IN PERSON
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Tony P. Bihl is chief executive officer at Siemens Medical Solutions Diagnostics. After serving as the president of the diagnostics division of Bayer Healthcare, he was named chief executive officer at the closing of Siemens’ acquisition of Bayer Diagnostics in January 2007. He joined Bayer’s diagnostics division in January 2000 as vice president, finance and controlling for the laboratory testing segment. He can be reached at 914/631-8000.
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Siemens has previously stated its intention to create the first full-service diagnostics company that brings together IVDs, in vivo imaging, and healthcare information technology, but what are the real implications on the IVD industry of Siemens’ unprecedented entrance upon the scene? A full-service diagnostics company would change the IVD landscape, which could necessitate changes in the product offerings of other manufacturers.
To learn more about what the future may hold for the diagnostic industry, IVD Technology editor Richard Park spoke with Tony P. Bihl, chief executive officer at Siemens Medical Solutions Diagnostics. In this interview, Bihl discusses Siemens’ big picture vision and the future of IVDs.
IVD Technology: How has Siemens integrated Bayer and DPC into its diagnostics business?
Tony P. Bihl: The integration process began well before the closing of the transaction occurred. A team with members from the former DPC, the former Bayer, and Siemens participated in developing our framework for the integration of the companies. The decision was made early on to put Bayer and DPC into a diagnostic unit and have it be an individual business unit within Siemens.
The focus of the transactions was on growth. Siemens’ objective was to take two successful companies, integrate these two companies, and then integrate this in vitro diagnostics business into the Siemens portfolio. The goal was to fill out a space in the healthcare continuum where the belief was that in vitro diagnostics was the missing element.
Early on the decision was made to have the leadership come from all three companies. I joined as the chief executive officer from Bayer. Then Sidney A. Aroesty joined as the chief operating officer from DPC and Jochen Schmitz, from Siemens, joined as the chief financial officer.
As a leadership team, we began to pull together the rest of the organization and we built an organizational structure that took the best elements of the three companies to build our team and to make plans to go forward. We formed cross-functional integration teams to lead the activity. We have had the benefit of sharing experiences from very different backgrounds so it has been a good process for us.
In terms of product lines, we have already done some very interesting work to look at how we can capitalize on the combined products of DPC and Bayer. We have formalized the ability to connect the DPC Immulite systems to Bayer Automation Systems, which is a big step. We launched our first development project to combine immunoassay and chemistry from Bayer and immunoassay from DPC onto an automated platform work cell. And we’ve begun to capitalize on the great reputation DPC had for allergy assays in the marketplace.
It has been a very inclusive process and a win-win situation so far. Siemens made it clear up front that it was new to the in vitro diagnostic business and the model was to put these companies together with the benefit from the leverage we gain from Siemens. The objective was not to buy a turnaround case or a fix-it case, but to take two successful companies and put them together.
What were the biggest challenges throughout the process for all the companies involved?
The DPC transaction closed at the end of June 2006 and the Bayer transaction closed in the beginning of 2007. In the interim period we have had to continue the integration while still competing in the marketplace. This went amazingly well.
Our number one focus was to take care of the customer. That may sound cliché but in the midst of integration, people can easily turn their thoughts toward wondering what this means to them, what this means to their company, and how this will develop. Clearly our people stayed very focused on the customer.
We did our best to separate the integration activity from the running-the-business activity. We formed cross-functional integration teams and had people who were very focused on carving the Bayer operations out of the middle of Bayer and integrating them with Siemens and then with DPC. We also had people to continue to focus on customers, to run the business, and to produce our products. The results for both companies for the last calendar quarter of 2006 would indicate from our sales numbers that people were successful in doing that.
How will Siemens deal with the overlaps in personnel and in product lines?
The first thing that Siemens did was to announce that the current products in the market would continue to be supported. For instance, if you are a customer who has purchased Advia Centaur, or Immulite, or has an Immulite immunochemistry platform in the market, you can count on us continuing to support and develop menus on that product.
The immunoassay area is the primary overlap area. When I go into the laboratory I see a Centaur and I see an Imumulite in the same laboratory. It is not all that often that we’re competing head-to-head for the same business.
The Bayer product line had infectious diseases assays and the DPC product line did not. The DPC product line was excellent in the allergy area and in a number of aciduric test areas. We quickly put together a product positioning that demonstrated to us, and now to our customers, that both products have a place in the market.
If you talk to a Siemens sales representative today and you outline your needs and the needs of your laboratory, the representative will promote the product from the company that best fit your needs. There are differences between products. They fit in different volume spaces, in different locations, and address different menu challenges that a customer may have. We see this as a very complementary portfolio for the future.
The interesting question is about new platforms and methods that are in development. Does it make sense for us to continue this path or could we take the power and capability of our combined engineering forces and chemistry forces and create a better product in the future? What will customers need in the 2010-plus time frame, and what is the best that we can do as Siemens Medical Solutions Diagnostics to meet those needs?
