GE Medical Systems

Business
GE Medical Systems (GEMS) is one of seven operating segments within General Electric Co. (GE of Fairfield, Conn.). The diversified industrial company’s product line includes lighting, appliances, aircraft engines and plastics. GE also owns the television network NBC and its affiliate networks, CNBC and MSNBC.

For the first nine months of 2000, GE’s revenues increased 20 percent to $94.9 billion, compared with $78.8 billion in the same period of 1999. Net income also gained 20 percent to $9.1 billion, compared with $7.6 billion in the year-ago period.

From a financial point of view, the bottom-line goal for GE Medical Systems is growth, growth and more growth. The healthcare company is committed to producing double-digit revenue and earning advances in each quarter over the previous year’s quarters.

“GE Medical Systems will not sit for less than double-digit top-line and earnings growth,” says Paul J. Mirabella, president and CEO of GE Medical Systems-Americas.

GE reports GE Medical Systems’ quarterly revenues and earnings within GE’s Technical Products and Services unit. Technical Products and Services appears to be well along on its pace to top 1999 revenues of $6.9 billion and earnings of $1.3 billion.

Through the first nine months of 2000, the unit posted revenues of $5.5 billion, up 18 percent from $4.7 billion in the same period of 1999. Net income climbed 31 percent to $1.2 billion, compared with $912 million in the year-ago period.

In its 1999 annual report, GE wrote that the 29 percent improvement in Techincal Products and Services’ revenues in 1999, compared with 1998, was “primarily attributed to growth at [GE] Medical Systems, the result of higher volume, including new products, and continued growth in product services, partially offset by lower selling prices across the segment.”

Operating profit, the report continued, increased 12 percent over 1998 “as productivity and volume increases more than offset lower selling prices.”

In 1999, GE Medical Systems received orders totaling $6.4 billion, compared with $4.8 billion in 1998. The backlog of unfilled orders at the end of 1999 was $3.1 billion, compared with $2.6 billion at the end of 1998.

GEMS’ mission is the same as any other company’s goal – to develop leadership technology that serves the needs of patients and customers in healthcare and to be No. 1 in as many product and service categories as possible.

Without a doubt, GEMS is at or near the top in market share around the world in each medical imaging modality in which the company participates, whether it be radiography, cardiology, ultrasound, nuclear medicine or mammography.

Traded
General Electric trades under the ticket symbol GE on the New York Stock Exchange. The stock’s 52-week high is $60.50 per share; its 52-week low is $38.19 per share. In mid-October, the stock traded in the range of $53 per share. The company implemented a 2-for-1 stock split this past May.

Principal Products
GEMS covers the gamut in medical imaging equipment and related products and services. GEMS’ offerings include radiography, radiography and fluoroscopy, vascular, cardiology, mobile C-arms, mammography and women’s healthcare.

Arguably, X-ray may be the modality with the most widespread growth potential, given the advent of digital technologies in the seven aforementioned product areas. In X-ray, digital is the future.

In February, GEMS unveiled its new Innova 2000 all-digital cardiovascular imaging system and formally launched its first-in-the-industry, full-field digital mammography system – the Senographe 2000D.

Both the Innova and Senographe feature GEMS’ Revolution digital detector, the flat-panel amorphous silicon detector used in GEMS’ Revolution QX/i digital radiography system. The FDA cleared the Revolution QX/i in October 1998.

The Innova’s digital capabilities are designed to help clinicians view hard-to-see blood vessels, as well as devices used during cardiac procedures, including stents, guidewires and catheters. The technology also enables cardiologists to see blood vessels clearly in larger patients who can be more difficult to image with conventional X-ray systems.

GEMS Senographe 2000D is the only FDA-cleared full-field digital mammography system. The agency has approved the system for hard-copy printing image reads. FDA clearance for soft-copy reading is pending.

