June 2002

A.L.I. provides enterprise medical imaging solutions, including PACS (picture archiving and communications systems). The acquisition is expected to close in the third quarter and is subject to regulatory approval and other customary conditions.

For the 12 months ending March 31, A.L.I. reported sales of CN$56 million. The company has more than 500 ultrasound and PACS installations.

With the acquisition of A.L.I., McKesson said it will expand its Horizon Clinicals offering to include data, documents, voice and medical images. Horizon Clinicals is McKesson’s next-generation, integrated suite of solutions for physicians and other clinicians in multiple-care settings. A.L.I. solutions currently address the specialized workflow requirements of radiologists, obstetricians, perinatologists, oncologists and orthopedists.

“The addition of medical imaging solutions to our Horizon Clinicals offering will accelerate our market momentum,” said John H. Hammergren, McKesson president and chief executive officer. “Today, more than 40 percent of all medical exams use digital technology such as computed tomography (CT) and magnetic resonance imaging (MRI) applications, and that percentage is increasing rapidly as digital x-ray technology is being deployed. New medical device technology in these digital applications is also creating a rapid increase in the number of images being created per exam.”
“By joining forces with the leading provider of clinical information systems, we see a tremendous opportunity to extend our reach and take advantage of the large market that exists for next-generation enterprise image management solutions,” said Greg Peet, A.L.I. president and chief executive officer.

McKesson said that Peet and all other personnel associated with sales, installation, development and support will become part of McKesson’s Information Solutions business and will remain based in Vancouver.

Royal Philips Electronics (Amsterdam), Eastman Kodak Co. (Rochester, N.Y.) and Fischer Imaging Corp. (Denver) have chosen new executives to lead their firms in the coming years.

Royal Philips in April named Jouko Karvinen as the new president and CEO of Philips Medical Systems International B.V. (Best, Netherlands). Karvinen, 44, has served an executive vice president at ABB Group (Zurich), where he heads ABB’s Automation Technology Products (Zurich) division.

Karvinen joined Philips on June 1 and assumes the duties of president and CEO Hans Barella on Oct. 1, when Barella retires.

For the past eight years, Karvinen has headed several global businesses in ABB’s automation sector. During that time, he has, among other responsibilities, helped orchestrate the consolidation of businesses and integrate acquisitions into ABB Group.

Barella, 59, has been president and CEO of Philips Medical Systems since 1997, having taken the reins from then-chairman Michael Moakley when Moakley moved to Philips Electronics N.V. (Eindhoven, Netherlands).

With Barella at the helm, Philips embarked on a three-year acquisition
and growth program that transformed

the Medical Systems division into a $4.4 billion company.

Eastman Kodak announced that Dan Kerpelman joins the company on June 1 as president of the Health Imaging unit.

Kerpelman, 43, comes to Kodak after most recently serving for the past 18 months as general manager of GE Medical Systems’ (GEMS of Waukesha, Wis.) Global Diagnostic X-ray division. In that capacity, he was responsible for the marketing, manufacturing, engineering and sale of x-ray products, as well as the introduction of new technology in digital radiography and advanced applications.

Kerpelman fills the vacancy left by J. Michael McQuade, who stepped down in January to become division vice president of 3M Co.’s (St. Paul, Minn.) newly formed Medical division. McQuade served in the Kodak post for 14 months.

Kerpelman served for 17 years at General Electric Co. (Fairfield, Conn.), spending most of his career at GEMS. He also held the positions of general manager for global quality; general manager of global service operations; region services manager; and manager of safety and regulatory engineering during his tenure.

Fischer Imaging, meanwhile, has tapped one of its board members to become the company’s next CEO. Gerald D. Knudson replaces Louis E. Rivelli, who will continue to advise the company on operational matters during the transition.

Rivelli has been with Fischer since his appointment as CEO in October 1999.

Knudson has been a Fischer board member for the past two years and most recently served as chairman and CEO of Combimatrix Corp. (Mukilteo, Wash.) for 18 months from March 1999 to September 2001.

Prior to that post, Knudson was an executive vice president with the former Sterling Diagnostic Imaging Inc. (Greenville, S.C.). He served at Sterling from 1997 to 1999. In May 1999, Agfa-Gevaert Group (Mortsel, Belgium) purchased Sterling.

Under the agreement, Cooper paid $3.5 million for Norland’s bone densitometry systems and technology, with $1.5 million held against representations and warranties. Cooper may pay additional amounts — up to $12 million — based on performance over the next three years.

