Thermo Electron to reorganize, sell Trex subsidiary |
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For sale: Major medical imaging equipment manufacturer with solidified product line, strong market share and financial troubles. Price negotiable. That description could be the ad for Trex Medical Corp. (Danbury, Conn.), as its parent company, Thermo Electron Corp. (Waltham, Mass.), on Jan. 31 unveiled its complex reorganization plan. The goal is to shift focus to its core business of measurement and detection instruments and spin off or sell non-core businesses. Thermo Electron has decided to sell several subsidiaries, including Trex, as part of that reorganization. It also will combine the remainder of its more thane 20 publicly traded subsidiaries into three public companies to consolidate its business. The plan is expected to take one year and involve “spinning in” several public subsidiaries into Thermo Electron to make it one integrated public company. Thermo Electron also will spin into two companies, including Thermo Fibertek, and a newly created public medical products company. Trex will not be involved in either venture. The new medical products company will include Thermo Electron’s neurodiagnostic, patient monitoring, auditory, respiratory and medical polymers product lines. Trex Medical will be sold with several other subsidiaries. (See chart.) According to a company statement, Thermo Electron “does not expect to incur losses from the disposition of these businesses.” The reorganization plan is meant to simplify what has become a complex group of public subsidiaries at Thermo Electron. Most market watchers feel this will accomplish that goal. In a Reuters report, Goldman Sachs analyst Deane Dray said Thermo Electron “had gotten too complicated in its subsidiary structure.” The conclusion that Trex Medical does not fit in with Thermo Electron’s future plans is not a total surprise to observers, given the recent spiral of bad news for the subsidiary. Just over a year ago, Trex appointed William Webb as president and CEO, hoping he could turn around the company. In May 1999, Trex revealed plans to close two of its manufacturing facilities and reduce its work force by 15 percent after reporting a $4.2 million net loss in the second fiscal quarter. By the end of FY99, ending Oct. 2, Trex reported revenues of $241.6 million, compared with $267.0 million in FY98. Trex’s net loss was $28.1 million, compared with net income of $18.2 million in FY98. “I think this is something that has been in the works for a year now,” said Juan Noble, a medical device industry analyst with Fahnestock & Co. Inc. (New York), who tracks Trex Medical. Thermo Electron “had been in this spin-out strategy for years, so clearly they had to do something to regain shareholder confidence.” Last May, Thermo Electron proposed a deal where the ThermoTrex group – of which Trex is a part – would become a wholly owned subsidiary of Thermo Electron. Trex would remain public and would become a direct subsidiary of Thermo Electron. That plan was still in place when Thermo Electron filed its 10-K statement on Dec. 19. “I think overall [Trex] had what is reputed to be a strong product line, but they have had their problems in the recent years, not the least of which was the FDA’s rejection of their full-field digital mammography system,” said Noble. “That turn-down by the FDA seemed like it torpedoed a lot of hopes at the company. Coming on the heels of some other things, it just exacerbated Trex’s problems.” The saga of Trex’s full-field digital mammography system has been well-documented. In August 1999, 18 months after submission, the company received a letter from the FDA ruling that Trex’s 510(k) submission for digital mammography was not substantially equivalent to film screen mammography. According to the company’s Dec. 19 10-K filing with the Securities and Exchange Commission, Trex was reevaluating its submission. The document offered no timetable for when Trex would unveil any major changes or resubmit the system to the FDA. The news in early February that GE Medical Systems (Waukesha, Wis.) had received final clearance from the FDA on digital mammography (see page 12) only adds insult to injury, as Trex was the first to submit its digital mammography system for clearance in December 1997. The stock price of Trex has suffered from the bad news in the past year, too. In March 1999, it was trading at more than $8 per share. On Jan. 31, Trex closed at $3.50, down 50 cents per share for the day. Trex officials were unavailable for comment on this story. |
March 2000
Image Systems calls off acquisition of Nortech’s Imaging Technologies |
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Image Systems Corp. (Minnetonka, Minn.) has withdrawn its letter of intent to acquire Nortech Systems Inc.’s (Wayzata, Minn.) Imaging Technologies (Plymouth, Minn.) division. “Negotiations with Image Systems stalled over warranty-related issues,” said Quent Finkelson, chairman, president and CEO of Nortech Systems in a prepared statement released Jan. 19. “Although our manufacturing operations have ceased, we retain monitor service capabilities to uphold our existing product warranties and perform non-warranty service. We expect non-warranty service revenue to contribute positively to corporate earnings until the assets of the Imaging division are sold.” The companies were in the final stages of the deal when the issue of warranty service emerged as a stumbling block. As recently as Jan. 17, the companies planned on a postponement of the deal with talks scheduled to resume in April. Nortech was faced with a choice. If it completed the sale of its Imaging Technologies division, it would have been forced to contract with a third party – most likely the buyer – to handle the service of its products that remained under warranty. That is an additional cost that Nortech preferred to avoid for a division that is no longer producing new products. With a lease on its office space for the division through June 1, Nortech decided to delay the sale and continue to service the warranty calls itself to reduce expenses until a final agreement was reached. “They decided they could spend less money doing it themselves than paying us to do it,” said Marta Scheff Volbrecht, vice president of sales at Image Systems. Volbrecht said the value of Imaging Technologies was decreasing and the previously agreed upon purchase price no longer applied. Many employees that have left Nortech were hired by Image Systems. Both companies are in the greater Minneapolis area. |