The Senographe 2000D received regulatory approval last year in Europe, Canada, Latin America and much of Asia. As of early October, GEMS had sold approximately 50 systems in the United States, and anticipated having 80 to 90 units installed by year’s end.

The Senographe 2000D includes an acquisition workstation that displays a digital image within 10 seconds after an exposure to provide the technologist with quick verification of correct patient positioning. It also uses a review workstation that features a variety of imaging enhancing and magnification tools.

GEMS C-arm line is led by its Series 9800 digital mobile imaging system, which GEMS garnered through its November 1999 acquisition of OEC Medical Systems Inc. (Salt Lake City). Now manufactured by GEMS OEC, the Series 9800 features real-time, 1K-by-1K imaging resolution technology, as well as all image capture, recording and management capabilities in a mobile system comparable to fixed-room fluoroscopic imaging systems at a lower cost.

In nuclear medicine, GEMS was the first company out of the gate with fusion imaging technology. GEMS’ Millennium VG Hawkeye was the first FDA-cleared imaging system, which merges anatomical and functional images through the combination of CT with PET (positron emission tomography). Hawkeye debuted as a works-in-progress in June 1999 – dubbed functional anatomic mapping at the time – and received FDA clearance to market earlier this year.

GEMS also offers its Millennium MC, a next-generation, fixed-angle imaging system designed for nuclear cardiology. The system’s small footprint can fit a room 11 feet by 11 feet, and is upgradeable to a variable-angle general-purpose system. Millennium MC also features GE-patented digital CSE detectors and ATC attenuation correction to help reduce cardiac SPECT (single photon emission computed tomography) artifacts.

In CT, the GE HiSpeed NX/i is the company’s newest multislice CT scanner. The NX/i incorporates GEMS’ patented HiLight detector and thinner slices for enhanced image quality and scan times as fast as 0.7 seconds to optimize contrast enhancement for tri-phase organ studies.

CT products include the GE LightSpeed QX/i CT multislice scanner with solid-state CT detector for simultaneous scanning of multiple adjacent slices of the anatomy in less than one second.

The HiSpeed CT series includes the premium CT/i model, followed by the ZX/i, LX/i, FX/i and DX/i CT scanners with varying degrees of technology and performance, all with upgrades capabilities.

On the low-end of the line is GEMS’ CT/e, which carries much of the software features as GEMS’ high-end HiSpeed and LightSpeed lines.

The CT/e, which debuted at RSNA ’99, is designed with GEMS’ HiLight detector and helical scanning technology. The helical scanning mode allows doctors to acquire a volume of data rather than the previous single-slice views. The company markets the CT/e as a secondary or back-up CT unit for hospitals and a primary scanner for smaller clinics.

In October 1999, GEMS launched its 0.7 tesla Signa OpenSpeed open MRI. In addition to traditional MRI capabilities – such as knee, shoulder, ankle, spine and brain – the GE Signa OpenSpeed potentially can be used in pediatric care, monitoring of stroke therapy, trauma patients and minimally invasive surgery procedures. GEMS says the OpenSpeed allows doctors to scan patients three times faster than any other commercially available open MRI system.

The CV/i MRI is a 1.5T unit designed for cardiovascular applications. Advanced cardiac features include an open, patient-friendly, 70 cm short bore and dockable table for greater patient comfort, access and safety.

GEMS’ 0.5T SP/i intra-operative MRI scanner offers a specially designed imaging magnet that allows radiologists and surgeons to perform procedures while viewing the position of their instruments in relation to organs and structures inside the body.

The 0.5 T MR/i is one of three open MRI models. The wide open, high-field system features a shorter bore and dual-flared apertures for greater openness and patient access.

GEMS’ new VH/i is a 3.0 tesla scanner designed for real-time image processing for functional MRI and is DICOM 3.0-compatible. The Signa VH/i is FDA-cleared and features an open design and dockable table.

One goal of GEMS’ ultrasound segment is to introduce one new clinical breakthrough to its product line every year. GEMS strategy is to unveil the new technologies at the top of the platform and eventually migrate them downward to its lower-level ultrasound systems.

