Syncor finds $500,000 in allegedly illegal payments
Syncor International Corp.’s (Woodland Hills, Calif.) investigation into allegedly illegal payments to foreign customers found that approximately $500,000 was paid to state-owned facilities and certain employees from those entities over the last five years.

Those questionable payments, which came to light in early November, potentially could scuttle Syncor’s pending acquisition by Cardinal Health Inc. (Dublin, Ohio).

Cardinal found Syncor’s allegedly illegal payments to foreign customers during its due diligence process and handed the information to Syncor. Syncor, in turn, contacted the U.S. Justice Department and Securities and Exchange Commission (SEC).

The probe focuses on Syncor Chairman Monty Fu and his brother, Moses Fu, who is director of the Asia region for Syncor Overseas Ltd. Both men were placed on paid leave of absence, pending the probe’s outcome.

On Nov. 19, Syncor filed its financial statement with the SEC for the quarter, ending Sept. 30, and released information on its investigation into the allegedly illegal payments.

The investgation
A special committee of Syncor’s board — working with outside counsel and an independent forensic accounting firm — believes it has – in its words – “substantially completed its gathering of facts in connection with the previously announced investigation of all of Syncor’s foreign operations,” except Israel where Syncor only has a licensing arrangement.

The probe included on-site reviews by the special committee in every foreign country in which Syncor has operations.

In its statement, Syncor said that “questionable payments have been made over a substantial period of time to customers in Taiwan, including state-owned and private healthcare facilities and certain of their employees. Based on information gathered to date, some or all of the payments appear to have violated U.S. law, including various provisions of the Foreign Corrupt Practices Act (FCPA) of 1977,” as well as Taiwan law.

“Over the past five years, these payments to state-owned facilities and certain of their employees appear to have totaled an estimated $500,000,” the statement continued.

The committee also found what it described as “questionable payments and other transactions at Syncor operations in at least six other countries in Asia, Latin America and Europe that also may have violated U.S. law, including the payment, record-keeping and controls provisions of the FCPA.”

In its investigation, Syncor also “identified a number of additional instances where activities of Syncor or of its subsidiaries or representatives may have constituted violations of local laws and regulations relating to, among other things, tax, competition and regulatory matters.”

Regulatory talks
Syncor became involved in what is described as “advanced discussions” with the SEC and the Justice Dept. (DOJ) to resolve potential claims related to the investigation’s results.

Syncor added that it “cannot predict the extent to which the SEC, the DOJ or any other governmental authorities will pursue administrative, civil injunctive or criminal proceedings, the imposition of fines or penalties or other remedies or sanctions.”

Based on the discussions with the SEC and the DOJ, Syncor said that it has “accrued $2.5 million for estimated potential fines and other penalties that may be imposed by the SEC and the DOJ in connection with this matter.”

On the financial side of the SEC report, Syncor showed net sales from continuing operations of $192.2 million in the third quarter, a gain of 28 percent from $149.8 million in the same quarter of 2001. Operating income increased 53 percent to $23.9 million, compared with $15.6 million in the year-ago quarter. Sales for Syncor’s U.S. Pharmacy business increased by 28 percent to $181.9 million, compared with $142.1 million in the year-ago quarter.

Syncor also posted a special charge to earnings of $31.3 million in the third quarter. The company took the charge based on its review of the offers it received from potential buyers for its medical imaging business unit, Comprehensive Medical Imaging Inc. (CMI), and its probable loss from the sale of CMI. CMI has been on the block since June.

Cardinal, Syncor revisit acquisition
Cardinal Health Inc. (Dublin, Ohio) and Syncor International Corp. (Woodland Hills, Calif.) went back to the table to re-evaluating terms of Cardinal’s proposed acquisition of the pharmaceutical company in mid-November.

The companies have agreed to move to Jan. 15, 2003, the date after which either could terminate the deal.

Syncor said that it does not believe the investigation into allegedly illegal payments by Syncor Chairman Monty Fu and his brother, Moses Fu, director of the Asia region for Syncor Overseas Ltd., would result in Syncor’s “failure to satisfy the conditions to the merger agreement.”

The current proposal calls for a stock-for-stock transaction, in which Syncor stockholders would receive 0.52 Cardinal Health common shares for each outstanding share of Syncor common stock.

With the drop in Syncor’s stock price in recent months, the original $1.1 billion value of the transaction has declined precipitously. Syncor stock in mid-November traded in the range of $25 per share, down from a high of $35 per share in late August. Cardinal’s shares traded in the range of $65 per share during that time.

Based on those prices, Cardinal would pay approximately $34 for each share of Syncor stock, reducing the value of the transaction to approximately $882 million. Cardinal also would assume approximately $200 million in Syncor debt.