Seiko to close Digital Imaging division in U.S. and Europe |
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Seiko Instruments USA Inc. (Elk Grove Village, Ill.) on Jan. 24 began notifying its customers that its Digital Imaging division will cease selling medical printers in the U.S. and Europe, effective July 1. The target date for last purchases by customers is May 15. Seiko plans to maintain technical assistance, service support and supply availability for its products at least through August 2005. The decision to stop selling new printing products came as a surprise to employees in both markets. The reason for the move is economic. The Digital Imaging division is part of Seiko’s Print Systems division headquartered in Japan. Print Systems includes pre-press color graphics products and 3D CAD CAM (computer-aided design and manufacturing). Printers for those product segments are manufactured in Japan. Rather than continue to make printers for the underperforming segment and because of the poor Japanese economy, Seiko chose to curtail manufacturing, even though the U.S. market for medical printers and supplies was doing well. Sales of medical printers, film and related supplies in the U.S. totaled $13 million in 1998 and has grown annually. Seiko’s Digital Imaging division had preferred vendor supply agreements with several major medical imaging equipment vendors, including ADAC Laboratories Inc. (Milpitas, Calif.), GE Medical Systems (GEMS of Waukesha, Wis.), Marconi Medical Systems Inc. (Highland Heights, Ohio) and Siemens Medical Systems Inc. (Iselin, N.J.). The decision to stop selling new products in the U.S. also puts the brakes on two pending developments. Seiko had reached an agreement-in-principle on a global contract for products and service with GEMS at the 1999 annual meeting of the Radiological Society of North America. The company also had a high-end inkjet printer waiting in the wings for U.S. introduction to the medical market. |
FDA clears GE’s Senographe 2000D digital mammo |
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GE Medical Systems (GEMS of Waukesha, Wis.) on Jan. 31 became the first company to cross the finish line in the race to win first clearance of a digital mammography system. The FDA cleared GEMS’ Senographe 2000D system for marketing in the U.S. for hard-copy, printed images only and not for “soft copy” digital mammograms. FDA approval became little more than a formality after the agency’s Radiology Device Advisory Panel in December recommended full agency approval of the system for use in hard-copy image reading. The panel said GEMS’ pre-market approval (PMA) application – filed in October 1999 – was sufficient to establish the safety and effectiveness of the device in producing hard-copy images when compared with current film/screen mammography. The GE Senographe 2000D is intended to be used in the same clinical applications as traditional film-based mammography systems. GEMS’ clinical trial compared digital mammography films to analog mammography films of 625 women, 44 of whom had breast cancer. The FDA concluded that researchers found “comparable clinical performance” in screening and diagnosing breast cancer. In its final approval statement, the FDA also wrote that the “evidence presented so far does not show that digital images are more helpful in finding cancer than the analog/film images. The digital technology, however, offers several potential advantages over the standard use of radiographic film.” The FDA cited the ability to store and transfer digital images electronically for “quick and easy retrieval, as well as remote evaluation by distant specialists” as one benefit. The agency also cited how digital images can be manipulated to correct for over- or under-exposure without retakes and the “dynamic range that allows for examination of all areas of the breast despite their varying density.” FDA clearance essentially is the final hurdle for GEMS’ Senographe 2000D, which last year received regulatory approval in Europe, Canada, Latin America and much of Asia. There are approximately 50 systems in use in those regions. Systems also were installed in eight U.S. facilities as part of Senographe 2000D’s investigational study. The locations include Massachusetts General Hospital (Boston), Northwestern University Medical School (Chicago), Hospital of the University of Pennsylvania (Philadelphia), University of Chicago and Bethesda (Md.) Medical Center. GEMS has estimated the cost of the Senographe 2000D at $500,000. GEMS says it allocated $100 million over the last 13 years to develop the technology. The company also has been granted more than 100 U.S. patents. |
Marconi Medical signs Nomos as IMRT supplier |
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It didn’t take long for Marconi Medical Systems (Highland Heights, Ohio) to find a new supplier of Intensity Modulated Radiation Therapy (IMRT) products after its agreement with Varian Medical Systems Inc. (Palo Alto, Calif.) ended. Marconi in early February signed a multi-year distribution and development agreement with Nomos Corp. (Sewicky, Pa.). Nomos has products installed at some 100 hospitals, according to company officials. Marconi distribution will bring Nomos products to a much wider installed base worldwide. In January, Varian signed a four-year distribution and development deal with GE Medical Systems (Waukesha, Wis.) to supply IMRT products. At the time, Varian President and CEO Richard M. Levy said the company’s supply and development deal with Marconi would lapse within 30 days. IMRT allows an escalated radiation dose to be delivered to the tumor, while limiting exposure and damage to nearby healthy tissue. Nomos President and CEO John Friede downplayed the timing of the deal, saying the two companies felt it was the right time to strike an accord and the GEMS/Varian deal wasn’t a major factor. The agreement calls for Marconi to sell Nomos’ Peacock, an IMRT treatment planning and delivery system, which includes the Mimic multileaf collimator. The pact also covers Nomos’ Corvus, an inverse treatment planning and delivery system, and the Bat, an ultrasound organ locator for prostate cancer treatments. The primary Marconi product in the deal is its AcqSim CT simulator. |
Mallinckrodt, DuPont to align on Canadian deals |
