GE ventures outside radiology with bid to purchase Marquette

Vendor beefs up offerings in cardiology

Less than two weeks after putting in a bid for the MRI and nuclear medicine divisions of Elscint, GE Medical Systems made another corporate play, this time in its own backyard. If all goes as planned, Milwaukee-based Marquette Medical Systems will become part of GE sometime in December. The deal, a stock swap that could be worth about $800 million, would be the first time the multimodality imaging giant has acquired a company not directly associated with radiology.

“The fit with Marquette is very complementary and will present us with greater opportunities to grow in the future and to provide a better package of products to customers,” said Jeffrey Immelt, president and CEO of GE Medical Systems.

Marquette is a formidable provider of medical products, including resting electrocardiography, exercise stress testing, and point-of-care monitoring for adult, fetal, and neonatal patients. Last year, the company had total sales of about $578 million and net income of $26.6 million. About half those revenues came from sales in patient monitoring, while one-third of the total was in cardiology. The remainder was in after-market service and support.

“We have been able to grow our patient-monitoring business without acquisitions on an internal growth rate of about 20% a year for the last four years,” said Marquette CEO Fred Robertson.

The acquisition, if regulatory and due diligence hurdles are cleared, will boost GE into the same category as Hewlett-Packard and Siemens Medical Systems, both of which have substantial offerings in patient monitoring. GE’s decision to acquire Marquette was not driven by a need to keep up with these competitors, but rather is part of the vendor’s decision to push forward into new areas, according to Immelt.

“I don’t view this as a defensive move from the standpoint of GE needing to compete with HP or Siemens, but more as an offensive,” he said. “Understanding disease profiles and being able to couple our approach to the market with what we could do with both patient monitoring and some other Marquette products is one of the great growth opportunities.”

Just as imaging modalities are moving toward the concept of one-stop shopping, in which a single technology such as MR might be used for a range of diagnostic applications, the acquisition of Marquette might help GE better provide for customers’ needs. Cardiology has become a major focus at GE, exemplified by the introduction of advanced cardiac cath and MR cardiac systems. This disease-based focus is addressed not only by Marquette’s MUSE information system but also by its patient-monitoring devices.

“There are clear synergies that we could work on together—looking at a combination of echo ultrasound with patient monitoring; looking at cardiac cath networking, which is something we are both working on,” Immelt said.

Distribution is one of the most complementary aspects of the proposed merger. GE plans to leverage distribution channels already established by Marquette for the sale of its products into cardiology. Conversely, channels established by GE in Asia and the Pacific Rim should benefit the sale of Marquette products, which have achieved only modest penetration in that part of the world.

Exactly how the two companies will take advantage of these potential synergies has yet to be determined, however. GE has sales and equipment facilities around the globe. Marquette operates facilities in Milwaukee, Wallingford, CT, Torrance, CA, Annapolis, MD, Jupiter, FL, and Freiburg, Germany.

Perhaps the most significant aspect of the deal is not how it will be implemented but what effect it might have on the imaging industry. Traditionally, GE Medical Systems has been able to establish trends by virtue of its extraordinary size and influence in the market. If the Marquette acquisition is part of a strategic move to expand the company outside the strict confines of medical imaging, other vendors might have to respond in kind so as to better serve the patient-management goals of customers. Immelt believes this orientation toward disease-management solutions will be embraced by customers because it reflects needs emerging in the modern practice of medicine.

“Disease management as a focus is being instituted and driven by managed care, and it is a process that people here think can improve patient outcomes and reduce costs,” Immelt said. “It clearly links the roles of various modalities and technologies in treatment, and I think that will converge over time.”