Syncor said it cannot determine the impact its investigation will have on the proposed acquisition until the probe is completed and concludes its discussions with the Securities and Exchange Commission and U.S. Justice Department regarding any potential penalties from the alleged violations.

Platinum closes on buys of PSS’ DI unit, Philips’ HCP division
Platinum Equity LLC (Los Angeles) in November jumped into the healthcare equipment and supply distribution market, completing its deals to acquire Diagnostic Imaging (DI of Jacksonville, Fla.) from PSS World Medical Inc. (Jacksonville) and the Health Care Products (HCP of Mayfield Village, Ohio) division of Royal Philips Electronics (Best, Netherlands).

The global acquisition firm plans to merge the two medical imaging distributors into one company. Platinum also named Jerry C. Cirino as the new entity’s CEO. Cirino served as executive vice president at the former Marconi Medical Systems Inc., where he headed the company’s global sales, service, marketing and operations. He also served as president of Marconi’s HCP division, which was sold to Philips in 2001.

As for the new entity, Platinum said that details on the new company’s name, brand image, management team, operational structure and business plans will be announced as the transition unfolds over the next several months.

Platinum acquired DI in a stock transaction for $45 million in cash and assumes $71 million of DI liabilities. PSS added that the sale will generate more than $40 million in tax benefits that will be applied to ordinary income generated by PSS during fiscal years 2003, 2004 and 2005.

PSS plans to use the proceeds from the sale to reduce its debt load.

With the divestiture of DI and completion of this transaction, PSS President and CEO David A. Smith said the product distribution company enters a new phase of growth, focusing on PSS’ Physician and Long-term Care supply businesses.

For the past several years, PSS has been working to lower internal costs by, among other initiatives, consolidating operations into more centralized facilities.

PSS’ Physician and Long-term Care business posted net sales of $1.1 billion in FY02, ending March 30, compared with $1.06 billion in FY01. The two business units had income from operations of $29.6 million in FY02, compared with $1.8 million in FY01. In FY01, the Long-term Care business posted a loss from operations of $15.5 million.

By comparison, DI achieved net sales of $711.7 million in FY02, compared with $737.9 million in the previous fiscal year. DI also reported a loss from operations in FY02 of $2.4 million, compared with a loss from operations of $1.4 million in FY01.

All income from operations amounts are prior to income taxes and special charges.

CMS sets hike for Medicare, mammo
There is welcome news for healthcare practitioners who provide mammography and colonoscopy services.

The Centers for Medicare & Medicaid Services (CMS of Baltimore, Md.) has released its final rule increasing overall Medicare expenditures for hospital outpatient services in 2003 by approximately 6 percent. Payment rates for mammography will increase by 11 percent next year, while colonoscopy will receive a hike of 10 percent.

The CMS anticipates total payments to outpatient hospital departments to be $18.7 billion in 2003, compared with $17.7 billion in 2002. Medicare payment rates will increase, for each service, by an average of 3.7 percent. Rural hospitals will see total payments increase by 6.2 percent next year.

The final rule is published in the Nov. 1 issue of the Federal Register. The full text of the final rule from CMS is available at

Medicare pays some 5,000 hospital outpatient departments for outpatient services through the Outpatient Prospective Payment System (OPPS). The OPPS establishes base payment rates for 569 ambulatory payment classifications (APCs).

The rule also establishes a new APC for procedures that use drug-eluting stents in the event that the FDA approves pending applications to permit their use. Preliminary studies have shown that use of drug-eluting stents in coronary arteries reduce the frequency of restenosis in the stented vessel.

Study: HIPAA spending could reach $1.3 billion
Healthcare providers, especially physicians in private practice settings, still have plenty of work ahead to comply with the Health Insurance Portability and Accountability Act (HIPAA) by the first deadline of April 2003.

By the time 2003 is done, a report from market research firm Frost & Sullivan (San Jose, Calif.) estimates that healthcare entities affected by HIPAA — namely providers, insurers and information clearinghouses — will have spent approximately $1.3 billion to meet the law’s privacy and security statutes. The study adds that the majority of that money will be spent on privacy and confidentiality training for staff.

Frost &Sullivan’s report polled hospitals, including standalone centers and multi-facility independent delivery networks; private practices, which include specialty and group practices; and managed care organizations (MCOs), such as health maintenance organizations (HMOs).

Among the findings in the study authored by Amith Viswanathan, senior industry analyst for healthcare information systems at Frost & Sullivan, is that approximately 70 percent of MCOs have filed for extensions beyond the April 2003 deadline. In addition, hospitals are grappling with training their employees in confidentiality issues.

“We believe that [confidentiality] will be the paramount issue for hospitals due to the high liability threat that is presented in the form of personnel and staff,” Viswanathan said. “Each employee presents a potential breach of HIPAA privacy policy. Training in the care setting is poised to be a long and expensive internal process.”

