April 2001

Mitsubishi operated its 3D volume graphics offerings from its Semiconductor Group and its Real Time Visualization (RTViz) business unit. RTViz was formed in 1998 and specializes in real-time 3D imaging products for healthcare, geophysical, scientific and research applications.

RTViz designs, manufactures and markets Volume Pro visualization products based on its patented technology. Volume Pro provides real-time 3D imaging for CT, MRI and ultrasound systems and for diagnostic and surgical planning workstations for medical imaging equipment companies.

“We always operated RTViz as an entrepreneurial, independent, self-sustaining business unit,” said Steve Sandy, RTViz’s vice president of marketing. “We did not rely on Mitsubishi for anything other than the investment.”

As RTViz evolved and since Mitsubishi does not have a medical division, the “synergies between [Mitsubishi and] Real Time Visualization naturally split,” Sandy added, “and we were managed by the Semiconductor Group.”

TeraRecon is a privately held company headquartered in San Mateo, with branch offices in Tokyo and Concord, Mass. The company targets the medical imaging industry with proprietary processing and reconstruction technologies for next-generation CT and ultrasound systems. TeraRecon’s offerings cover applications from acquisition, review, distribution and archiving.

Mitsubishi and TeraRecon believe that by combining the two companies’ technologies, they will be able to integrate 3D volume processing on a single board or processor in the near future. Those advanced developments could be marketed to a variety of medical imaging equipment marketplaces.

“TeraRecon sees tremendous opportunity and synergy with the volume graphics products and technology developed and distributed to date by Mitsubishi’s RTViz division,” said Motoaki Saito, M.D., TeraRecon’s president and CEO. “With this acquisition, TeraRecon has accelerated its plans to deploy comprehensive, innovative solutions for next-generation imaging systems.”

With $4.5 million investment, Saito said Mitsubishi now owns 2.7 percent share in TeraRecon. The investment does not include any exclusivity rights to RTViz or TeraRecon technologies.

Over the last three years, Mitsubishi has made what Saito described as a “major investment” to RTViz in aid in its evolution. He declined to provide an amount, other than to say it is “far more than the $4.5 million” that Mitsubishi is investing into TeraRecon.

Last November, DC unveiled plans to sell the two companies to ICII Ventures Inc. (Torrance, Calif.) for approximately $7 million. At that time, DC said the sale would close on or about Dec. 15, 2000, and proceeds from the transaction would be used to reduce DC’s indebtedness to its lenders.

NAI had acquired DICOM connectivity firm Aspect in February 2000. Aspect became part of NAI’s Technology Product division, which focuses on four product areas — DICOM network integration, digital radiographic upgrades, Web-based image management solutions and OEM subassembly systems.

On Feb. 28, DC President and CEO Brock Armstrong said in a prepared statement that “as a result of weaker than anticipated earnings from Technology Suppliers, the sale of North American Imaging Inc. and its subsidiary, Aspect Electronics Inc. will not be completed.”

Because Technology Suppliers did not meet its profit forecast, ICII chose not to pursue the acquisition.

In its first fiscal quarter financial report, ending Dec. 31, 2000, DC reported that Aspect’s increased revenues were “partly offset by weaker X-ray and image intensifier sales.” Gross margin totaled approximately $1.5 million, compared with $1.4 million in the year-ago quarter.

For all of DC, increased revenues from its imaging centers helped power the company to greater revenues in the first fiscal quarter. Revenues increased 4 percent to $17.2 million, compared with $16.5 million in the first quarter of FY2000. DC also posted a net loss of approximately $770,000, compared with net income of approximately $28,000 in the year-ago quarter.

The Imaging Centre business led the way with revenues of approximately $12.5 million in the first fiscal quarter, up from approximately $11.7 million in the year-ago quarter. DC credited the revenue gain to imaging clinic acquisitions late in 1999 and 2000 and individual imaging clinic growth.

Despite holding its own on first fiscal quarter revenues, DC reiterated the statement it made last November that the company is “in default of its credit facility.”

In Armstrong’s statement from Feb. 28, he added that lenders “continue to defer principal repayments and provide [DC] with advances to meet its working capital requirements. In addition, the company’s lenders are continuing to actively work with the company toward a restructuring plan.”