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DuPont Pharma Inc. (Mississauga, Ontario, Canada), the Canadian subsidiary of DuPont Pharmaceuticals (Wilmington, Del.), has signed letters of intent to acquire two radiopharmacies from Mallinckrodt Canada (Mississauga) for an undisclosed amount. DuPont also is close to securing the Canadian distribution rights for Mallinckrodt’s nuclear medicine products line for the next 10 years. Financial details for both deals will not be disclosed until due diligence is completed in early March. The two Mallinckrodt radiopharmacies are located in Pointe-Claire, Quebec, and Mississauga. DuPont would gain the rights to four Mallinckrodt nuclear medicine products distributed in Canada: Octreoscan – which is used for tumor localization – the UltraVent inhalation system, the cardiac assessment tool UltraTagRBC and MAG3, which assesses renal structure and function. According to the pact, DuPont will fulfill any obligations to Mallinckrodt customers under contract. The agreement tentatively was scheduled to take effect March 1. |
Bracco seeks boost of contrast agents in ultrasound |
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Bracco Diagnostics Inc. (Princeton, N.J.) is on a mission. The company’s goal is to convince more healthcare providers to use its contrast agent in ultrasound imaging. Currently, Bracco has one FDA-cleared product. The company launched SonoRx in February 1999 after the product received regulatory approval in November 1998. Bracco has filed for regulatory approval in Canada. That decision is pending. SonoRx is an ultrasound contrast agent taken orally and used primarily for upper abdominal ultrasound imaging. In SonoRx, Bracco has the only FDA-cleared oral ultrasound contrast agent. While ultrasound contrast agents are creeping their way into radiology departments, Bracco still faces the issue of changing many healthcare providers’ collective mindsets and practice patterns. Because the use of ultrasound contrast agents is relatively new, drug companies, such as Bracco, are lobbying to get providers to use the agents with more regularity. Because a contrast agent is a prescription drug, another issue is the question of whom prescribes the use of SonoRx or any other agent. Is it the radiologist? The referring physician? The sonographer? The provider has to devise protocols to determine that authority or responsibility. Contrast agent use in MRI and CT started with the same issues. “Today, you can’t imagine doing an MR brain image without a contrast agent or CT without a contrast agent,” said Joseph Balogh, director of marketing for MRI and ultrasound. “It has taken how many years to get to this point? I think we’re in the beginning of that process with ultrasound.” Bracco is hoping that with more education and the benefit of clinical results – which include completing a greater percentage of exams – more healthcare providers will think to use an ultrasound contrast agent where applicable. Given that SonoRx costs $28 per patient dose, Balogh contends that the contrast agent is economically viable, compared to what it would cost to have a patient return for an image retake or compared to the cost of an MRI or CT image with or without contrast. “If we can show you can save money in the long run by investing $28 up front, then the equation makes sense,” Balogh said. “We know that on a local basis, if hospitals apply to their local [healthcare insurance] carriers on an in-patient basis, they have been reimbursed.” Bracco has applied to the Health Care Finance Administration for a reimbursement code for use of the agent, but there has been no decision. Bracco concurs with estimates that the worldwide market for ultrasound contrast agents could reach $400 million by 2003 or 2004. The company estimates 8.8 million abdominal ultrasound exams are performed in the U.S. annually, approximately 45 percent of which are upper abdominal exams, where SonoRx could be used. Those numbers translate to a potential market of $4.5 million, Balogh said. Bracco has two works-in-progress contrast agents. SonoVue is a microbubble ultrasound IV contrast agent and would compete against Molecular Biosystems Inc.’s (San Diego) Optison and Definity from DuPont Pharmaceuticals Co.’s (Wilmington, Del.) Medical Imaging division (North Billerica, Mass.). Bracco currently is preparing SonoVue’s paperwork for the FDA and expects to submit its application this year. SonoVue has been filed in Europe and is pending a decision. Bracco’s MultiHence is an MRI contrast agent for imaging the liver. The company’s FDA filing also is planned for this year. MultiHence is approved for use in Europe. |
Analogic creates new divisions for X-ray, ultrasound |
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Analogic Corp. (Peabody, Mass.) is using a companywide strategic plan to formalize its work in the ultrasound and digital X-ray areas by creating two new dedicated divisions. The new digital X-ray division is the result of an agreement signed with Eastman Kodak Co. (Rochester, N.Y.), which Analogic unveiled at the 1999 meeting of the Radiological Society of North America (RSNA). Analogic will supply digital detectors for Kodak’s new digital X-ray systems – set for release this year – and be the contractor responsible for production of the systems. “All this is doing is putting into a formal structure a business, which had its beginnings just prior to the RSNA,” said Thomas J. Miller, Analogic’s president and COO. “[The division] is projected to have sufficient growth and longevity, which requires us to put an actual organizational structure around it.” Miller said Analogic soon expects to name a general manager for the new division and complete prototypes of the Kodak systems. The new ultrasound division will combine existing operations, which include an OEM components supply business in Peabody and Analogic’s B-K Medical (Copenhagen, Denmark) subsidiary. Rather than have two separate functioning ultrasound divisions, Miller said the components business and B-K Medical will be linked more closely to share technologies where feasible to reduce architectural and software redundancies. At the same time, Analogic will work to preserve the independence between the two units. “B-K specializes in urological, gynecological and surgical applications of ultrasound, whereas our OEM ultrasound partners are general ultrasound businesses,” Miller added. “In spite of that difference, there is no reason why much of the underlying technology can’t be shared or use shared platforms to reduce costs over larger volumes.”