The commercial market may experience some “deflation of interest,” the report noted, as many covered entities choose “to keep budget allocations for HIPAA within the confines of the organization.”

Still, information technology companies, which supply electronic medical record (EMR) and electronic date interchange (EDI) technologies, are expected to benefit from HIPAA — EMR for audit trail and access authorization purposes, and EDI for the conversion of transaction code set standards used in reimbursement.

HIPAA also looks like a boon for lawyers and legal counsels, as the “delicate nuances of the privacy ruling and its amendments will call in extensively the services of in-house legal teams,” Viswanathan added. “We think for hospitals, especially, there is no time and/or budget to delve into HIPAA’s privacy rulings and much of the burden will be shifted to designated chief privacy officers and the attorneys that contract for that facility.”

In outlining the report’s findings, Viswanathan said what is “most alarming” is the lack of HIPAA compliance review in the private practice community.

He estimated that nearly 70 percent of private practitioners have waited until the current fourth quarter to begin preparations for HIPAA, preferring to wait until statutes were finalized.

This healthcare segment wasn’t the only one to postpone HIPAA initiatives pending a final version of the law. The poll found that less than 25 percent of the expected total spending for HIPAA — for both policy review time and information technology — had occurred, as of 2001.

Fischer Imaging forms new division, sets new vision
Fischer Imaging Corp. (Denver) in November unveiled several moves to position the company for future growth in both its women’s healthcare line and its long-held specialty imaging products.

Among the organizational changes is the creation of a new division, encompassing Fischer’s radiology, electrophysiology and surgery products. Fischer first announced plans to combine its specialty imaging technologies into the new RE&S division in August.

While RE&S’ products have been part of Fischer’s history, the company’s focus on women’s healthcare — namely, its SenoScan full-field digital mammography system and Mammotest stereotactic breast biopsy system — drew attention from RE&S. In a complete reversal of the past, women’s healthcare product revenues now account for the vast majority of Fischer’s total revenues.

With the non-core RE&S lines languishing, Fischer in August noted there had been — in its words — “significant declines in revenue in recent quarters.” Now, Fischer says that it is ready to recommitting resources to bring growth and profitability to the products.

“I think by making this division we have turned the business around from atrophying over time and going away to blowing some vitality into it and keeping it as a sound profitable business,” said Fischer CEO Gerald D. Knudson.

The newly created RE&S division will continue to develop, market and support products that include Fischer’s VersaRad film-based and digital general radiography systems. Fischer markets VersaRad directly to healthcare facilities and has an OEM agreement to supply systems to Analogic Corp. (Peabody, Mass.) and Eastman Kodak Co.’s (Rochester, N.Y.) Health Imaging division.

Also in the RE&S line are the EPX2 bi-plane electrophysiology system, EP-X single-plane electrophysiology system, Bloom simulators, new Surgical Imaging System (SIS), and ceiling-mounted C-arm for special procedures and emergency applications.

“If you look at those markets in aggregate, they probably have a 5 percent growth factor each year,” estimated Knudson. “There aren’t many companies that serve the basic x-ray lines with fluoroscopy and basic radiology.”

Given the relatively small size of the market, larger medical imaging vendors bypass participation in the product segments.

If Fischer can resurrect the RE&S division, it also will afford the company more strategic options.

“If you think about an exit strategy for the corporation, it would be to position this division to join another company as a stand-alone company or to be acquired by another company as a hand-and-glove fit to the products lines they don’t have currently,” Knudson said. “I see a very profitable business, a very nice return to our shareholders on their investment, and a product line that either will be positioned where we acquire to make that division bigger or we sell to another entity.”

In women’s healthcare, Fischer plans to show enhancements to its SenoScan digital mammography system at the annual meeting of the Radiological Society of North America (RSNA of Oak Brook, Ill.).

US Diagnostic receives U.S. bankruptcy court OK
The U.S. Bankruptcy Court for the Southern District of Florida on Oct. 25 approved US Diagnostic Inc.’s (USD of West Palm Beach, Fla.) motion to divest substantially all of its operating assets, including all 21 of its medical imaging centers.

The court’s authorization follows a Sept. 12 agreement between USD and its primary lender, DVI Inc. (Jamison, Pa.), to sell USD’s assets to DVI Financial Services Inc. (DVIFS of Jamison) for approximately $14 million in cash.

Under the agreement, DVIFS assigned its purchase of USD’s assets to an affiliate of PresGar Medical Imaging Inc., a privately held company that owns and operates medical imaging centers in the United States. PresGar also will assume specified liabilities and contracts of USD and its subsidiaries, which own and operate the 21 fixed-site medical imaging facilities. DVI will reserve its rights to secured claims against certain USD property.