We are more focused on what we can do in the next generation than we are on changing anything we are doing today. We think we have a very powerful portfolio; we are number one in immunoassay in the United States and number two worldwide. These are great positions to be in and there are numerous markets we can still approach.
What efforts will Siemens make to promote themselves as an IVD company?
The process began at the Radiological Society of North America (RSNA) meeting in November 2006, where Siemens had a future technologies booth that described its ideas of integration. Siemens is also talking about this in the marketplace very specifically with customers and in forums like we’re doing here.
You will see advertising campaigns that we will be launching. We have launched a new campaign where we show a patient with a half x-ray and a technician drawing blood in the laboratory. It’s beginning to put the concept out there.
Also, you will be seeing more at shows like RSNA and American Association for Clinical Chemistry meetings where we will be beginning to bring these products together in the marketplace, talking about workflows, and talking about integrating information technology.
What is Siemens’ big picture vision regarding IVDs?
The big picture vision regarding IVDs is the Siemens vision that has already been in existence and from my perspective it is the beauty of what Siemens has done here. I have had the benefit of speaking with Siemens over the past few years about this concept and what I’ve been most impressed with is Siemens’ vision has remained the same throughout time in our dialogue.
Siemens’ vision is very clear. Healthcare can be better. Healthcare can be more effective and efficient. We have to find ways to drive down the costs and improve the efficiency. That vision has remained clear throughout time.
Siemens has had a long-time strategy to improve healthcare efficiency by providing products along the healthcare continuum. Siemens realized many years ago that in vitro diagnostics was one of the gap areas for them in terms of this continuum of prevention and early detection, diagnosis, therapy, and care. In vitro diagnostics was a missing element and if we were able to bring in vitro and in vivo data together with an integrated information systems platform we could provide valuable information to clinicians.
Why should the continuing pressure of healthcare costs translate to less care or to healthcare becoming unavailable? The acquisition of Bayer and DPC just filled in that portfolio and that vision has been validated. If you look at GE’s acquisition of Abbott, it shows that GE saw the same strategy in the marketplace.
From a technology standpoint, how does Siemens plan to merge in vitro and in vivo diagnostics?
If you think about this healthcare continuum and think about it from the perspective of a disease state, we know that in vivo and in vitro are complementary. We know that if you show up in an emergency room presenting with chest pain you are likely to have an in vitro troponin test to identify damage to the heart muscle that could indicate a myocardial infarction (MI). If MI is identified you could be sent for a computed tomography scan and an x-ray exam that would identify the location of damage to the heart, potential blockages, and so on.
So we already know that in healthcare, from a disease focus, technologies are being brought together. They are not integrated from a technical perspective but they are providing information for a clinician. If we could bring that knowledge base together in terms of indications and prognosis then we could add real value in the healthcare continuum.
Molecular imaging and molecular medicine are different, certainly, in terms of how they are applied and in terms of the technologies. We are beginning to talk with the folks in molecular imaging about potential common biomarkers that we can look at. We are in the very early stages of that so there is not a lot that we have come out with in that area, but we are beginning to have a dialogue about interesting markers and from that we may be able to gain some leverage in the marketplace.
How are Siemens, Bayer, and DPC engineers working together to merge in vitro and in vivo technologies?
Siemens is a very technology- and innovation-focused company. It puts a significant amount of revenue into research and development; this has been characteristic of the in vitro business as well. Bayer and DPC have engineers working together on platforms to develop an immunochemistry work cell that combines the products of the two former companies.
We have had a number of our engineers looking at further opportunities for us to leverage instrument and software development technologies. We have identified interesting opportunities for leverage, but we are just starting the process. Most of our focus has been on bringing the Bayer and the DPC groups together and getting our leverage across our combined product offerings.
Is there a target date for the launch of new products?
That activity has already begun with the in vitro product offerings of DPC and Bayer and the integration of the Immulite product line onto the Advia WorkCell. Siemens has a timeline for creation of this work cell to combine the two products. I don’t want to commit to the timeline but within the early parts of 2008 you will see a product in the marketplace from the combined companies. We began this process just over a month ago. We were working together before that time but there were limitations to the dialogue we could have before the acquisitions closed.
In molecular, we are working on significant opportunities that Siemens had been pursuing already and we are now evaluating their application within the in vitro diagnostics space. A number of new exciting opportunities could be coming out of that, but it is very early for me to talk about what they are. Siemens has been active in looking at molecular diagnostic opportunities and we are excited about now having the opportunity to potentially develop and commercialize products. We haven’t put a time limit on new products and Siemens recognizes that value comes from taking care of the customers that we have in the market today and not becoming too distracted along the way.
Which areas of the IVD market does Siemens plan to pursue?
