It's been called the biggest acquisition in healthcare this year, and now it's a done deal. Siemens Healthineers announced on Thursday that its purchase of Varian Medical Systems is complete. The purchase instantly makes Siemens the dominant player in the global radiation therapy market.
Siemens first announced in August 2020 that it intended to acquire Varian, the U.S.-based company that has dominated the market for radiation therapy systems for decades. The deal at the time was valued at $16.5 billion U.S. (13.8 billion euros).
Siemens executives have positioned the deal as complementary to Siemens' existing position in medical imaging equipment, and there was little duplication of product lines between the two companies. With the acquisition done, Siemens now offers the "most comprehensive portfolio" in the medical technology sector, according to Ralf Thomas, PhD, chairman of the board at Siemens Healthineers.
"With a highly integrated approach, Siemens Healthineers will take the global fight against cancer to a new level," Thomas said in a statement.
The combination of Siemens Healthineers and Varian creates a new company with positions in medical imaging, lab diagnostics, artificial intelligence, and oncology treatment, according to Siemens. The combined company will also have annual revenues approaching $20 billion: Siemens Healthineers recorded revenues for its 2020 fiscal year (end-September 30) of $16.812 billion (14.460 billion euros), while Varian posted revenues for its most recent fiscal year (end-October 2) of $3.168 billion (2.7 billion euros).
Furthermore, Siemens Healthineers said that Varian is expected to contribute positively to its adjusted basic earnings per share within the first 12 months. Siemens also expects that it will save $359.2 million (300 million euros) per year in earnings before interest and taxes (EBIT) due to "synergies" between the companies.
Siemens has said that Varian will retain its corporate name and will be led by Chris Toth, currently the company's president and chief operating officer; he will report to Bernd Montag, CEO of Siemens Healthineers. Varian's current CEO, Dow Wilson, will retire now that the acquisition is complete, the companies announced in March.
Siemens and Varian have been working together in radiation therapy since 2012 as part of a partnership they call EnVision. The goal of the collaboration is to improve ways to use imaging to improve radiation therapy and deliver oncology treatment that's more efficient and customized to patients.
The companies plan to continue joint development efforts, such as to leverage artificial intelligence (AI) in the creation of analytics algorithms to support data-driven precision medicine and improve cancer diagnosis, care delivery, and post-treatment survivorship. Siemens Healthineers further believes that its imaging technology can enable earlier and more accurate detection of cancer, which will improve the quality of radiation therapy treatment.
Siemens Healthineers is positioning the Varian acquisition as a major step in its Strategy 2025 plan. The company completed the first phase of the plan in 2019, which included an initial public offering (IPO) in 2018 that saw the vendor spin off from parent company Siemens AG.
It is characterizing the second phase of the plan as an "upgrading" phase that will move the company "to the next level of profitable growth." Two recent acquisitions that exemplify this phase of the company's plan are of interventional technology developer Corindus and healthcare advisory firm ECG Management Consultants.
But Siemens Healthineers may be open to divestitures as well, at least if industry scuttlebutt is to be believed. An article this week from Bloomberg claimed the company was entertaining offers for its ultrasound business, with a potential divestiture valued at up to $1 billion (840 million euros). Executives with Siemens Healthineers declined to comment on the news story, however.