The companies expect the transaction to close by December.

On Sept. 13, USD and certain non-operating subsidiaries filed for a Chapter 11 bankruptcy. USD began to fall into dire financial straits following a string of medical imaging center acquisitions in the mid-1990s.

In August 1998, USD owned and operated 102 medical imaging centers around the United States. However, with debt mounting, USD began to divest its medical imaging centers and revenues declined and net losses increased in 1999 and 2000.

USD sold or closed 35 medical imaging centers in 2000, reducing the number of facilities it owned and operated to 44 by March 2001.

In 2000, USD posted a net loss of $32.6 million, compared with a net loss of $8.2 million in 1999. 2000’s deficit includes a loss from continuing operations of $18.8 million, compared with a loss of $12 million in 1999.

The financial outlook for USD did not improve in 2001. Net revenues declined to $55.9 million in 2001, compared with $127.9 million in 2000. USD also reported a net loss of $24.1 million, compared with a net loss of $32.6 million net loss in 2000.

In its most recent financial report, USD’s net revenues for the first six months of 2002 slipped to $22.5 million, compared with $32.4 million in the same period of 2001. USD’s net loss decreased to $2.2 million, compared with a net loss of $13.4 million in the year-ago period.

Molecular imaging begins to make its mark
Molecular imaging once seemed like a technology far off in the distant future. Today, the burgeoning use of new techniques and technologies is rapidly making steady strides and greatly influencing patient care decisions.

In particular, molecular imaging is having a significant impact in oncology, cardiology, drug development and disease treatment.

A recent forum sponsored by Philips Medical Systems North America (Bothell, Wash.) brought together several researchers to detail how molecular imaging already has made inroads in patient care.

“With molecular imaging, we are asking questions about biology — which genes are activated or deactivated in tissue?” said James P. Basilion, Ph.D., assistant in radiology at the Center for Molecular Imaging Research at Massachusetts General Hospital (Boston). “Can we merge this information of gene activation onto the [anatomical] image to understand which cells are changing their gene expression and to utilize that to aid in diagnosis?”

With a better understanding of complex, biological in vivo interaction, physicians look for a way to detect the presence of a disease sooner. The molecular information also is seen as a key factor for effective drug development and screening, and to monitor if a drug is working within a patient as the drug is administered.

Molecular imaging researchers currently are developing imaging markers for all major pathways to understand biology and disease. The goal is to identify the most informative and clinically relevant imaging biomarkers of disease to enable early detection.

One area where molecular imaging already shows great promise is oncology.

Until now, the standard procedure was to treat patients with general metabolic poisons, which also affected all cells in the body, including DNA replication and microtubular activity.

Conventional wisdom has been that a proliferating cancer cell would be more susceptible to general metabolic poisons compared to normal cells in the body. As a result, the hope was that the cancer would respond to the poisons and treatment would be successful.

The practice was “surprisingly blinded and unsophisticated compared to the tools we are beginning to get an insight on today,” said David Piwnica-Worms, M.D., Ph.D., director of the Molecular Imaging Center at Washington University School of Medicine (St. Louis, Mo.).

Today, oncologists are looking to provide a more target-driven therapy, as molecular imaging helps to identify specific genes that are expressed in certain cancers.

“Individual cancers are as individual as the fingerprints on our fingers,” added Piwnica-Worms. “Each patient can be viewed as an individual and we might be able to in the near future — and it is happening today — tailor therapies.”

The fundamental driver is that these new targeted therapies demand pre-treatment analysis of the presence of the target, Piwnica-Worms said. Molecular targets must be assessed before therapy to optimize choices for patient selection and the appropriate therapy.

“In that context,” he added, “there is great promise for molecular imaging to be one of the major tools in oncology.”

In cardiology, practitioners eye molecular imaging as a way to determine and assess calcium scores, view coronary inflammation with the aid of the radiotracer fluorodeoxyglucose (FDG), and image vessels non-invasively through high-speed CT and CT angiography.

Imaging agents

Researchers also looking to integrate molecular imaging with nanotechnology and nanoscience to better detect disease and enhance patient care and treatment.

“If you don’t know what is causing the disease, all you are going to do is ‘shotgun’ the therapy,” said Samuel A. Wickline, Ph.D., professor of medicine and co-director of the cardiovascular division at Barnes-Jewish Hospital, Washington University School of Medicine (St. Louis). “[Molecular imaging] offers a much more specific and tailored approach.”

Wickline believes the combination of molecular imaging and nanotechnology will help in the development of biosensors — or biomarkers — to detect and locate disease and in the development of new types of tissues that self assemble, are implanted to help fix tears or bones.