Cooper added that the acquisition will have no effect on earnings in fiscal year 2002, ending Oct. 31, but will contribute to the bottom line in subsequent quarters. Norland’s bone densitometry products posted sales of $8.5 million in 2001.

For years, Norland’s products have been — and still are — manufactured in Fort Atkinson, Wis., and CSI plans no changes there.

“We plan on keeping that operation going,” said CSI President and CEO Nicholas Pichotta. “What we will do is invest in Norland to see if we can build its revenue base and presence in the market.”

Norland’s bone densitometry products are a new line for CSI, although CSI has had an exclusive agreement with Norland since November 2000 to distribute the systems to the U.S. obstetrics and gynecology market. CSI will continue to sell Norland units under current brand names, targeting the same women’s healthcare providers.

“We are particularly interested in the clinic and primary-care physician markets,” Pichotta noted. “In the future, we think there will be growth in that segment.”

He added that CSI does not plan to market the bone densitometry systems to radiologists or large hospital radiology departments, which would have brought CSI into competition with Hologic Inc. (Bedford, Mass.) and the Lunar division (Madison, Wis.) of GE Medical Systems (Waukesha, Wis.).

By staying with its niche among primary-care physicians and clinics, CSI hopes to benefit from the anticipated increase in the number of woman age 50 and older who will receive osteoporosis screenings.

“We believe primary-care physicians will pay more and more attention to osteoporosis,” Pichotta said. “So, it is a procedure-oriented strategy, as opposed to a technology strategy.”

Norland’s product portfolio offers both peripheral and central DEXA (dual-energy X-ray absorptiometry) measurement systems. The Apollo DXA and Discovery systems are designed to measure bone density in areas such as the heel and forearm. Both systems are marketed to physician offices, small clinics and other settings, such as pharmacies and other non-traditional testing environments. The peripheral systems correlate to hip and spine measurements, but are more compact and lower priced than traditional DEXA systems.

The company’s central measurement systems include three DEXA bone densitometers — the compact Excell, the Excell plus and the full-size XR-46, which measure bone mass density and mineral content.

The creation of the URIS partnership also marks the start of a major investment program in new facilities and PET imaging research at Uppsala University.

Bengt Langstrom, the former head of the Uppsala PET Center, will join Amersham Health as IMANET’s chief scientific officer and retain his professorial position at Uppsala. He also will serve as managing director of URIS on an interim basis.

Finkelson, 69, served as Nortech’s president and CEO since 1989.

Under Finkelson’s watch, Nortech overcame bankruptcy in October 1990 and became known as Nortech Systems Inc. Over the next decade, the company increased sales from $6 million in 1991 to $58.5 million in 2001. Nortech also expanded from one manufacturing facility in Bemidji, Minn., which employed 110 people, to five sites in Minnesota and Wisconsin, employing more than 700 people.

In September 1999, Nortech made a strategic decision to focus its resources on its core electronics manufacturing business. Subsequently, the company sold its Imaging Technologies division (Plymouth, Minn.) to monitor manufacturer Image Systems Corp. (Minnetonka, Minn.) in December 1999.

At the time, Finkelson cited consolidation in the monitor industry and downward price pressure over the previous 18 months as the two prime culprits for the company’s slackening profit margins in the Imaging Technologies segment.

Before Nortech Systems, Finkelson held a variety of positions with Pako Corp. (Minneapolis), including vice president of operational planning and corporate development. He also served at International Multifoods Corp. (Minneapolis) and 3M Company (St. Paul, Minn.).

In a board meeting on May 1, Nortech’s directors elected Michael J. Degen to assume the duties of president and CEO on an interim basis. Degen has been a Nortech director since May 1998 and currently is a senior manager with technology consulting firm SSI Worldwide (Minneapolis). Previous to SSI, Degen served as the managing director of worldwide operations for The Toro Company (Bloomington, Minn.). His career includes more than 30 years in the manufacturing sector with companies, such as Honeywell International Inc. (Morris Township, N.J.).

The Nortech board also named Myron Kunin, a company director since 1990, to take the reins as chairman.

In a prepared statement, Degan said that Nortech management is “committed to carrying through on Quent’s vision of building Nortech Systems into a global player in the electronics manufacturing services industry. Our strategic planning efforts, which began two years ago, address key corporate issues including executive succession plans.”