GEMS offers ultrasound systems at all price points, beginning with its top-of-the-line Logiq 700 Expert Series through to its midtier Logiq 400 Pro and Logiq 400 MR3 systems to its low-end Logiq a200 black-and-white ultrasound and its Logiq a100 compact ultrasound system.

In recent years, GEMS has added technological features, such as digitally encoded ultrasound, to enhance and sharpen image quality over a full range of applications. At the same time, GEMS lower-level systems are capable of upgrades to late-breaking technologies.

With its acquisition of Marquette Medical Systems (Milwaukee) in November 1988, GEMS had one more cornerstone of what would become an even larger IT business segment.

GEMS already had PACS (picture archiving and communications system) company Lockheed Martin Medical Imaging Systems under its wing from a 1996 acquisition, and the addition of Marquette’s cardiology products – such as its Muse CV cardiovascular information system – helps bolster GEMS’ IT product area, especially in the cath lab, hemodynamic systems and patient monitoring.

GEMS first mulled combining its IT-related businesses last year, but waited until all of the pieces were in place before creating its new GE Medical Information Technologies Business this past August. Joining Lockheed Martin and GE Marquette in the same organization are Mecon, Applicare, Innomed, Prucka Engineering and Micro Medical Systems. Greg Lucier, who most recently served as vice president of global services for GEMS, is the president and CEO of the information technology (IT) business unit.

GEMS has been working with its newest addition – Micro Medical – since 1998, when the companies jointly developed the Catalyst cardiovascular information system. Catalyst unites patient data, images, waveforms and descriptive text on a single screen to optimize clinicians’ review and reporting processes.

Chief Competitors
Given its variety of medical imaging equipment and related products and services, the roster of GEMS’ competition would read like a Who’s Who in Healthcare.

There are several companies that have the same – or close to the same – breadth of product offerings that GEMS has. Siemens Medical Systems Inc. (Iselin, N.J.), Toshiba America Medical Systems Inc. (Tustin, Calif.), Philips Medical Systems North America (Shelton, Conn.) and Marconi Medical Systems Inc. (Highland Heights, Ohio) readily come to mind in the modalities of CT, MRI, X-ray, ultrasound, nuclear medicine and IT products. Marconi is the only company of GEMS’ four multimodality competitors that does not have an ultrasound line, while Philips lacks a nuclear medicine portfolio.

Siemens soon may become a more formidable foe in ultrasound, once its proposed $700 million acquisition of Acuson Corp. (Mountain View, Calif.) comes to fruition. At press time, Siemens had received German regulatory clearance for the transaction. U.S. approval was pending.

With revenues of $475.9 million in 1999, Acuson ranks among the top ultrasound companies in the world in market share, along with Agilent Technologies Inc.’s Healthcare Solutions Group (Andover, Mass.) and ATL Ultrasound, a Philips Medical Systems Co. (Bothell, Wash.). GEMS projects ultrasound revenues of $660 million this year.

In nuclear medicine, GEMS’ primary competitors are Siemens, Marconi, ADAC Laboratories Inc. (Milpitas, Calif.) and SMV America (Twinsburg, Ohio).

While GEMS may not worry about its competition, the company is cognizant of what other companies are doing in the modalities in which they compete. GEMS’ view is that it is near or at the top in market share in all product areas in which it has a presence. The strategy is to stay there by putting its competition in a position where it has to react to what GEMS is doing, rather than the other way around.

Strengths
Supporting GEMS’ healthcare effort is a vast amount of financial and human resources from within the medical unit itself, as well as parent company GE when needed.

Over the years, if GEMS has needed to develop and advance the technology of X-ray tubes, for example – say, to optimize the efficiency of tungsten filaments – there have been occasions when the GE Lighting unit would assist. If the issue is heat transfer technology and rotating machinery for a GEMS’ medical product, GE Power Systems and GE Aircraft Engines had expertise in those areas to offer technological guidance.