DC has a network of more than 160 medical imaging centers across Canada and two wholly owned subsidiaries, NAI and Diatech Imaging Inc. (Ottawa, Ontario, Canada).

The ultrasound equipment and service company recently added some 5,000 square feet to its Wallingford operation, bringing the expanded space for its service repair, administrative and warehouse facility to approximately 20,000 square feet. All of Aloka’s manufacturing is done at the company’s corporate headquarters in Tokyo.

The company traditionally has had a market presence in ob/gyn, perinatology and surgery. With ultrasound systems that range in price from $8,000 to $200,000, Aloka currently is re-evaluating where to focus its resources and is setting its sights on new markets.

The first likely target is a re-entry into the U.S. cardiology arena, which Aloka exited about 10 years ago. At the time, Aloka did not believe it had the right product for where the cardiology market was headed. In fact, Aloka America was the only Aloka subsidiary to leave cardiology because of the poor market prospects in the United States.

Aloka will promote its high-end Aloka 5500 in cardiology circles, expanding the reach of the ultrasound system beyond its traditional applications in surgical settings and in perinatology. The 5500 has a price range of $150,000 and up, depending on options.

“We are currently in the process of doing research to look at the [cardiology] market,” said Aloka COO David Famiglietti, “where it is, who the successful people are, the types of products they have and how best to enter into the market, so people don’t say ‘Who’s Aloka?’”

Aloka also believes it can garner share in the anesthesiology market — in Famiglietti’s words — “relatively easily. We are already very strong in surgery, so we already have a presence in the OR.”

For this segment, Aloka offers its model 5000, which has fewer options than the 5500.

The third target market likely will be urology, particularly in brachytherapy. Aloka has several low-end and premium products to offer, although Famiglietti said less expensive ultrasound systems — such as Aloka’s model 900 portable ultrasound system — are the keys to market success in urology.

While Aloka has no plans to exit any markets at this time, the company is keeping close watch on low-margin sales to ob/gyn offices.

“That marketplace has become so price competitive,” Famiglietti said. “Our product line is somewhat competitive, but there are a lot of sales costs to get into that [market]. We are trying to focus our efforts on the higher-end markets right now.”

Aloka tallied U.S. sales of approximately $25 million in 2000. “Financially, we hope to be over $30 million within the next year, and we hope to be about $50 million in the next four years,” Famiglietti added.

More than 10 percent of the 9,908 registered sites in the contiguous states participated in the national study including hospitals, independent imaging centers and physician offices with fixed and mobile services, said IMV, formerly Technology Marketing Group.

Other highlights of the findings include:
• The reported mix of screening vs. diagnostic procedures performed was 73 percent screening and 27 percent diagnostic.
• 9 percent of respondents indicate they currently have and 8 percent are planning to purchase a “computer-aided diagnosis/detection” system (over the next three years).

Calling 2000 a “stellar year,” the medical imaging equipment manufacturer credits its reorganization into business units and its build-to-order manufacturing strategy for its financial turnaround. Fischer said that its new manufacturing blueprint has led to a decrease in production lead time from eight weeks in 1999 to two weeks in 2000 and has contributed greatly to improved gross margins, which were 28 percent greater last year than in 1999.

Fischer also replaced some of its low-margin OEM relationships with more lucrative pacts, such as its X-ray and hardware component partnership with Eastman Kodak Co.’s (Rochester, N.Y.) Health Imaging division and Analogic Corp. (Peabody, Mass.).

Fischer’s 2000 profit was achieved despite a 14 percent decline in revenues. Revenues in 2000 slipped to $51 million, compared with $59.9 million in 1999.

“This change is due primarily to the planned reduction of low-margin OEM sales and partially offset by an increase in service revenue,” added Rodney B. Johnson, Fischer’s vice president of finance and CFO.

Net income totaled $2.1 million, compared with a net loss of $5.4 million in 1999.

Fischer does not have much time to bask in the glory of its 2000 results. Rivelli warned analysts that the company faces revenue challenges in the first half of this year. He cited the flattening of sales of stereotactic systems as one area of concern.

Fischer also submitted its PMA (pre-market approval) application for its SenoScan digital mammography system to the FDA in early March. Fischer hopes to begin shipments in the second half of this year.

