Siemens & Cerner Make $1.3B Deal, Enter Strategic Alliance

By Jof Enriquez,
Follow me on Twitter @jofenriq

Cerner Corp. and Siemens AG have entered a strategic alliance to integrate Cerner’s expertise in healthcare information technology (IT) with Siemens’ strong diagnostics, imaging, and therapeutic businesses.

The partnership involves the sale of Siemens’ hospital IT business to Cerner for $1.3 billion in an all-cash transaction that is expected to close in the first quarter of 2015. With the acquisition, Cerner expects annual sales to rise to $4.5 billion, roughly $1.6 billion more than in 2013, and yearly R&D spending to increase to $650 million, up from $311 million in 2013, according to a Bloomberg report.

For the initial three-year phase, both companies have earmarked up to $50 million each to co-develop “projects that integrate health IT with medical technologies for the purpose of enhancing workflows and improving clinical outcomes,” according to a recent Cerner press release.

“Siemens is very innovative around imaging, diagnostic and therapeutic technologies and processes,” Neal Patterson, Cerner chairman, CEO, and co-founder, said in the company announcement. “Medical technologies generate mountains of images and other data that must be stored, accessed, visualized and interpreted intelligently. In addition, advanced diagnostic and therapeutic processes are enhanced by presenting EMR data at just the right moment and in the right context. Together we will innovate at the edge where IT, processes and technologies meet.”

The scale of the deal will allow Cerner to compete with rivals such as Epic Systems, AthenaHealth, and AllScripts, as adoption of electronic health records continue to accelerate in the healthcare industry, according to Forbes.

“We believe this is an all-win situation for the clients of both organizations and all of our associates and shareholders,” Patterson said in the Cerner statement. “Through more than $4 billion of cumulative investments in R&D, Cerner has established a strong market standing and is positioned for continued growth.”

For Siemens, the deal was about selling another low-performing asset that had failed to consistently keep up with the competition.

Siemens said in a statement that the sale to Cerner keeps with its “Siemens — Vision 2020” strategy to jettison low-performing businesses and concentrate on core industries. As stated in a Med Device Online article, the company recently spun-off its audiology unit and separated its healthcare business as part of its ongoing restructuring plan.

“In the recent years, we have continuously invested in our HS-portfolio and achieved significant progress on the technology side. At the same time, we realized that business success of our hospital information systems could not always keep pace with our competition,” Hermann Requardt, CEO of Siemens Healthcare, said in the company press release.