The two ultrasound groups will be combined on the organization chart, but will remain in their current locations. Miller said the moves are a continuation of a general trend for Analogic to offer a broader and more diverse line of products to its OEM customers. “We are not departing from our OEM model as the basis of our business,” he added. “We would like to offer our OEM customers a menu of products from a simple module like a data acquisition system to a fully functioning CT system or digital X-ray system for example.” The Kodak deal is not Analogic’s only foray into the digital X-ray supply business and may not be the last. Miller said that Analogic’s policy is to own the technology it supplies to OEMs and be free to supply it to other companies, if the opportunity arises. In Miller’s words, what Analogic does with a customer that “creates differentiation” is exclusive to that customer, but the basic technology can be marketed to other customers. “Our OEMs want it that way,” said Miller. “It’s the only way in which we can get a good cost basis. If every time we do a project and start from scratch and have an assembly line, we’ll always be too expensive.” Analogic also announced that it has hired a replacement for retiring CFO John Tarello. John J. Millerick will serve as treasurer and CFO. He comes to Analogic from the former CalComp Technology (Anaheim, Calif.). |
Acusphere begins Phase II imaging trials for AI-700 |
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Phase II clinical trials have begun for Acusphere Inc.’s (Cambridge, Mass.) AI-700 ultrasound contrast agent to assess blood flow within the heart muscle in patients with coronary artery disease (CAD). Acusphere President and CEO Sherri C. Oberg described the next step as “another milestone” in bringing to market an ultrasound contrast agent to detect myocardial perfusion. “This agent could assume an important role in the clinical management of patients with acute myocardial infarction, angina, ischemia and other manifestations of CAD,” she added. AI-700 is a patented porous microparticle made of synthetic polymer, which acts as an intravenous delivery system for gas. The agent is the first application of Acusphere’s porous microparticle technology. The company said that the multi-center trial will try to determine optimal imaging conditions for assessing myocardial perfusion in patients with CAD after a single bolus administration of AI-700. The localization of perfusion defects on AI-700-enhanced ultrasound images will be compared to the current clinical standard for the non-invasive assessment of myocardial perfusion. Paul A. Grayburn, M.D., director of echocardiography at Southwest Medical Center (Dallas), is the first clinician to study AI-700 in patients. According to his early results, AI-700 demonstrated long-lasting and uniform myocardial perfusion after one IV bolus injection without resorting to the complex administration procedures of other agents. Perfusion enhancement with contrast ultrasound could enable cardiologists to view the motion of the heart wall at the same time as viewing blood flow to the heart muscle, allowing them to fully assess cardiac health using a single procedure. |
Philips to shift service training to home country |
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Philips Medical Systems International B.V. (Best, Netherlands) is in the process of closing its service training center in Shelton, Conn., and moving those operations to its training facility in Best. Philips plans to phase out its U.S.-based classes by August. The move will not leave biomedical technicians totally without a training option here in the States. Philips will continue to offer the program, which sends a service instructor to a healthcare facility to conduct a training seminar on-site. As it has in the past, the facility would pay for tuition, materials, the instructor’s room-and-board, transportation and other related expenses. Philips recently completed a $6 million upgrade of its training facility in Best. The center now houses the company’s technical training for products and applications training. Best had hosted service training for Philips’ CT, MRI and networking products. Shelton has been home to service classes for R&F, surgery, vascular and cardiovascular equipment. Philips said the reaction to the announcement that it is shifting service training to Best has been mixed. “Some people said they like the idea of going to where the manufacturer is,” said John D. Bills, director of strategic support programs for Philips Medical Systems North America (Shelton). “Other people have been concerned about pricing and those kinds of things.” Philips has no manufacturing facilities in the U.S. Bills said Philips has some 900 biomedical technicians take courses in Shelton each year. The same course curriculum will be available in Best and training will be done in English. In Best, Philips will continue to offer biomed technicians the option to train with Philips’ service personnel, along with its ‘first call’ biomed courses. Biomeds can continue to sign up for Best courses through Philips’ Shelton office, even after the U.S. programs are terminated. The company will send the customary package on training, hotel accommodations, area activities and other details about training in Best. In the U.S., biomeds have paid their own transportation costs to travel to Shelton, along with the tuition fee, lodging and other expenses. It is the same case, if they were to travel to Best. If arrangements are planned in advance, Bills said some flights to Best are less expensive than traveling within the U.S. He noted that some future training attendees have booked flights for as little as $300 round trip. The on-site program, which allows a Philips’ service instructor to conduct seminars on-site, has been used by facilities that cannot afford to lose a technician for an extended period of time. “If they want to put five or six people through the course, they pay us x dollars per day for the instructors, the materials and [instructors’] room and board,” said Bills. Philips will customize the educational seminar based on the facility’s requirements. |
NAI, Aspect Electronics take steps to become one |