CADx Medical Systems and Qualia Computing become one company
CADx Medical Systems Inc. (Laval, Quebec, Canada) in September merged with its research-and-development partner Qualia Computing Inc. (Beavercreek, Ohio).

The merger went into effect on Sept. 26. Financial terms of the merger were not disclosed. The new company will retain the CADx Systems name.

Both companies are involved in computer-aided detection (CAD) technology. Qualia founder Steve Rogers was the prime developer of CADx’s Second Look CAD system to assist radiologists in the early detection of breast cancer.

Rogers will serve as CEO for the new company. Previous CADx Medical Systems and Qualia executives Jim Corbett and Tom Shoup will assume positions as executive vice presidents. CADx also will continue as a subsidiary of Shire Pharmaceuticals Group plc (Chineham, United Kingdom), as Shire remains a major shareholder in the new company.

The FDA in January cleared CADx’s pre-market approval (PMA) application to market Second Look. CADx gathered its data from more than 9,000 patients at 18 medical institutions across the United States for its PMA submission.

Second Look currently is available in North America, Europe, Asia and Japan. Rogers said the new company will help “streamline the process” of delivering the CAD technology to doctors and patients.

The Second Look platform has facilitated three new software releases in 2002. CADx also is pursuing CAD programs for lung and colon cancer detection, as well as cardiovascular disease.

Study questions CT screening in lung cancer
CT screening of lung cancer may yield misleading results and additional studies need to be conducted before this type of screening becomes widely recommended.

That conclusion comes from a study out of the Mayo Clinic (Rochester, Minn.) under the direction of Stephen Swensen, M.D., professor and chair of radiology, who found 98 percent of false positive results in CT screening for lung cancer.

Swensen said that patients should be forewarned of the risks associated with false positive findings, which include the cost of the tests, surgical complications and a patient’s unnecessary worry and distress.

Swensen’s study is published in the October issue of the American Journal of Roentgenology.

Advocates of CT screening maintain that early detection of disease increases a patient’s chances for survival. While no healthcare provider would argue that point, some practitioners assert that early detection does not necessarily lead to a better prognosis, especially in lung cancer cases. Some physicians also are critical of CT screening advocates, alleging that marketing CT screening to the general public downplays the negative and overemphasizes the positive.

The National Cancer Institute currently is conducting a random trial on CT screening for lung cancer, which will include some 50,000 participants in 30 states.

Swensen, a principal investigator for the trial, said study results will help determine whether CT or x-ray screening can help reduce the number of deaths from lung cancer. Trial results will not be available until 2009.

AIUM not amused by some ultrasound exams
While the practice of commercial companies using ultrasound to provide videos of unborn fetuses may be a hit with expectant parents, the American Institute of Ultrasound in Medicine (AIUM of Laurel, Md.) is taking a dim view of the novelty.

The AIUM has reiterated its opposition to the use of ultrasound for what the organization describes as “entertainment purposes,” asserting that the casual use of the medical imaging modality “may have harmful repercussions.”

In its statement, the organization said that while there are “no confirmed biological effects from ultrasound at the present time, the possibility exists that such biological effects may be identified in the future.”

The AIUM also is concerned that parents may interpret the keepsake videos as a medical examination, giving them a false sense of security or that the parents may receive inaccurate information about the videos and undergo unnecessary follow-up tests.

“Entertainment sonograms do not assess fetal well-being,” said AIUM President Alfred B. Kurtz, M.D., in a prepared statement. “The personnel performing these studies are often unskilled, while 3D and 4D studies require considerable expertise so that, at times, the images created can be either disappointing or give a misleading appearance to the fetus.”

Siemens Medical reorganizes its customer relations
Siemens Medical Solutions USA (Iselin, N.J.) in October unveiled a new organizational structure for how the medical imaging and information technology (IT) company will handle its sales and customer relations.

Each Siemens customer now has one point of contact for medical equipment, IT and services on the sales staff to manage a customer’s account.

Under the initiative, all sales, service and logistic activities in the United States will fall under the direction of Thomas N. McCausland, president and CEO of Siemens USA.

Much of the catalyst for the transformation comes from Siemens’ acquisitions of the former Shared Medical Systems Corp. (SMS) – now Siemens’ IT division in Malvern, Pa. – and ultrasound company Acuson Corp. (Mountain View, Calif.).

Siemens acquired SMS in July 2000 and followed four months later by purchasing Acuson in November of that year.

“It was a natural process of integrating these two other companies that we have formed and molded them into our sales organization and now we have one operation,” said. “We were three distinctly different companies when we made the acquisitions. Each company had its own way of doing business. Now we have melded all of that into one process.”

Siemens began to lay the groundwork for the new organization in December 2001, when teams of employees started to dissect customer service processes, such as equipment acquisition, obtaining an order, filling the order and follow-up service.