Siemens has made it pretty clear that this molecular space is an area with the potential for personalized medicine and is highly consistent with the vision of playing along the healthcare continuum. If you can diagnostically identify a predisposition to disease you really can make a difference in efficiency and quality of healthcare. There are interesting opportunities within molecular diagnostics that we now have a chance to take a look at; some very interesting collaborations with pharmaceutical companies. Siemens is going to be highly energetic around that area of medicine as well; I expect Siemens will look toward collaborating with the pharmaceutical industry as we move forward.
Siemens’ objective is to drive the broader focus. Siemens was interested in the Bayer offering because this afforded a broad position in the in vitro diagnostic area. We see automation of process and application of information technology as the most important of the emerging areas in the in vitro space. These are areas where Bayer was focused. It is also an area where DPC was moving itself out of their start in immunoassay. And we see these as the most exciting market opportunities.
Additionally, point-of-care is an area in which Bayer had a very strong market position. They were a market leader in urine testing, among the top players in blood gas, and a market leader in HbA1c testing for diabetics. So Bayer had a very strong point-of-care footprint and we want to see where we can develop some new opportunities potentially in point-of-care immunoassays in those areas.
Siemens is excited about a number of very broad opportunities. The near term ones are what we are doing in immunoassay and automation. The opportunities with the longer-term payoff are point-of-care and the molecular area.
What obstacles will Siemens have to overcome in the pharmacogenomics, personalized medicine, and molecular diagnostic arenas?
Having been in this molecular market for a few years, we have seen that the timeline for the translation of genomic research has been a little later than everybody thinks. It hasn’t changed our passion or our energy or our beliefs, but it has caused our expectations to become a bit more realistic.
If you talk to people in the laboratory you will hear that the movement toward molecular medicine will happen when we can automate process and expand menu. If you look at what has happened with cystic fibrosis and human papillomavirus, I mean these are tests that are beginning to emerge very quickly and we are seeing fast growth. The pharma industry is acutely aware of the need to be able to more effectively identify patients, particularly in the area of oncology. We are finding that if you look in those areas and can identify the right markers, the pharma industry is going to be very interested.
We have recalibrated ourselves on how fast it will come but we haven’t stopped our belief that it is going to come. The markers are coming in rapid fire, but evaluating all of the parameters is a significant challenge.
How does Siemens plan to get involved to work on issues that affect the IVD industry?
The entrance of a company like Siemens into this marketplace brings attention to the value of in vitro diagnostics. It validates in vitro diagnostics with the concept that diagnostics are an important part of the healthcare continuum. While a very small percentage of the total spent in healthcare goes to diagnostics; IVD companies are involved in a very high percentage of the decisions.
Siemens’ involvement and now, interestingly enough GE’s involvement, validates the value of IVDs in healthcare. We have been actively involved with industry groups like AdvaMed (Washington, DC), the National Electrical Manufacturers Association (Rosslyn, VA), and others because they do a good job of representing the industry and a good job of advocating for the industry. Siemens will continue to play a role in that.
With the power Siemens has in the marketplace, it has the ability to take all the data that comes from all the diagnostic modalities, including in vitro, and really make a difference in healthcare. We have to stop thinking that a cost-pressure in healthcare means delivering less healthcare or delivering lower quality healthcare. This is a paradigm shift and I think Siemens is going to be in the forefront of it.
We can go to Washington with AdvaMed and others and we can go throughout Europe with European Diagnostic Manufacturers Association and we can advocate for the industry. But I believe the real value is going to come by demonstrating what in vitro and in vivo diagnostics together can do to improve healthcare.
I am impressed with Siemens’ innovation focus. Working on issues that affect the industry is not a matter of having good public relations. It is a matter of actually delivering value. That is what is going to help the industry. The IVD industry is a growing business that has tremendous opportunities in the molecular space.
All of us in the industry can comment about the challenges we face. But healthcare at large faces those same challenges. Our job is to figure out how to deliver value. If you do that, you are going to make a difference in the market and you won’t need to advocate; the market will to come to you.
Do you see a movement toward more industry partnerships that would further merge in vitro and in vivo technologies under the umbrella of diagnostics?
This concept has been in discussion for a number of years and there has been a belief that something that could be gained by bringing these two technologies together. I suspect GE has talked about it with companies and I know that Siemens has talked about it for some time. It seems that the time has become right. The fact that DPC, Bayer, and Abbott have all been acquired recently validates this. These were not events that just came out of the blue. When the number one and two in the in vivo diagnostics market acquire some of the top companies in the in vitro marketplace, it’s a strong market message. I don’t know if this is a trend, but it is a strong indicator.
The simple answer is to look at the class of companies that are engaging here. A company like Siemens, with the breadth it has in the marketplace beyond healthcare, completing a transaction with Bayer, which was very focused on healthcare, saw that healthcare was clearly a professional market that could be better served by another company focused on the professional market. The stars just aligned and made this thing happen.