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More than 18 months after the companies began doing business, North American Imaging Inc. (NAI of Camarillo, Calif.) and DICOM connectivity firm Aspect Electronics Inc. (Auburn, Calif.) are taking the next step. The companies have signed an agreement for NAI to acquire Aspect for an undisclosed amount. The transaction is expected to close in the first quarter. NAI and Aspect have worked closely over the past two years and have considered an acquisition in the past, but the companies said the timing wasn’t right. In April 1998, they signed a contract for NAI to distribute Aspect’s line of DICOM conversion products. “We primarily handled non-OEM activities for them,” said Paul Dempster, general manager of NAI Technology Products. The division was established in April 1998 to focus on the digital imaging market. Aspect, which reported $2.5 million in revenues in its last fiscal year, will fall under the Technology Products division after the acquisition closes. Dempster said at the time of the 1998 distribution agreement, NAI considered an acquisition of Aspect, but opted to wait on it. “They weren’t quite ready to sell and we weren’t committed strongly enough to [moving in a new direction] to pursue the acquisition aggressively,” he added. Another factor also may have contributed to the decision to delay the acquisition. At that time, NAI was involved in other acquisition talks of its own. In May 1998, the company announced it was being purchased by Canadian imaging firm DC DiagnostiCare Inc. (Edmonton, Alberta, Canada). After getting to know Aspect’s products for the last 18 months and seeing the firm develop more complementary products, NAI decided it was time to move on the acquisition in late 1999. Dempster said the plan is to bring the majority of Aspect employees under NAI’s Technology Products division, which is based on four product areas: DICOM network integration, digital radiographic upgrades, Web-based image management solutions and OEM sub-assembly systems. NAI also wants to use the Aspect acquisition to improve its customer service center and develop a technical school program for reseller certification and technician training. “We’ll be recruiting for both field support staff, as well as to provide technical and applications support,” Dempster said. “Right now, that has been the biggest weakness for both NAI and Aspect in terms of supporting their installed base and allowing us to expand. It seems to be everybody’s weakness in this market.” Dempster added that NAI is preparing for the future with its Technology Products division. While the imaging tube business still provides NAI with its bread and butter, the company is making sure it doesn’t miss the digital boat. “It’s a separate business unit that will provide a parallel revenue stream and sit beside our conventional tube products business,” said Dempster. |
News Briefs |
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Tenet Healthcare Corp.’s (Santa Barbara, Calif.) group purchasing organization, BuyPower, has awarded Acuson Corp. (Mountain View, Calif.) a new, exclusive, sole-source contract for radiology and vascular ultrasound systems. The pact covers Tenet’s 113 acute-care hospitals through May 31. Imaging products supply chain NHD Inc. (Beachwood, Ohio) is expanding. One of its founding shareholders, E.M. Parker (Wilmington, Mass.), has acquired Bi-County X-ray (Holbrook, N.Y.). Bi-County joins EmPower Inc. (Glen Cove, N.Y.), Standard Medical Imaging Inc. (Columbia, Md.) and E.M. Parker as shareholders of NHD, making the group one of NHD’s largest shareholders. Another founding shareholder of NHD, Interstate Imaging (Evansville, Ind.), has acquired the film, accessory, and chemical processing service business of Radiologic Resources (Chesterfield, Mo.). The acquisition gives Interstate an entrance into the St. Louis market. NHD also signed a deal to supply Concentra Managed Care Inc. (Boston) with film, film supplies, processor and X-ray equipment. The deal is expected to bring in $2.5 million in new business for NHD. Norland Medical Systems Inc. (White Plains, N.Y.) has received pre-market approval from the FDA to market its CubaClinical sonometer, which Norland distributes for McCue plc (Hampshire, U.K.). The list price is less than $20,000. Norland also has received preliminary court approval for a stipulation of settlement of a stockholders class action. Company officials do not expect the settlement to affect its 1999 financial results. ADAC HealthCare Information Systems (Milpitas, Calif.) has signed with Ascension Health Systems (St. Louis) to offer its Envoi image and information management solution as an RIS option to Ascension members. Ascension owns or is affiliated with 73 hospitals in the U.S. St. Mary’s Hospital (Saginaw, Mich.) and St. Joseph Hospital and Health Center (Kokomo, Ind.) will become the first facilities to implement the Envoi system. Swissray International Inc. (New York) has established a Romanian subsidiary to oversee the delivery of a $13.8 million shipment of its ddRMulti-Systems to the Romanian Ministry of Health. Swissray Romania SRL (Bucharest, Romania) will deliver the systems between March and June. Swissray also has subsidiaries in Slovakia, the Czech Republic and Germany. Applicare Medical Imaging B.V. (Zeist, The Netherlands) has struck a deal with Eastman Kodak Co. (Rochester, N.Y.) to allow its RadWorks 5.0 software to support Kodak’s 1200 Distributed Medical Imager. The 1200 is a small desktop printer, which allows users to view and print high-resolution referral images and reports from anywhere in a healthcare enterprise. Applicare, a GE Medical Systems (Waukesha, Wis.) company, will include a driver for the 1200 on each the RadWorks CD. MRI radio frequency coil maker UltraImage Corp. (Redmond, Wash.) has struck a deal with Intermagnetics General Corp. (IGC of Latham, N.Y.) for Intermagnetics’ IGC-Medical Advances Inc. (IGC-MAI) subsidiary to distribute UltraImage’s new line of RF coils in the U.S. IGC-MAI will market UltraImage’s three RF coils when they are cleared by the FDA. Clearance is expected later this year. All three coils were previewed at the 1999 annual meeting of the Radiological Society of North America (RSNA of Chicago). Diagnostic Ultrasound (Redmond, Wash.) has established a Japanese subsidiary – Touchmetrics K.K. – to provide a direct sales channel for its products. Seijiro Shirahama has been named president of the new subsidiary. Diagnostic Ultrasound previously was represented in Japan by Sumitomo Corp. (Tokyo), which will continue to work with Touchmetrics on distributing products. AmeriNet Inc. (St. Louis) has signed a three-year deal with Cemax-Icon (Fremont, Calif.) and its parent company, Eastman Kodak Co. (Rochester, N.Y.), to distribute Cemax-Icon imaging products to its members. Products in the agreement include Cemax-Icon’s ArchiveManager digital archive manager and AutoRad workstations, as well as a number of digital imaging products from Kodak. U.S. Electronics Inc. (Golden Valley, Minn.) recently introduced a three-million pixel, 21-inch video monitor to the U.S. market. The new monitor features automatic brightness limiter and auto magnetic field corrector to meet calibration standards. The new monitor includes the Calyx calibration software. U.S. Electronics also signed a recent deal to distribute color CRT and flat panel display products from Totoku Electric Co. Ltd. (Tokyo) in the U.S. |
PSS to review options after 3Q financials |
