Business
Codonics Inc. (Middleburg Heights, Ohio) is a privately held developer of color imagers for use in virtually all medical imaging modalities. The company was incorporated in 1982 and got its name because the founders were interested in getting into the genetic engineering market (a codon is a small group of chemical units present in DNA and RNA). Early on, however, the company found a niche in the graphics terminal market, supplying components to those manufacturers. When that market showed a need for quality printing devices, Codonics moved into the graphics printer business.
In 1988, Codonics began distributing print products from Toyo Engineering Corp. (Chiba, Japan) as a method of entering the printer market. But as workstations and PCs gained power and replaced the more expensive graphics terminals, Codonics focused all of its energies on the manufacture of printers and eventually expanded into the medical area. In 1992, the company released its first printer, the NP-600. Codonics gained a foothold in the OEM sales game in 1994 when it released the EP-1600 series, which was customized to work with OEM products without requiring the OEM to write any printer drivers.
Today, Codonics claims a strong market share for dye-diffusion printing in the medical market and relies primarily (70 percent) on OEM agreements to drive sales. More than 500 companies currently resell Codonics printers and the company has 10 direct salespeople. As a private company, the size and annual revenues for Codonics are not readily available, but industry estimates put the company at anywhere from $10 million to $25 million for the 90-person firm. Company officials estimate the firm’s revenues at more than $25 million but less than $100 million.
Internationally, Codonics operates in a variety of markets, with Germany and Japan cited as two of the stronger ones.
Codonics Inc.
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T I M E L I N E1982: Condonics is founded as a supplier of products for the graphics display 1986: Codonics starts selling video printers to supply graphics terminal market. 1986 ? 1988: Company focuses more on printer business as more powerful PCs and workstations replace graphics terminals. 1992: Codonics introduces the NP-600, its first line of in-house printers. 1993: NP-1600 is introduced. 1994: EP-1640 “Economy Printer” introduced; Codonics signs a worldwide agreement to supply GE Medical Systems with printers. 1996: Codonics introduces the EP-1650; Company also signs a three-year deal with ADAC Laboratories to supply that company with the EP-1650. 1997: Codonics releases its current products, the NP-1660M and the NP-1660MD. 1998: DirectVista paper is introduced, allowing photographic-quality output on thermal paper. 1999: Codonics releases the EP-1660 and signs a $6 million deal with GE OEC Medical Systems to supply a version of that product; Company shows the Horizon multimedia imager as a works-in-progress at RSNA. |
Key ManagementPeter O. Botten, President |
Chief Competitors
The market for medical imaging printers is a relatively small one with even fewer printer-specific companies. Many of the companies in the market are major OEMs that expanded into the imager market. The number of PACS-related printer companies became smaller when Agfa-Gevaert (Mortsel, Belgium) closed on its acquisition of SDI Holding Corp. (Houston), the parent company of Sterling Diagnostic Imaging Inc. (Greenville, S.C.), both of which offer printer lines. Agfa’s DryStar 2000C is considered by Codonics to be a direct competitor to its NP-1660M, although in another price range, with the Codonics product listing for less than half the Agfa list price, according to Codonics officials. At RSNA, Agfa unveiled its plans to market two former Sterling printers (SIJ 100 and SI 400) under the Agfa name. Agfa also unveiled the Drystar 4000 series of direct thermal, black-and-white, compact floor standing printers.
When Eastman Kodak Co. (Rochester, N.Y.) purchased Imation Corp. (Oakdale, Minn.) in late 1998, it included Imation’s well-respected DryView family of imagers, which has become the lead product in Kodak’s PACS imager family. Codonics compares its NP-1660M directly to the Imation DryView 8300, another high-end product which prints black and white only.
Seiko Instruments USA Inc. (San Jose, Calif.) offers the ColorPrint series of printers which print to both paper and film, most notably the ColorPoint 1720 series. Fuji Medical Systems USA Inc. (Stamford, Conn.) markets both centralized and decentralized imagers, including the FM-DP L Dry Laser Imager and the FM-DP 2636. Konica Medical Corp. (Wayne, N.J.) unveiled its DryPro 722 at RSNA ’99 featuring a throughput of 150 films per hour.
Sony Electronics, Business and Professional Group (Park Ridge, N.J.) has a presence in the industry with a line of medical printers including the UP-5600MD Digital Color Printer which produces images in 38 seconds and is DICOM-compliant as well as the UP-5600MD1 Analog Color Printer which prints in 30 seconds at 300 dpi. Mitsubishi Electronics America Inc. (Cypress, Calif.) also markets a line of color and black and white analog and digital dye sublimation printers to the medical market.
Principal Products
Codonics unveiled a works in progress at RSNA ’99, the Horizon multimedia imager. The Horizon prints on film and paper in a 14-inch-by-17-inch format. The Horizon is seen by Codonics as the future of medical imagers in the digital age. It’s ability to print on grayscale paper saves money and is billed as “perfect for insurance records, referring physician reports and file copies.” The Horizon requires only two feet of space and connects to any medical system, according to company officials. It is expected to ship in the third quarter.
In the current product lineup, Codonics’ latest series of medical printers is the NP-1660 series of dual mode color dye-diffusion and grayscale direct thermal technology printers. Released in 1997, the NP-1660 series produces images on four media: blue base film, color transparency, color paper, and grayscale paper. It can be customized for sales to OEMs in a variety of imaging modalities, particularly those requiring high-resolution color printing like nuclear medicine, color Doppler ultrasound and oncology therapy planning.
The NP-1660MD Diagnostic Medical DICOM Printer is the latest in the 1660 series. The dual mode (dye diffusion and direct thermal) printer has a 20-second print engine and can print 80 dry films per hour at 300 dpi. It can print seven sizes from 8-inch-by-10-inch to 8.5-inch-by-14-inch and weighs 60 pounds. The 1660MD features 16 megabytes of RAM and 80 megabytes of virtual memory. The printer has a floppy disk drive for software upgrades and network interfaces.