That was one of the messages delivered last month at the 26th annual Scientific Meeting of the Society of Cardiovascular and Interventional Radiology (SCVIR of Fairfax, Va.).

“The era of noninvasive imaging of the coronary artery is either here now or it is about to arrive in the very near future,” opined David Levin, M.D., professor and chairman of radiology at Thomas Jefferson University Hospital (Philadelphia). “The holy grail of cardiac CT and MRI will be the ability to visualize the coronary arteries as clearly as we see them on the angiogram.”

Two years ago, SCVIR adopted an initiative to re-energize radiologists’ interest in imaging the heart. SCVIR elicited the help of the Radiological Society of North America (RSNA of Chicago) and the American College of Cardiology (ACC of Reston, Va.) to co-sponsor the campaign to acquaint providers with

cardiac imaging. The groups cited the public health impact and because of new technological progress in CT and MRI.

Jerry F. Breen, M.D., consultant at the Mayo Clinic (Rochester, Minn.), encouraged the use of CT scanning to detect coronary artery calcification, in part to stay ahead of the competition. “Also, patients are asking for this exam like no other radiology exam in the history of our profession,” he said. “Finally, it is probably a useful test, especially in the right population.”

While calcium scoring may be helpful in predicting a future cardiac event, Breen admittedly remained unsure as to what the calculations actually mean. “For a [calcium] score, none or zero is probably a good thing,” he quipped. “Having ‘lots’ is probably a bad thing. Having some is not as good as having none, but it is better than having ‘lots’.”

It is the younger patient with the higher score for their age group that it is predictive of future events, Breen added, “but I think to put a lot of support and faith in the calcium score is yet to be determined.”

In MRI, Vivian Lee, M.D., associate professor of radiology at New York University Medical Center, advised colleagues to not wait any longer to take advantage of the modality for cardiac imaging.

“The technology is available today for routine imaging of the heart that exceeds that of other existing technologies,” she said.

One technology Lee touted was True FISP (fast imaging with steady state precision), which can image cardiac wall motion and function without contrast agents. Faster gradients enable True FISP to enhance image contrast and shorten the time of image acquisition to seven to 10 seconds per slice. “Now we are taking about a breath hold that is possible for almost all of our cardiac patients,” she added.

Why are some facilities slow to adopt MRI for cardiac imaging? Lee said that many hospitals have older machines that need updating. “They need newer hardware and newer software that has these capabilities,” she said. “Also I think there is the process of education whereby radiologists and the referring doctors need to learn about what is available to hospitals.”

Uterine fibroid embolization (UFE) also was among the prominent topics for advances in healthcare at this year’s meeting.

In a head-to-head comparison between UFE and myomectomy, a Stanford (Calif.) University Medical Center study found that UFE appears to be superior in alleviating excessive menstrual bleeding, a major symptom of uterine fibroids.

In the study, 36 women had myomectomies and 76 women had UFE. Bleeding decreased significantly in more than 90 percent of women who received UFE, compared with 61 percent who underwent a myomectomy.

A new protocol using MRI may make determining the suitability of a potential living liver donor for a child or adult who needs a transplant. The simple procedure using several blood tests and a single MRI scan may be completed in 30 minutes.

The protocol came about through research conducted by James C. Carr, M.D., fellow cardiovascular and interventional radiology at Northwestern Memorial Hospital and Northwestern University Medical School (Chicago).

Carr found that two MRI techniques — MRA (magnetic resonance angiography) and TrueFISP — use radio waves and a magnetic field rather that radiation to capture images. Both techniques are implemented using a high-field MRI system that has ultrafast imaging capabilities and can be performed at the same time.

As in past years, HealthTech 2001 offers a multitude of specialized educational sessions, valuable networking opportunities, details on the latest technologies and services available today, and many other venues to help advance one’s career or business.

Once again, HealthTech gets a fine, early educational start on Sunday, April 22, thanks to Wayne Hibbs, president of C. Wayne Hibbs & Associates (Dallas), and William K. Pollock, president of Strategies for Growth (Westtown, Pa.).

