have PACS installed at over 1,600 healthcare institutions worldwide, and will be second largest in the global PACS market, according to a news release.

According to an October 2003 report by the U.S. General Accounting Office, less than 10 percent of hospitals had replaced paper charts with EHR, and the U.S. Center for Medicare & Medicaid estimated that in 2004 less than 5 percent of U.S. healthcare spending went into IT – much lower than in financial institutions and other service industries.

In 2003, Philips embarked on its vision for healthcare IT through the launch of an alliance with Epic Systems Corp. of Madison, Wis., a specialist in electronic patient record systems that can be used enterprise-wide.

By acquiring Stentor, Philips will be able to equip EHRs with diagnostic quality medical images that can be viewed throughout the hospital and via the Internet.