The Center for Devices and Radiological Health and the FDA recently advised against the use of whole-body CT screening because it holds no merit in detecting disease earlier or allowing more effective treatment. Specifically, the agency said that “at this time, the FDA knows of no data demonstrating that whole-body CT screening is effective in detecting any particular disease early enough for the disease to be managed, treated or cured and advantageously spare a person at least some of the detriment associated with serious illness of premature death.”

The FDA continued, saying “any presumed such benefit … may not be great enough to offset the potential harm such screening could cause.” Other medical associations currently holding the same position include the American College of Radiology, the American College of Cardiology and the American Heart Association.

The FDA said that the most likely outcomes of CT screening of a healthy person with no symptoms of illness are normal findings or suspicious findings requiring follow-up tests. The agency points out that normal findings carry the possibility of inaccuracy and false reassurance. For suspicious findings, invasive testing may be necessary. The radiation dose to the patient also is a concern, as “the principal risk associated with the radiation dose resulting to a person from a CT procedure is the small possibility of developing a radiation-induced cancer some time later in that person’s life.”

Merge is offering 1 million shares of its common stock for the company. Plans are to close the transaction some time this month. eFilm has approximately 35 employees.

“We have a full integration plan that will continue to be developed throughout the next month as we move toward closing,” added Merge President and CEO Richard Linden.

Linden described the companies’ year-plus business partnership as “a key contributor to the acquisition.”

The companies have developed technologies around Merge’s connectivity, integration and image management products and eFilm’s image visualization and display offerings, which include the eFilm Workstation.

Linden added that eFilm’s profitability, positive cash flow and revenue base from its service and software licensing contracts “will create long-term accretive value” for Merge shareholders.

Merge also adds an international sales and service staff in North

America, Europe and Asia, which eFilm lacks.

eFilm’s history begins in 1997 at the University Health Network (Toronto) and Mt. Sinai Hospital (Toronto). The two facilities commissioned a group of engineers to develop an electronic image management system, with the goal of establishing an enterprise-wide filmless environment.

The first phase was completed in April 1998 with the deployment of eFilm Workstation 1.0. By November, the facilities began to share its technology with colleagues around the world through the Internet. The response eventually led to the incorporation of eFilm Medical.

The deal brings together Planar’s flat-panel display products for the healthcare informatics market and Dome’s high-performance display systems for healthcare applications, primarily radiology. Dome helps Planar expand its product portfolio and enter a new market segment. Planar adds worldwide distribution and marketing capabilities, the scale of which Dome lacked.

“We believe the digital radiology market has tremendous growth potential driven by the replacement of CRT [monitors] with flat-panel LCD [display systems] and the migration of medical images from film to filmless,” said Planar President and CEO Balaji Krishnamurthy. “This market complements the healthcare informatics market.”

Planar’s focus now is the integration of Dome’s products and operations into its new parent company.

“We do not anticipate any significant changes in personnel and intend to maintain Dome’s operations at its Waltham location,” Krishnamurthy added.

Dome employs 68 people at that site. In addition, all four of Dome co-founders will remain with Planar. They are: President and CEO G. Richard Fryling; Vice President and Chief Technology Officer Peter M. Steven; Marlin E. Cobb, vice president of product development; and Karen D. Miller, vice president of sales and marketing. The quartet founded Dome in 1989.

The transaction price of $61 million includes $49 million in cash, $3 million in new Planar shares issued to certain Dome stockholders and approximately $9 million in the value of existing Dome stock options assumed by Planar.

Dome posted sales of approximately $28 million last year and in the first quarter of 2002 already has achieved revenues of approximately $10 million.

As for FY02, ending Sept. 27, Planar expects the addition of Dome to help Planar reach $205 million in sales.

“Included in this figure is about $15 million in revenue we believe the acquisition of Dome will add over the five remaining months of our fiscal 2002,” said Planar CFO Steve Buhaly.

If Planar’s sales reach $205 million in FY02, that total would be a slight decline from FY01 when Planar posted sales of $208 million.

Planar recently released its second fiscal quarter results, ending March 29. Sales slipped to $48.9 million, compared with $54.5 million in the second quarter of FY01. Net income also decreased to $2.4 million, compared with $3.9 million in the year-ago quarter.

For the six-month period, sales declined to $89.6 million, compared with $104.9 million in the first half of FY01. Net income fell to $4.8 million, down from $7.2 million in the year-ago period.

In its third fiscal quarter, ending June 28, Planar said it expects to post a one-time charge of approximately $2.3 million related to in-process research-and-development at Dome.

VTI specializes in electromagnetic (EM)-based image-guided surgery (IGS) systems, which are designed for continuous navigation during surgical procedures regardless of a patient’s position or location of the surgical instruments.