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PSS World Medical Inc. (Jacksonville, Fla.) has hired a financial advisor to evaluate its strategic alternatives to maximize shareholder value. PSS has hired Donaldson, Lufkin & Jenrette Securities Corp. to investigate alternatives that could – in PSS’ words – “involve the entire company or its separate operating divisions.” In a prepared statement, PSS Chairman and CEO Patrick C. Kelly said that despite the success of the acquisition-happy PSS, the company believes its stock price “remains undervalued, whether considering the company as a whole or considering the value of our separate operating divisions. It is the board’s desire to explore all strategic alternatives for increasing shareholder value.” In the past year, the stock has traded as low as $6 and as high as $18 per share. The third-quarter numbers for PSS showed an increase in sales, but a decline in net income. Sales increased 16 percent to $462.1 million for the third fiscal quarter, ending Dec. 31, 1999, compared with $399.5 million in the third quarter of FY99. Net income slipped to $12.9 million, down 19 percent from $15.9 million in the year-ago quarter. PSS blamed the earnings decrease on a “shortfall of shipments from several of its equipment suppliers.” The company estimated the negative impact of this shortfall to be $15 million. PSS’ Imaging division reported improved sales and net income in the third quarter. Imaging sales grew to $184.2 million, a 35 percent increase over $136.8 million in the same quarter a year ago. Net income climbed to $8.2 million, up from $7 million in the year-ago quarter. For the nine-month period, sales increased 17 percent to $1.4 billion, compared with $1.2 billion at the same point in FY99. Net income declined to $41.4 million, down from $41.9 million in the year-ago period. |
StorageTek restructures in the wake of 4Q financials |
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Image storage firm Storage Technology Corp. (StorageTek of Louisville, Colo.) unveiled its second major restructuring within a year, following news that its preliminary fourth-quarter financial report would show a sizeable net loss. In addition, StorageTek Chairman, President and CEO David E. Weiss announced his resignation after serving in that capacity since May 1996. Fourth-quarter revenues declined to $622.6 million, compared with $660 million in the fourth quarter of 1998. The net loss totaled $25.8 million, compared with net income of $52.6 million in the year-ago quarter. The loss was due to restructuring, litigation and $12.5 million in other one-time charges related to the reorganization. StorageTek also cited lower profit margins from consulting and integration service revenues and the impact of a Y2K-inspired spending freeze on capital equipment by customers. For 1999, revenues hit a record $2.37 billion, up 5 percent from $2.26 billion in 1998. The year-end net loss was $74.6 million, compared with net income of $198.2 million in 1998. StorageTek is in the business of storing, securing and moving around digital data. Its network computing storage – which consists of disk and tape storage systems, networking systems, software and services – secures more than 100 petabytes from mainframe data to client-server applications to video, audio and still images. StorageTek entered the healthcare arena about three years ago, targeting storage and archiving for PACS and cardiology images. A company spokesperson who requested anonymity said StorageTek will remain independent and is not looking to be acquired at this point. The spokesperson declined to comment on the effect the restructuring may have on the company’s healthcare business. The latest reorganization will cut StorageTek’s six operating business units into two segments. The Enterprise Business Group will comprise the Nearline Business Group and Enterprise Disk Business Group. The newly created Client Server Storage Business Group will include the current Client Server Tape and Disk Business Groups and the Storage Net-working Business Group, including the Storage Area Networks unit. The moves will result in the layoff of 500 to 600 employees during this quarter, as well as the elimination of the COO position. COO Victor M. Perez will leave that position at the end of March. StorageTek reduced its workforce by 600 employees in the fourth quarter of 1999, as part of its first restructuring plan. An-other 680 em-ployees opted for a voluntary separation program in the first nine months of 1999. As of last fall, StorageTek had 8,500 employees in 22 offices worldwide. |
FDA’s CDRH betters review times in FY99 |
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The FDA’s Center for Devices and Radiological Health (CDRH) says it is getting better and better in reducing review times for 510(k) submissions. In fact, CDRH’s report for FY99, ending Sept. 30, says the average review time was the lowest in nearly a decade. CDRH officials said they acted on The FDA’s Center for Devices and Radiological Health (CDRH) says it is getting better and better in reducing review times for 510(k) submissions. In fact, CDRH’s report for FY99, ending Sept. 30, says the average review time was the lowest in nearly a decade. “This year, the review times were the shortest ever for some of our review processes, allowing safe and effective devices to reach the market more rapidly,” the report stated. The average FDA review time for 510(k) applications was 80 days in FY99, down from 89 days in FY98. Average total 510(k) review time was 102 days, compared with 114 days in FY98. One reason the CDRH was more productive may have to do with the number of special or abbreviated 510(k)s filed this past fiscal year. The total increased almost five times in FY99 to approximately 500. The review time for special 510(k)s averaged 24 days in FY99. Pre-market applications (PMAs) were up in FY99 to 72, while approvals remained nearly stagnant at 45 in FY99, compared with 46 in FY98. Two of the clearances were gained through product development protocols (PDPs), the first devices to ever gain clearance in this manner. The average total elapsed time to PMA approval was 12.5 months in FY99, up slightly from 12.4 month in FY98. PMA supplements were up this past fiscal year to 556, compared with 513 in FY98. Average total elapsed time for approval of PMA supplements was 3.9 months, the lowest since the early days of the PMA program. The average review time for investigational device exemptions (IDEs) remained stable at 27 days, while the average review time for IDE supplements dropped to 20 days, the lowest in the history of the program. |
Executives on the Move |
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Endosonics Corp. (Rancho Cordova, Calif.) CFO Richard L. Fisher resigned due to what the company described as “family considerations.” Kathleen E. Reed, Endosonics’ corporate controller, will serve as acting CFO until a replacement is named. G. Rodney Wolford, former chairman and CEO of the former Sterling Diagnostic Imaging Inc., has been named president and principal of healthcare industry advisory firm Pitts Management Associates Inc. (PMA of Baton Rouge, La.). Wolford served at Sterling until its acquisition by Afga Corp. (Ridgefield Park, N.J.) in May 1999. He assumed Sterling’s president and CEO duties – as well as continuing as chairman – in August 1996, replacing Suzanne R. Linderman, who retired. Wolford’s career includes service as the president and CEO of Norton Healthcare (formerly Alliant Health System in Louisvillle, Ky.) and Legacy Health System (formerly HealthLink in Portland, Ore.), as well as COO and CFO of the Forbes Health System (Pittsburgh).