“We had teams underneath those processes that began taking a look at how we did things in each one of the businesses and how we could bring them altogether into one set of processes that conformed to the way we did business around the world,” McCausland added.

In June, Siemens assembled the teams to identify the processes, analyze Siemens’ business from the customer to the customer, and initiate the process of training employees in new methods.

Malvern move
Coupled with the reorganization is the move of Siemens’ U.S. corporate headquarters to Malvern, Pa., the home of Siemens’ IT (information technology) division and the former Shared Medical Systems.

Plans have been underway since spring to expand the Malvern facility to include the individual medical imaging modalities, Siemens’ Executive Briefing Center, customer education facilities and the Information Services Center.

The current first phase relocated sales and marketing personnel from Iselin to Malvern over the course of several weeks. Those departments were scheduled to be in place by the end of November.

Financial personnel, purchasing employees and some IT staff are set to move by the end of January 2003. The final relocation phase will include the rest of the company, primarily IT personnel, by September of next year.

McCausland said the company expects to retain approximately 70 percent of its 300 or so Iselin employees in the move. There will be approximately 3,000 employees in Malvern when the relocation is completed.

Kodak reports good 3Q, but job cuts in 4Q
Sales and earnings increased at Eastman Kodak Co. (Rochester, N.Y.) in the third quarter, but the gains were not enough to deter the company from planning jobs cuts in the fourth quarter.

The film and imaging giant plans to reduce its 75,000 worldwide work force by 1,300 to 1,700 positions, with approximately 1,000 of those reductions coming before the end of the year.

In the third quarter, net sales increased 1 percent to $3.35 billion, compared with $3.3 billion in the third quarter of 2001. Net income rose to $334 million, compared with $96 million in the year-ago quarter.

For the nine-month period, Kodak’s net sales declined to $9.4 billion, compared with $9.9 billion in the same period of 2001. Net income, however, increased to $657 million, up from $282 million in the year-ago period.

“We have been cautious throughout the year in projecting our earnings, because the economic visibility has been so poor,” said Kodak Chairman and CEO Daniel A. Carp in a prepared statement. “In the third quarter, we were pleasantly surprised by the increased productivity across the company.”

There was good news from Kodak’s Health Imaging division in the third quarter, as the business unit grew sales by 4 percent to $565 million over the third quarter of 2001. Earnings from operations more than doubled to $126 million, compared with $51 million in the year-ago quarter.

Dan Kerpelman, president of Health Imaging and Kodak senior vice president, credited cost control and increased productivity for the gains in the medical division.

“For growth over the long term,” Kerpelman added in a prepared statement, “we will place renewed emphasis on globalization and on developing new products in both existing and new markets to serve customer needs and, in turn, accelerate revenue.”

Medrad hits full speed with Chinese plant
Medrad Inc. (Indianola, Pa.) has begun shipping disposable syringes for use in medical imaging procedures from its manufacturing facility in Dong Guan, Guangdong in the People’s Republic of China.

The deliveries mark the first time Medrad brand syringes have been manufactured overseas. The company anticipates that as much as 5 percent of Medrad’s syringes eventually will be made by Vincent Raya Electronics Company Ltd. (Dong Guan), which manufactures a variety of medical devices in China.

The facility will produce disposable syringes for use in CT and angiography medical imaging procedures. Medrad said the current annual growth rate of these procedures in Asia/Middle East is estimated at 7 percent to 8 percent and the company will increase production at the new Medrad facility as procedure rates increase.

Medrad will continue to partner with Congo Industries Ltd. (Hong Kong), a subsidiary of Elite Industrial Holdings Ltd. (Hong Kong), which has distributed Medrad products in China for 10 years.

Analogic acquires ultrasound and IT firm in Nov.
Analogic Corp. (Peabody, Mass.) is looking to cut itself a larger slice of the ultrasound market.

The medical imaging OEM supplier in November announced its acquisition of the Sound Technology Transducer unit (STI of State College, Pa.) from Siemens Medical Solutions’ Ultrasound division (Issaquah, Wash.).

Terms of the acquisition agreement were not disclosed.

STI employs approximately 110 people and produces linear and tightly curved array ultrasound transducers and probes for medical equipment companies worldwide.

“The acquisition will enable Analogic and STI to pursue new business opportunities with their highly competitive products and to support STI’s current OEM customers,” said Bernard Gordon, Analogic’s chairman and CEO, in a prepared statement.

STI will continue as a preferred supplier of selected transducers to Siemens. Siemens also will continue to deliver parts and products to STI.

Analogic’s holdings include B-K Medical A.S. (Copenhagen), which develops and supplies ultrasound systems and transducers primarily for the urology and surgery markets worldwide.

Also in November, Analogic expanded this time through its Camtronics Medical Systems Ltd. (Hartland, Wis.) subsidiary.