With the acquisition, GEMS creates a new business unit — GE Medical Systems Navigation and Visualization Inc. — which will develop and market IGS systems utilizing a universal, open platform that works in conjunction with all manufacturers’ intraoperative tools, instruments, devices and implants.

The new business combines VTI with Surgical Insights Inc. (Evanston, Ill.), which GEMS acquired in February. Surgical Insights develops IGS software applications for orthopedics. Surgical Insights’ IGS orthopedic applications are designed to help surgeons perform orthopedic trauma and total joint surgery procedures.

Ruben C. Berumen, general manager of GEMS’ global surgery and vascular imaging business, said the company plans to make “significant investments” in surgical navigation and visualization technology, which will include improvements to VTI’s Massachusetts facility. The operation will become GEMS’ navigation and visualization global technology center.

The first product from the new business will be the OEC FluoroTrak 9800 Plus, an integrated surgery imaging solution, which incorporates GEMS’ patented 1K-x-1K imaging technology with spine and orthopedic navigation applications. GEMS expects the FluoroTrak 9800 Plus to be available in the third quarter.

The company expects the relocation to be completed by the end of 2003. Tom McCausland, president and CEO of Siemens Medical Solutions USA, said the move to consolidate to one location helps Siemens “more effectively present one face to the customer and utilize our combined strengths.”

Siemens Medical Solutions Health Services is the Siemens information technology (IT) business segment and the former Shared Medical Systems Corp., which Siemens acquired for $2.1 billion in July 2000.

Siemens says that plans currently are underway to expand the Malvern facility to include the medical imaging modalities, customer education facilities and the Information Services Center.

The company added that the relocation also is advantageous because a large portion of Siemens’ medical employees already are located in the Malvern facility. Siemens is one of the largest employers in Pennsylvania, employing nearly 9,000 statewide. Approximately 3,700 are employed by the medical division.

How to accomplish those goals was among the primary themes at the 19th annual meeting of Symposium for Computer Applications in Radiology (SCAR of Great Falls, Va.) early in May in Cleveland. SCAR is co-sponsored by the American College of Radiology (ACR of Reston, Va.).

Radiologists, healthcare IT professionals and a host of other key contributors met to discuss, dissect, debate and try to determine the best possible paths to the next-generation digital image environment.

May’s four-day meeting included a public forum on the technology and role of whole-body imaging in health screening. While supporters say the tests can detect conditions such as calcium in coronary arteries, cancerous lung tumors, and early indications of osteoporosis, some healthcare providers argue there are some shortcomings. They assert that additional procedures are required to clarify the whole-body screening results, the scans expose people to unnecessary radiation, and the results do not measure fatty plaque in coronary arteries.

On the exhibit floor, more than 100 vendors tailor-made their demonstrations and displays to the attendees’ general interest in information technology (IT) and internal and external network connectivity.

Connectivity has become one of the key criteria when healthcare providers consider medical imaging or IT equipment purchases and often can be the difference in closing a sale or losing it.

Digital imaging and information technology have the potential to “revolutionize workflow and productivity patterns in radiology departments and clinics.”

That conclusion is among the findings of an ongoing survey by SCAR’s Research and Development (R&D) Committee.

The survey adds that while digital technologies can offer productivity enhancements, their integration into existing facilities and operations “is neither simple nor easy, and long-term, cooperative strategies will be needed to assess positive and negative effects on efficiency, productivity, and outcomes for patients and referring physicians.”

The survey was conducted last year and included 112 community, university and government hospitals and high-volume outpatient imaging centers.

The SCAR study also found that:

• Filmless operation frees up RT time for image acquisition. Eighty-one percent of RT time is spent in image acquisition in filmless operations, compared with 71 percent in film-based departments;

• Filmless operation significantly increases productivity, when measured in examinations per full-time RT;

• The introduction of PACS is accompanied by a critical learning period in which productivity may be temporarily lowered.

The proposed reorganization would have Comdisco divided into three primary operating subsidiaries. Comdisco’s reorganization plan includes reducing its U.S. work force by approximately 180 positions, or approximately 20 percent of its total workforce. About 80 percent of the reductions are at Comdisco’s Rosemont corporate headquarters.

A hearing on the disclosure statement was scheduled for May 31. A confirmation hearing on the reorganization plan is scheduled for July 30. Comdisco still hopes to emerge from Chapter 11 bankruptcy protection by the end of the third quarter.