North American Imaging Inc. (Camarillo, Calif.) has named James R. Foyles as national sales manager. Foyles previously served as manager of global sales for Direct Radiography Corp.’s (Bedford, Mass.) DirectRay digital X-ray detector technology for general radiography. He also was the North American sales manager for Linx printing and networking systems for DuPont Diagnostic Imaging (Wilmington, Del.). Medison America Inc. (Pleasanton, Calif.) has named J.H. Park as its new president, effective immediately. He replaces Moon T. Kwon, who will become CEO of a new e-commerce subsidiary of parent company Medison Co. Ltd. (Seoul). Park previously served as president of Medison Brazil Ltd. (Sao Paolo) for three years and president of Medison Latin America Inc. (Miami) from 1995 to 1997. Marconi Medical Systems Inc. (Highland Heights, Ohio) has appointed Jerry C. Cirino as executive vice president of global sales and service, making him responsible for all global sales and service activity for Marconi medical imaging products, including international subsidiaries. Cirino most recently served as president of Marconi’s Picker Health Care Products business, overseeing its growth to $600 million in annual sales and the acquisition of six companies. AccuSoft Corp. (Westborough, Mass.) has named Richard Burchell as CFO and COO at the imaging software company. Burchell most recently served as corporate controller at Staffware Corp. (Bedford, Mass.). AccuSoft also named Guy D. Haas as vice president of sales. Over the past 20 years, Haas has held executive sales positions in high-tech software companies, such as Computervision Corp. (Bedford) and MacNeal-Schwendler Corp. (Los Angeles).
Syncor International Corp. (Woodland Hills, Calif.) has announced that Brad Nutter, executive vice president and COO, has resigned. Nutter will become president of Gambro Healthcare (Stockholm, Sweden). He joined Syncor in 1997. The Health Industry Distributors Association (HIDA of Alexandria, Va.) has named Ruth Ann C. Kaiser as its director of government relations. Kaiser previously served as HIDA’s associate director of government relations, concentrating on regulatory affairs. Before joining HIDA, she worked for the Kaiser Foundation Health Plan of the Mid-Atlantic States Inc. (Rockville, Md.) and as an independent consultant. Kaiser also has served in management consulting, providing research and evaluation services for several projects for the office of the assistant secretary for health in the U.S. Department of Health and Human Services and the National Institutes for Health. |
Caren Mason in January joined eMed Technologies Corp. (Lexington, Mass.) as its new CEO. Mason most recently served as the general manager for GE Medical Systems’ (GEMS of Waukesha, Wis.) Women’s Healthcare Business unit. Prior to joining GEMS in 1996, Mason was senior vice president for Bayer AG’s Corporate Healthcare segment in the U.S. and senior vice president of Agfa Corp.’s (Ridgefield, N.J.) Technical Imaging Business Group. At that time, Agfa was a division of Bayer. Her first position at GEMS was as the company’s general manager for the southeast service zone.
TransScan Medical Inc. (Ramsey, N.J.) has expanded Chairman Hal Kirshner’s duties to include president and CEO. He replaces George Solomon, who left the company on Jan. 24 to pursue other opportunities. Kirshner has been with TransScan as chairman since May 1999 after serving for seven years as president and CEO of Trex Medical Corp. (Danbury, Conn.) and president of the former Lorad Corp. (Danbury). 
Siemens Medical Systems Inc. (Iselin, N.J.) has named John Pavlidis as president of the company’s ultrasound business. Pavlidis formerly served as vice president of MRI in the U.S. business unit. He replaces Wolfgang Reim, who is leaving the company for other business opportunities, according to a company statement. In addition, David Quist was named vice president of marketing and sales and support for Siemens’ ultrasound group. He joins Siemens from Civco Medical Instruments (Kalona, Iowa), where he served in a similar capacity.