Camtronics acquired VMI Medical Inc. (Ottawa, Ontario, Canada), a medical information software company specializing in clinical database, workflow automation and business improvement products for children’s heart centers. Terms of the transaction were not disclosed.

Camtronics — which develops and markets cardiovascular image and information management technology — plans to integrate VMI’s technology with its Vericis for Cardiology Image and Information Management system. Camtronics will market the combined product to both pediatric and adult cardiology departments.

VMI Medical was founded in 1996 to develop products for the detection, evaluation, treatment and ongoing assessment of congenital and acquired heart disease in fetal, neonatal, pediatric and adolescent care settings.

VMI Medical President Doug Seaborn said the company’s acquisition by Camtronics will provide “substantial financial and technological resources” to strengthen its cardiac imaging and information management technology and support existing products, such as VMI’s EchoVACS and Echo IMS.

VMI Medical will remain at its Ottawa headquarters.

M.D. Imaging spun off by American
American Health Imaging Inc. (Decatur, Ga.) in October spun off its M.D. Imaging unit after completing a round of funding to help cover business development and marketing initiatives.

M.D. Imaging specializes in the placement of high-end medical imaging equipment, primarily MRI and CT systems, in physicians’ offices. The company purchases the equipment, builds a site, hires and manages the radiologist and maintains the equipment for the duration of the contract.

Scott Arant, founder and chairman of M.D. Imaging and American Health Imaging, said the spin-off of M.D. Imaging was done to maximize its opportunities as a separate company.

American Health Imaging named Hal Rogness as the new president of M.D. Imaging. Rogness has 20 years of medical sales and management experience.

DMS Imaging buys Mobile Diagnostic
DMS Imaging Inc. (Fargo, N.D.) is expanding again in the upper Midwest.

The company on Nov. 1 announced its acquisition of the assets and operations of Mobile Diagnostic Services Inc. (Fall River, Wis.). Mobile Diagnostic Services specializes in portable x-ray services to nursing homes, the state prison and other healthcare facilities in and around Milwaukee, Madison, Wausau, and Green Bay, Wisconsin. Mobile Diagnostic Services will operate as part of DMS Portable X-Ray (Minneapolis), a division of DMS Imaging.

Terms of the cash transaction were not disclosed.

DMS Imaging offers mobile medical imaging services to more than 450 healthcare facilities throughout the United States, including MRI, CT, positron emission tomography (PET), nuclear medicine, ultrasound, mammography and bone densitometry.

Financial Pulse
 Hologic Inc. (Bedford, Mass.) received a boost from both its mammography and digital imaging product lines to post a profit in its financial report for the fiscal year, ending Sept. 28.

Revenues increased to $190.2 million in FY02, up 5 percent from $180.2 million in FY01. Excluding Hologic’s general radiography product line, which the company phased out during the fiscal year, revenues for FY02 increased 17 percent to $179.3 million.

Hologic also posted net income of $179,000, compared with a net loss of $20.8 million in FY01. FY02 earnings include restructuring costs of $2.1 million related to Hologic’s closing of its general radiography division and other workforce reductions, as well as operating losses of $1.7 million in that business segment. Excluding those restructuring costs and operating losses, Hologic would have reported pre-tax income of approximately $3.5 million in FY02.

In the fourth fiscal quarter, revenues increased 5 percent to $48.2 million, compared with $45.7 million in the fourth quarter of FY01. Excluding the general radiography product, fourth-quarter revenues increased 16 percent to $46.6 million in the year-ago quarter.

The company also posted a net loss of $3.2 million, compared with a net loss of $4.9 million in the fourth quarter of FY01. The FY02 fourth-quarter net loss includes a provision for income taxes of $3.9 million.

In the fourth fiscal quarter, mammography revenues gained 31 percent to total $20.3 million, compared with $15.4 million in the fourth quarter of FY01.

The company’s osteoporosis assessment segment experienced a downturn in the quarter, with revenues of $15.8 million, compared with $17.9 million in the same quarter of FY01.

General radiography revenues totaled $1.5 million in the fourth quarter, compared with $5.4 million in the year-ago quarter. The downslide was due to Hologic closing its manufacturing facility in Littleton, Mass., in January, scuttling its unprofitable conventional radiography product lines.

Compiled and analyzed by Health Care Markets Inc. (Hilton Head, S.C.), the stock indices above plot the performance of two market segments: Imaging Devices and Imaging Services. The indices are part of WDI’s healthcare database of more than 1,000 companies. For comparison we also plot the progress of the S&P 500. The indices began in January 1991 with a base of 100.