The NP-1660M Medical Printer is a dual-mode diagnostic printer which produces both high-quality paper prints or 8-inch-by-10-inch blue base film for imaging applications. Options on the 1660M include a video frame grabber interface, DICOM image formats, and a shock-resistant portable cart. The NP-1660M interfaces directly with products from a number of imaging OEMs.
The EP-1660P Digital Printer is another version of the dye diffusion/direct thermal mode printer. The EP stands for “Economy Printer” because the product sacrifices some of the bells and whistles available on the NP models in an effort to keep costs to a minimum, company officials say. The network version supports up to eight media sizes and provides both Ethernet and Centronics compatible parallel interfaces. It outputs grayscale and color at 256 levels. Beyond these main products, Codonics offers the 1600 line of imagers, the predecessors to the 1660 line.
Codonics also sells the SA-1000, a screen acquisition device which allows users to connect to video inputs with a hand-held remote, capture images to a local hard drive, format a page and send it to the printer. The company also markets a variety of print media including its DirectVista paper, clear film, and various ribbons. The various media come in sizes ranging from 8-inch-by-10 inch to 9.5-inch-by-14-inch.
Strengths
Codonics focuses on cost more than most of its competitors. Company officials repeatedly emphasize the firm’s ability to control costs and offer products at a lower price point than others in the market. That philosophy gave the company entrance into new markets like the C-arm market. As one Codonics official explains, higher-cost imagers almost equal the cost of a lower-end C-arm, which made it a difficult market to break into for imager makers. By offering a lower priced product, Codonics got the nod in a recent deal with GE OEC Medical Systems (Salt Lake City). The deal calls for Codonics to supply its EP-1660P Low Profile Imagers to GE OEC for distribution with the new Series 9800 C-arm.
The GE OEC deal also is a good example of Codonics’ ability to customize its product for OEM deals rather than adopting a “take it or leave it” attitude with OEM sales. In the GE OEC agreement, the EP-1660P was completely integrated into the Series 9800 C-arm to conserve space, a priority with C-arms.
In addition to the GE OEC deal, Codonics recently renewed its relationship with nuclear medicine firm ADAC Laboratories (Milpitas, Calif.) in a $10 million deal for the supply of NP-1660M and EP-1660N imagers. Codonics officials cite nuclear medicine as a very strong market for its products due to the reliance on color images.
On the service side, Codonics offers a 24-hour swap-out program which allows users to ship the product to the company for repair and receive a replacement within 24 hours. Having the product at the Codonics facility means all the parts are readily available and facilities don’t have to wait for service personnel.
As a smaller company, Codonics has the ability to react quickly to market trends, which may prove crucial in the company’s future. The role of imagers in the radiology department may be changing as digital imaging becomes more prevalent and Codonics has to find the niche for its products. A larger company may be too slow to react and miss the changing trends.
Weaknesses
Codonics officials admit that its name recognition in the medical imaging industry leaves something to be desired. Vying against larger household names like Agfa, Kodak, Seiko, and Sony makes it a difficult market to compete in, but it’s something any small company in this market has to face. Some market watchers feel that, with 17 years in business, Codonics should wield more clout than it currently does.
Beyond the name recognition, a company’s size and budget comes into play at a certain point. While Codonics spends a high percentage of revenues on research and design, that budget still can’t match what a company like Kodak or Agfa can afford to spend on developing new products and enhancing current lines. Areas like marketing and sales also benefit from the deep pockets at the larger firms. Codonics’ visibility needs to be increased to gain market share.
When it comes to direct sales, Agfa and Kodak have the advantage of selling their printers to all of their own PACS installations, while Codonics has to continue to beat down the OEM doors to get in on installations.
And as with any hard-copy based technology, the trend towards digital isn’t good news for Codonics long term. Company officials say that the move towards a totally digital environment will be a slow and gradual one. But it’s obvious the demand for hardcopy will decline as physicians become more used to reading digital images and Codonics’ features on the new Horizon are testament to that. Imagers won’t disappear, but if the demand declines too sharply, only larger OEMs will be able to afford to offer those products. To succeed, Codonics needs to have a clear strategy – and it does.
Outlook
Codonics is not without a plan for the near future as facilities go through a slow transition to digital imaging. In addition to continuing to focus on its current OEM markets including nuclear medicine, 3D CT and MR and oncology therapy planning, the firm plans to drive much further into the PACS market with its PACS Printer philosophy. Company officials say that decentralized, low-cost, flexible printers will become more in demand as PACS installations grow and the resolution capabilities of current monitors lag behind.
Industry watchers agree that monitors are a limiting factor to digital diagnosis and a printer like the NP-1660 which can print to film, paper, color and grayscale may prove to be the perfect transition technology. Its lower price point also will appeal to facilities spending a large chunk of their capital budget on a PACS, DR or CR system. Codonics envisions radiology departments using the 1660 for a variety of functions, including those beyond imaging duties.
Codonics is preparing for the future with a $1.5 million expansion of its Ohio facility in 2000 to more than double its current size. The new space will house the production and warehouse facilities.
Flexibility is key to survival in the ever-evolving medical imaging industry and Codonics has proven its flexibility as a corporation. As hospitals move little by little towards a digital environment but scrutinize costs more as well, Codonics plans to move more into those areas as well.
The high-end ultrasound market also is being targeted as a developing market by Codonics officials. Technologies like color Doppler and soft-tissue imaging “play right into our product line” in the words of one company executive. Other developing segments being targeted by Codonics include cardiac imaging, digital mammography, and R/F markets. 