Acuson’s stock rebounds with ’99 financials, buy rating |
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Acuson Corp.’s (Mountain View, Calif.) positioning for growth in 2000 and beyond drew attention from investors in the wake of the company’s 1999 year-end financial report. The company’s stock price closed at $14.44 per share, up $1.12 on Feb. 2. Acuson’s share price had not been that high since Sept. 16, 1999. The firm estimated that new products will generate $17 million in 2000 and $45 million in 2001. While the launch of the new products – in the words of Warburg Dillon Read – “has weighed down margins, [new products] should turn to a benefit over the course of 2000.” For 1999, Acuson revenues increased to $475.9 million, compared with $455.1 million in 1998. In the fourth quarter, Acuson took a one-time charge of $13.9 million for in-process research and development from its December 1999 acquisition of Ecton Inc. (Plymouth Meeting, Pa.). Ecton is now Acuson’s Small Systems division. The write-off lowered the company’s net income for 1999 to $6.7 million, compared with $20.8 million in 1998. Excluding the one-time charge, income slipped slightly to $20.6 million in 1999. In the fourth quarter, revenues reached an all-time high at $135 million, up 10 percent from $123.1 million in the fourth quarter of 1998. The fourth-quarter write-off resulted in a net loss of $7.1 million, compared with net income of $6.8 million in the year-ago quarter. Excluding the charge, Acuson’s income held steady in the fourth quarter at $6.8 million. Acuson expects to begin shipments this summer of its Cypress echocardiography system. The unit, developed by Ecton under the product name of Sonnet, targets the low- to mid-range echocardiography market. In December, Acuson began deliveries of its KinetDx PACS (picture archiving and communications system) to radiology customers. Also in December, Acuson received FDA 510(k) clearance to market its AcuNav intracardiac ultrasound catheter. Shipments are expected to start this quarter. |
Financial Watch |
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Del Global Technologies Corp. (Valhalla, N.Y.) continued to ride the wave of OEM outsourcing to post gains in sales and earnings in its first fiscal quarter, ending Oct. 30. Net sales grew 6 percent to $15.7 million, compared with $14.8 million in the first quarter of FY99. Net income gained 7 percent to $1.5 million, up from $1.4 million in the year-ago period. Analogic Corp.’s (Peabody, Mass.) new fiscal year got off to a bumpy start. In the first quarter, ending Oct. 31, revenues slipped to $65.4 million, down from $67.2 million in the first quarter of FY99. Net income declined to $2.5 million, compared with $4.7 million in the year-ago quarter. Analogic President & COO Thomas Miller said the company will “compensate” for its first-quarter revenue shortfall with “increased sales and improved productivity” in the second half-year to avoid “disappointing” results in FY2000. Sales at Image Systems Corp. (Minnetonka, Minn.) declined in its second fiscal quarter, ending Oct. 31, 1999. Sales dipped 6 percent to $1.5 million, compared with $1.6 million in the same quarter of FY99. Net income was $4,786, an improvement over a net loss of $12,950 in the year-ago quarter. For the six-month period, net sales were down 7 percent to $2.9 million, compared with $3.1 million in the first half of FY99. Image Systems reported a net loss of $17,461 for the six-month period, compared with a net loss of $16,288 in the year-ago period. Image Systems blamed increased expenses to attend additional trade shows and expand its sales staff as reasons for the mid-year net loss. E-Z-Em Inc. (Westbury, N.Y.) notched greater revenues and earnings in its second fiscal quarter, ending Nov. 27, 1999. The company achieved net sales of $28 million, compared with $26.5 million in the second quarter of FY99. Net income grew to $1.8 million, up from $1.5 million in the year-ago quarter. For the six-month period, net sales increased to $55.2 million, compared with $52.2 million in the first half of FY99. Earnings reached $3.6 million, up from $3 million in the year-ago period. General Electric Co. (Fairfield, Conn.) again posted record revenues and earnings in its latest financial report. In 1999, the company’s revenues increased 11 percent to $111.6 billion, compared with $100.5 billion in 1998. Net income grew to $10.7 billion last year, up from $9.3 billion in 1998. The company stated that GE Medical Systems’ (GEMS of Waukesha, Wis.) earnings grew 25 percent in 1999 with – in the company’s words – “strong global acceptance of its six Sigma-designed products.” A non-ordinary charge of $10.3 million cut into ADAC Laboratories Inc.’s (Milpitas, Calif.) earnings in its first fiscal quarter, ending Jan. 2. Revenues were $90.3 million, compared with $94.3 million in the first quarter of FY99. Excluding the non-ordinary charge in connection with the tentative settlement of certain class action and derivative litigation involving the company, ADAC’s income was $2 million, compared with net income of $3.8 million in the first quarter of FY99. Including the litigation-related charges, ADAC posted a net loss of $4.5 million. Final settlements in the lawsuit and litigation cases are pending. ADAC Chairman and CEO R. Andrew Eckert said ADAC’s fiscal year is off to a strong start, due in part to an increase in the company’s PET (positron emission tomography) business. Eastman Kodak Co. (Rochester, N.Y.) reported increased revenues and net income for 1999 due, in part, to the positive effects of its acquisition of Imation Corp.’s (Oakdale, Minn.) medical imaging assets. Kodak posted sales of $14.1 billion, a 5 percent increase from $13.4 billion in 1998. Year-end earnings rose to $1.4 billion, up 2 percent from 1998. Kodak’s Health Imaging division sales increased to $2.1 billion last year, up 39 percent from $1.5 billion in 1998. Net earnings in the Health Imaging segment climbed to $315 million, a 54 percent hike from earnings in 1998. Mallinckrodt Inc. (St. Louis) posted mixed results at the mid-year mark in FY2000. In its second fiscal quarter, ending Dec. 31, 1999, the company reported sales of $682 million, up 7 percent from $638 million in the second quarter of FY99. Sales outside the United States accounted for $233 million, or 34 percent of total sales. Net income from continuing operations increased to $47 million, compared with $35 million last year. Sales in Mallinckrodt’s Imaging segment dipped to $195 million in the quarter, down 1 percent from $196 million in FY99’s second quarter. Imaging’s operating earnings declined to $23 million from $29 million in the year-ago quarter. Net sales for the six-month period, advanced 5 percent to $1.3 billion, compared with $1.23 billion in the first half of FY99. Earnings from continuing operations for the first six months of FY2000 totaled $85 million. Net income declined to $84.5 million, compared with $89.4 million in the year-ago period. Hologic Inc. (Bedford, Mass.) reported a net loss in its first fiscal quarter, ending Dec. 25, but company officials remain positive on the remainder of FY2000. Quarterly revenues declined 14 percent to $21.3 million, compared with $24.6 million in the first quarter of FY99. Hologic reported a net loss of $2.9 million, compared with net income of $2 million in the year-ago quarter. Hologic Chairman and CEO David Ellenbogen said the company is pleased with the operating results for the quarter, noting that the numbers are an improvement over the fourth quarter of FY99. New radiography and densitometry products are expected to produce improved results in the coming quarter. Lumisys Inc.’s (Sunnyvale, Calif.) revenues held steady at $19.2 million in 1999, |