Hibbs wants to know “Is That Your Final Answer on Terms and Conditions?” Hibbs’ workshop will address the expectations and realities of terms and conditions for both medical equipment purchasing and service agreements. Pollock deals with “Service Planning: Building and Applying a Strategic Services Marketing Plan.” Pollock’s forum offers advice of implementing a successful services marketing plan and answers many key questions that arise in the planning process.

Monday’s schedule
Manuel J. Glynias, president and CEO of NetGenics (Cleveland), is Monday morning’s keynote speaker. His topic is “The Source Code of Life,” as he provides insights on the effect information technology has on the understanding of human diseases and on the identification of new molecular targets for drug discovery.

From there, HealthTech trekkers are welcome to attend any one of a number of sessions throughout the day. James Lussier, president and CEO of St. Charles Medical Center (Bend, Ore.), returns to HealthTech this year with “What Healthcare CEOs Need from Technology.” A new leadership role for the engineer/manager will be presented, which moves hospitals and healthcare systems to a more dynamic level of integrated service through telehealth and communication technologies.

Jim Loeffler, BMET for International Aid Medical Equipment Services (Spring Lake, Mich.), discusses ways the U.S. can “Help Developing Countries Using Our Healthcare Technology.” While the U.S. is technology rich, much unused, unwanted, viable equipment still may have many productive years left.

Tuesday’s lineup
Keynoter James B. Battles, Ph.D., senior service fellow for the Agency for Healthcare Research and Quality (Rockville, Md.), launches the schedule on Tuesday, April 24. Battles discusses “Doing What Counts for Public Safety,” as he outlines federal government activities to address the problem of preventable medical errors.

Tuesday afternoon, Scott Schubert, manager of global X-ray research marketing for GE Medical Systems (Waukesha, Wis.), delves into “Studies Which Demonstrate the Clinical and Economic Benefits of Flat-Panel Digital X-ray.”

Barbara Maguire, director of biomedical engineering at New York Presbyterian, will offer her insights on going “Wireless in Healthcare” and how to embrace it in one’s facility.

Wednesday’s finale
HealthTech 2001 continues a strong lineup on Wednesday, April 25, with several forms and workshops. Charles B. Myers, director of healthcare equipment planning at Peterson Associates (Charlotte, N.C.), details with maximizing a capital budget with an effective strategy and implementation plan.

For more information or to register for HealthTech 2001, call (401) 455-0555.

The study, published in the Nov. 16, 2000, issue of The New England Journal of Medicine, involved 50 adults — 44 men and 6 women — already scheduled for revascularization by either bypass surgery or angioplasty. Patient recruitment time covered approximately 20 months, from Jan. 7, 1998, through Sept. 30, 1999.

“Cardiac MRI is something that people believe will emerge as an important tool, but right now it is not routinely used for heart diagnosis,” said Robert M. Judd, Ph.D., a researcher in Northwestern’s department of medicine and a lead investigator in the study with Northwestern cardiologist Raymond J. Kim, M.D.

“People who get MRIs for other organs or knees or brains, get an MRI contrast agent as part of the test, and it makes different features in the body show up in a way that makes them a little bit easier to see,” Judd added. “Our hypothesis is, when you give these contrast agents and then take images of the heart, you see bright spots in the heart. Based on some previous studies, we built up this hypothesis that these bright areas were areas of necrosis — areas that were dead.”

For purposes of the study, investigators scanned patients by MRI in two parts prior to surgery, first, for wall motion, playing the cine movies to see which parts of the heart were not moving. They then administered the contrast agent and scanned patients to see whether the areas that were not moving were either bright or not bright and also how much of the wall thickness appeared bright. Three months after recovery from surgery, patients were scanned again, this time to view which regions of the heart that had not been moving originally had started moving again.

“Basically, we found that if you take all the areas of the heart that are not contracting well and they have no hyper-enhancement (no brightness) whatsoever, they have a very high chance — about 80 percent — of improving,” Judd said. “Conversely, if 75 percent to 100 percent of the thickness of the wall is hyper-enhanced, they have only about a 5 percent chance of improving. We also found out that in between, there is a decreasing likelihood that the more bright you have, the less likely you are to improve. That was an issue you couldn’t look at before because the current methods of evaluation cannot distinguish within the heart wall.”