May 31 is an important date for Comdisco as the company hopes to complete the sale of its healthcare leasing assets to GE Capital Corp.’s (Stamford, Conn.) Healthcare Financial Services unit for approximately $165 million. GE also will assume approximately $45 million in related secured debt. The companies plan to close the transaction by May 31.

CTI Inc. (Knoxville, Tenn.) is setting its sights on going public. The positron emission tomography (PET) developer and manufacturer filed an S-1 registration statement with the Securities and Exchange Commission (SEC) on April 5 for an initial public offering (IPO) of common stock. CTI is hoping to raise some $230 million from the IPO.

The company says approximately $35 million would be used to expand manufacturing facilities, grow the distribution network of its P.E.T.Net Pharmaceuticals Inc. (Knoxville) subsidiary, and purchase capital equipment.

Another $25 million would be allocated to repay outstanding indebtedness under CTI’s credit line. The rest of the funds would be channeled toward general corporate purposes.

CTI’s business units also include CPS Innovations (formerly CTI PET Systems of Knoxville) and CTI Detector Materials (Knoxville).

Alliance Imaging Inc. (Anaheim, Calif.) notched healthy gains in revenues and earnings in the first quarter. Revenues increased 8 percent to $98.7 million, compared with $91.2 million in the first quarter of 2001. Net income rose sharply to $7.9 million, compared with $1.2 million in the year-ago quarter. The jump in earnings was due, in part, to the adoption of new accounting standards, which eliminate the amortization of goodwill. Alliance Chairman and CEO Richard N. Zehner said the medical imaging services provider continues to see “strong market demand for MRI and increasing demand for positron emission tomography (PET) imaging.”

An increase in sales produced higher revenues for Swissray International Inc. (Elmsford, N.Y.) in the company’s third fiscal quarter, ending March 31. Revenues increased to $6.3 million, compared with $4.7 million in the third quarter of FY01. Swissray also improved its net loss to $925,048, compared with a net loss of $1.7 million in the year-ago quarter. For the nine-month period, revenues increased slightly to $14.5 million, compared with $14.4 million in the same period of FY01. The net loss lessened to $6.6 million, compared with $7.7 million in the year-ago period. Swissray shipped 54 ddR (direct digital radiography) systems in the first nine months of FY02, compared with 40 units in the same period of FY01. The company projects that shipments for all of FY02 will increase 40 percent over the 66 ddR systems delivered in FY01.

Increased revenues and cost containment continue to power Hologic Inc. (Bedford, Mass.) to profitability in the company’s second fiscal quarter, ending March 30.

Revenues gained 5 percent to $46.1 million, compared with $43.7 million in the second quarter of FY01. Excluding results from Hologic’s general radiography products – which the company is terminating — revenues totaled $43 million, up 16 percent from $36.9 million in the same quarter of FY01. Hologic posted a profit of $4.4 million, compared with a net loss of $7.9 million in the year-ago quarter. For the six-month period, revenues climbed to $93.2 million, compared with $88.3 million in the first half of FY01. Excluding general radiography products, revenues increased 16 percent to $85.5 million, up from $73.6 million in the same period of FY01. Hologic tallied net income of $2.8 million, compared with a net loss of $14.7 million in the year-ago period.

A strong showing by its Oncology Systems business offset revenue declines in X-ray Products, as Varian Medical Systems Inc. (Palo Alto, Calif.) posted strong second fiscal quarter results, ending March 29. Sales grew 10 percent to $220.6 million, compared with $200 million in the second quarter of FY01. Net income advanced 32 percent to $23.8 million, up from $18 million in the year-ago quarter. For the six-month period, Varian’s revenues increased to $395.7 million, compared with $361.4 million in the first half of FY01. Net income more than doubled to $37 million, compared with $13.8 million in the year-ago period. Sales in Varian’s Oncology Systems unit rose 18 percent in the quarter to $186 million, powered primarily by orders for upgrades and accessories. Sales in its X-Ray Products unit slid 25 percent in the quarter to $28 million.

Eight new contracts helped boost A.L.I. Technologies Inc.’s (Vancouver, British Columbia, Canada) revenues in its second fiscal quarter, ending March 31. Revenues more than doubled to approximately $11.1 million in the quarter, compared with approximately $5.3 million in the second quarter of FY01. Net income increased to approximately $2.4 million, compared with approximately $432,000 in the year-ago quarter. All amounts are in U.S. dollars. The PACS company added 23 new employees, increasing its workforce in the quarter by 10 percent.