Financial watch
Instrumentarium Oy’s (Helsinki) July acquisition of Spacelabs Medical (Bothell, Wash.) boosted sales in the company’s financial report for the first nine months of 2001. Net sales gained 8 percent to approximately $765 million, compared with approximately $705 million in the same period of 2001. Operating profit before non-recurring items and amortization of goodwill totaled approximately $83.8 million, compared with approximately $82 million in the year-ago period. Strong sales of medical imaging products also elevated Instrumentarium’s Medical Equipment segment sales by 25 percent for the nine-month period to approximately $146.2 million, compared with approximately $117.3 million in the year-ago period. All results are in U.S. dollars.

Alliance Imaging Inc. (Anaheim, Calif.) continues to grow, as the company posted record revenues in the third quarter and nine-month period of 2002. Revenues increased 11 percent to $105.9 million, compared with $95.4 million in the third quarter of 2001. Net income increased to $10 million, up from $4 million in the year-ago quarter. For the first nine months of 2002, revenues increased 10 percent to $308.5 million, compared with $280.1 million in the same period of 2001. Net income grew to $27.5 million, compared with $6 million in the year-ago period.

Radiologix Inc. (Dallas) is blaming lower-than-expected volume and increased payor pre-authorization activity for its slight increase in revenues in the third quarter. Service fee revenues totaled $71.3 million, compared with $69.2 million in the third quarter of 2001. Net income dipped to $3.2 million, compared with $3.8 million in the year-ago quarter. For the nine-month period, service fee revenues reached a record $217.4 million, a gain of 7 percent from $203.3 million in the same period of 2001. Net income rose to $12.4 million, up from $11.2 million in the year-ago period.

Revenues and earnings continued to rise for Merge Technologies Inc. (Milwaukee) in the third quarter. The company posted revenues of $5.3 million, a gain of 32 percent from $4 million in the third quarter of 2001. Net income totaled $1 million, compared with $437,000 in the year-ago quarter. For the nine-month period, revenues advanced to $14 million, up from $11.1 million in the same period of 2001. Net income increased to $2.3 million for the nine months, compared with $589,000 in the year-ago period.

Fischer Imaging Corp. (Denver) says its third-quarter results are “in line” with the company’s sales, service and marketing efforts in 2002. Revenues slipped to $11 million, as compared with $12.9 million in the third quarter of 2001. Fischer also posted a net loss of $1.9 million, compared with net income of $1 million in the year-ago quarter. For the nine-month period, revenues declined to $30.9 million, compared with $36.9 million in the same period last year. Fischer posted net income of $9 million for the first nine months of this year, compared with $2 million in the year-ago period. A portion of Fischer’s nine-month net income in 2002 comes from the settlement of Fischer’s patent infringement suit against the former Trex Medical Corp. and its parent company Thermo Electron Corp. (Waltham, Mass.). Fischer received an initial payment of $25 million from the settlement.

Revenues at GE Medical Systems (GEMS of Waukesha, Wis.) increased 7 percent to $2.1 billion in the third quarter, as some U.S. and Asia projects and financing approvals were extended into future quarters. The medical division of General Electric Co. (Fairfield, Conn.) says third-quarter orders increased 11 percent to $2.5 billion, compared to the year-ago quarter. Two new ultrasound systems — the GE Voluson 730 4D and GE LogiqBook portable ultrasound device — led ultrasound order growth of 20 percent, or $185 million. The 16-slice GE Lightspeed16 CT helped power CT orders to a 12 percent gain to more than $300 million. MR orders climbed 9 percent to more than $305 million, while x-ray orders advanced 12 percent to more than $305 million. Orders for healthcare information technology systems grew 43 percent to more than $325 million.

Saying that the market for advanced radiotherapy systems remains “vibrant,” Varian Medical Systems Inc. (Palo Alto, Calif.) posted double-digit increases in sales and earnings in its fiscal year, ending Sept. 27. Net sales for FY02 rose to $873.1 million, a gain of 13 percent over $773.6 million in FY01. Net earnings for FY02 increased to $93.6 million, compared with $54.3 million in FY01. Net sales within Varian’s Oncology Systems’ business increased to $724.9 million in FY02, compared with $613.7 million in FY01.

SonoSite Inc. (Bothell, Wash.) says its revenues were “right on target” in the third quarter. The company posted revenues of $18.5 million, compared with $11.9 million in the third quarter of 2001. SonoSite also reported a net loss of $2.4 million, compared with a net loss of $2.3 million in the year-ago quarter. For the nine-month period, revenues climbed 58 percent to $47.9 million, up from $30.4 million in the same period of 2001. SonoSite lessened its net loss to $8.6 million, compared with $14 million in the year-ago period. SonoSite added that it has shipped approximately 8,500 units of its SonoSite 180Plus and SonoHeart Elite hand-carried ultrasound systems since they launched more than three years ago.