If the needed commodity or technical assistance could not be found internally, GEMS never has been shy about searching elsewhere for the appropriate outside supplier and either aligning or acquiring the vendor.

Despite its expansive product breadth in healthcare, GEMS does not try to be all things to all customers. The company’s strategy is to look for complementary technologies in markets and product areas where GEMS already has a presence.

To determine if an alliance or acquisition makes sense, the company will consider which companies are servicing that particular market, the anticipated growth for the sector and how much GEMS could benefit financially by entering that market.

GEMS has a business development board whose members come from around the world. The panel meets once a month and is responsible for discovering and evaluating potential partnerships and acquisitions.

Is there any product that GEMS is lacking? The company says it is, strategically speaking, satisfied with its current product portfolio. The plan is to continue to grow by investing in and advancing its current technologies. If the company is in need of something outside of the organization, GEMS can do what it has done in the past – acquire it or partner with it.

Through the adoption of Six Sigma principles, GEMS has been able to develop some of its new products in significantly less time than predecessor models and have them on the market sooner. The company says that Six Sigma is one reason GEMS believes it is six to 18 months ahead of its competition in some medical imaging modalities.

Weaknesses
While key factors that will help drive the company’s product performance in the near and long term vary geographically around the world, the common denominator is economics.

One of the biggest challenges GEMS faces is the healthcare market itself, particularly in the U.S., where overall growth – with a few exceptions, such as functional imaging – is defined in single digits.

Even though procedural volume is increasing in the double digits, today’s medical imaging equipment has reached a point where it has become so efficient and productive that facilities do not need to purchase new equipment as often, retarding sales in some cases.

Less lucrative reimbursements in other countries make it a factor, but those regions also may grapple with regulatory constraints and equipment price concerns.

In markets where the number of procedures may be flattening, companies, such as GEMS, look to develop technological advances to help propel growth. A new technology that produces better medical images may open a new area of application and the market will respond with new equipment or upgrade orders. If that advance migrates down from high-end products to midtier and low-range offerings, customers also may be tempted to buy.

Such is the case in GEMS’ ultrasound area, where the company has taken features from its top-of-the-line products and offered them on lower-level models.

How many times in the past have industry observers opined that the CT market has peaked? Manufactures add slip-ring technology, spiral CT technology is introduced, and now multislice CT is the “must have” feature for enhanced imaging.

The questions become whether customers can afford the new technology and can GEMS develop and then manufacture it at an affordable price.

Outlook
While overall growth in the U.S. medical imaging market may not be booming, there are pockets of prosperity on which GEMS is looking to capitalize. In the United States, for example, PET is enjoying tremendous growth, thanks to recent technological advances in functional imaging and image fusion, as well as new procedure reimbursements for healthcare providers.

In China, GEMS has been making in-roads in recent years and expects that its CT business will reach $100 million next year. The success of GEMS’ lower-end CT products has fueled its growth in this cost-conscious country.

GEMS also is keeping close watch on the FDA and its pending decision on digital mammography and its clearance for soft-copy reading.

If reimbursement for full-field digital mammography is approved and the FDA clears soft-copy read, the budding modality very well may explode in the marketplace. Full-field digital mammography would offer the promise of increased productivity and the financial reimbursement to make investment in the modality very viable and attractive.

Like other companies, GEMS also is reaching out to the Internet to position its products before buyers’ eyes and as a conduit to purchase items.

GEMS says it is hard to estimate what kind of revenues the company may be able to generate over the Internet, especially when one is considering the purchase of a complex, six- or seven-figure piece of medical imaging equipment. Some human sales assistance is required, the company says. Yet, the Internet will be a streamlined instigator of sales, providing specs and often prices for comparison.

In its latest financial report, GE said that online healthcare orders surpassed $1 billion in the first nine months of 2000 and “more than 650 diagnostic units with Internet connectivity.”