The test did not affect patients in the Northwestern study, because all had been scheduled for surgery, Judd noted. However, the theory holds that if people are scanned before surgery and their tests reveal hearts that are full of bright, or dead, areas with no expectation of improvement, they should be spared the risk and the cost of surgery, he said.

“First of all, nobody knew that MRI could predict anything at all, so now, in the first level, it says you can use contrast-enhanced MRI for the same purpose you were using those other tests; this offers a third option,” he commented. “In addition to that, there may be reasons to believe it may be more advantageous than the other tests because it also looks at how much of the heart is involved.”

Judd said that other questions that arise from such a study — FDA clearance, healthcare reimbursement and ethical considerations, for example — are under discussion and that additional trials most likely will be carried out at other locations.

Epix Medical Inc. (Cambridge, Mass.) benefited greatly from product development revenues from Schering AG (Berlin) to reach revenues of $8.8 million in 2000. That amount compares with revenues of $1.1 million in 1999. Revenues in 2000 included $3 million related to Schering AG’s up-front licensing fee for the Japanese rights to Epix’s MS-325 MRI contrast agent. Epix posted a net loss for the year of $21 million, compared with a net loss of $17 million in 1999.

Syncor International Corp. (Woodland Hills, Calif.) says strong sales growth among all its businesses led to double-digit gains in revenues and earnings in 2000. Revenues advanced to $629.4 million, compared with $520.3 million in 1999. Net income rose to $29.5 million, up from $19.2 million in 1999. Syncor’s U.S. medical imaging business — which operates as Comprehensive Medical Imaging Inc. (CMI) — notched sales of $100.8 million last year, almost double sales of $55.2 million in 1999.

Revenues from software license fees buoyed Vital Images Inc. (Minneapolis) to greater heights in 2000. Revenues increased 60 percent to $10.6 million, compared with $6.6 million in 1999. Revenue from software license fees contributed $7 million to total revenues, up from $4.2 million in 1999. The company reduced its net loss last year to $2.6 million, compared with a net loss of $3.2 million in 1999.

Revenues grew at Fonar Corp. (Melville, N.Y.) in the company’s second fiscal quarter, ending Dec. 31, 2000. Revenues reached $11 million, compared with $10 million in the second quarter of FY2000. Fonar posted a net loss of $3 million, compared with a net loss of $2.7 million in the year-ago quarter. For the six-month period, revenues totaled $21.1 million, up from $19.9 million in the first half of FY2000. The company’s mid-fiscal year net loss was $6.9 million, compared with a net loss of $6 million in the year-ago period.

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.

Voxar Ltd. (Edinburgh, Scotland) has named Conrad Chin to the new position of technical director and appointed John Field as head of engineering and customs solutions. Chin will oversee all research and development activity and technology strategy. He most recently served as Voxar’s head of engineering. Field had been with Voxar since 1999 as custom solutions manager. In his new position, he will manage the company’s product development in new and existing markets and will lead efforts to attract engineering talent to the firm.

Computerized Thermal Imaging Inc. (CTI of Layton, Utah) has named Joseph Labenek as vice president of international sales. Most recently, Labenek served as vice president of international sales and marketing for Lorad Corp., a division of the former Trex Medical Corp. (Danbury, Conn.). CTI also named Michael J. Giallongo to the newly created position of vice president of Eastern U.S. regional sales operations. Giallongo joins CTI after 26 years with XRE Corp. (Littleton, Mass.), a division of the former Trex Medical, where he served in various marketing and manufacturing positions. Most recently, he was vice president of network development for MDB Information Network (Dallas).

Philips Medical Systems International B.V. (Best, Netherlands) has named Jeffrey W. Nelson as general manager for ADAC Laboratories (Milpitas, Calif.). Nelson most recently served as ADAC’s senior vice president of sales. In his new post, he will be responsible for ADAC’s nuclear medicine, PET (positron emission tomography) and service businesses.

Marconi Medical Systems Inc. (Highland Heights, Ohio) has named Ralph Balestriere as senior vice president and CFO. Balestriere comes to Marconi from C.R. Bard Inc. (Murray Hill, N.J.), where he served as vice president and general manager of international administration.