July 2002

GEMS used the 10th Scientific Meeting of the International Society for Magnetic Resonance in Medicine (ISMRM of Berkeley, Calif.) in Honolulu as the backdrop for the unveiling.

GEMS calls the technology Excite. David Weber, manager of GEMS’ global high field MR business, said the “backbone” of Excite is technology that processes medical imaging data more efficiently.

“It is a redesigned data pipeline, end to end, that allows us to download information from the patient to the doctor’s eyes faster than ever before,” Weber said.

GEMS said that it took more than three years and more than $31 million to develop Excite technology.

Excite has three key components. Enhanced transmission capabilities are powered by new microprocessor technology to control the switching of the gradients and R/F (radiographic/fluoroscopic) electronics, as well as an increase in memory to store and play multiple pulse sequences.

Secondly, new R/F coil designs, an increase in independent receiver channels and a greater bandwidth in each channel have improved reception. GEMS also has developed a new line of five eight-channel, phased array coils, which include a brain coil, neurovascular coil, cardiac coil, torso coil and spine coil. Additional coils are in the works.

The third component – processing – utilizes advances in reconstruction speed and reconstruction memory to hasten the transfer of data from component to component.

GEMS is now offering its Signa Infinity 1.5T MRI system with new Excite technology that can increase clinical efficiency of the scanner by 30 to 50 percent.

Robert R. Edelman, M.D., professor of radiology at Northwestern University Medical School (Chicago) and chairman of the department of radiology at Evanston (Ill.) Northwestern Healthcare, has used Excite to scan more than 1,500 patients over the last four months at Highland Park Hospital (Chicago).

“This technology so accelerates the examination that we can routinely get good images in all these patients,” Edelman said. “We can acquire images faster, process the data and display it faster and make a clinical diagnosis in just a few minutes, whereas before it was a more laborious process.”

Excite technology also is in place at Edison (N.J.) Imaging and South Jersey Radiological Associates (Cherry Hill, N.J.). GEMS said it expects to install 250 units with Excite technology by the end of this year and as many as 1,000 systems worldwide within two years.

Excite technology will be available on new and installed GEMS Signa Infinity 1.5T MRI scanners. Weber described the conversion of existing GEMS’ MRI scanners as “a simple upgrade that can be accomplished over a weekend.”

He estimated that Excite technology would add 10 to 20 percent to the cost of GEMS’ MRI scanners.

“However,” Weber countered, “the Excite technology itself will increase the efficiency of that scanner clinically from 30 percent to 50 percent, depending on how you want to use it.”

Siemens maintained that some of the technology GEMS unveiled have been available from Siemens for several years.

“As manufacturers of medical imaging equipment, we all have to act responsibly with regards to product launches and announcements,” said Nancy Gillen, vice president of Siemens’ magnetic resonance division, in a prepared statement. “The ‘biggest breakthrough’ in any technology should be just that and not one manufacturer catching up with another.

“In the digital imaging market where competition is fast and furious,” the statement continued, “we owe it to our customers and the patient population to honestly address breakthroughs that affect the delivery of healthcare.”

Siemens cited components of its ultra fast MR technology, which include eight high-speed radio frequency channels, which the company introduced in 1997; computer specifications, which Siemens has offered with syngo technology since 1998; and integrated panoramic array technology and parallel imaging techniques for higher speed imaging. Siemens says the FDA cleared that technology in January.

Siemens added that the features give healthcare providers the ability to perform 4D angiography, cardiac imaging and routine clinical imaging. The features are available on Siemens’ Symphony 1.5-Tesla MRI system, the Harmony 1T and Trio 3T system.

Dennis Cooke, general manager for GEMS’ global MR business, reacted to Siemens’ statement by saying Excite technology “is a complete, system-based redesign of the imaging chain, rather than a piecemeal approach.”

He added that GEMS has deployed eight simultaneous high bandwidth receiver channels, which are scalable to 64 quadrature in the future, as well as eight channel surface coils for clinical efficiency and a balanced medical imaging system.

“Excite technology is not about eight receiver channels, but it includes them,” Cooke said. “It is not about parallel imaging, but enhances it. Excite is about a complete end-to-end redesign that delivers up to four times the resolution, 40 percent more signal-to-noise and four times the exam speed.”

in less than two months to expand its product portfolio.

The information technology company has acquired Aurora Technology Inc. (Lake Bluff, Ill.). Aurora provides picture archiving and communications systems (PACS), workstations, archives, storage and distribution systems for community hospitals, clinics and medical imaging centers.

Merge anted up 93,901 shares of common stock and $100,000 in cash, making the value of the transaction $800,000.

Aurora’s products include the E-1000 and E-2000 series workstations, which are designed for primary reading and feature sub-second image display from a local disk. The company also offers Aurora DeskView PC viewing software to display and review images on any PC within or outside of a healthcare institution. In the storage area, Aurora’s ImageSecure is a scalable digital image archive, which incorporates standard computing hardware and open DICOM technology.

Merge is very familiar with Aurora, having supplied its image archive and connectivity products, as well as its DICOM development toolkit products to Aurora for market sales and distribution.

Merge Technologies’ ExamWorks is just one product that will be integrated with products from Aurora Technology.

“We have become familiar with [Aurora] as a business and we are familiar with their customers and their go-to-market strategy in terms of distribution partners,” said Merge President and CEO Richard Linden.

Aurora’s current customers represent various end-user clinical environments, including small medical imaging centers, multi-facility organizations and large teaching hospitals.

Linden said that Merge plans to maintain Aurora’s facility in Lake Bluff, where the company’s five employees are based and “continue to build the strategy they put in place.”

The acquisition of Aurora is Merge’s second move to broaden its product and service platform and market reach. In April, Merge signed a definitive agreement to purchase strategic partner eFilm Medical Inc. (Toronto, Ontario, Canada). eFilm develops and markets medical imaging display workstations. Merge offered 1 million shares of common stock for eFilm.

Linden said plans are on track to close the acquisition by the end of June or in early July. Merge planned to hold a shareholder meeting in June to vote on the proposed acquisition.

eFilm has approximately 35 employees.

Net sales in FY02 totaled $1.8 billion, compared with net sales of $1.8 billion in the company’s last fiscal year. PSS also posted a net loss of $81.3 million, compared with a net loss of $36.1 million in FY01. The net loss includes special charges of $7.5 million related to PSS’ reorganization and previously adopted employee retention plans.

“We completed the stabilization of our company early in the year and substantially set the foundation for future growth of revenues and profitability,” said PSS President and CEO David A. Smith.

PSS’ restructuring comes in the wake of aggressive acquisition and growth activity in the late 1990s that resulted in PSS becoming a billion-dollar business. At the same time, its rapid expansion left PSS with considerable debt and prompted co-founder, Chairman and CEO Patrick Kelly to step down in October 2000.

The change in management signaled a new direction for PSS, one which the company promised would lead to greater financial diligence.

One indicator that PSS is holding to its promise is that the company eliminated $66.8 million in bank debt in FY02. Since October 2000, the company has reduced its bank debt by $113.8 million.

For FY03, PSS has set a goal of 4 percent to 6 percent revenue growth. The company also anticipates special charges of $7 million to $8 million in this fiscal year, due primarily to its continued restructuring, employee severance, lease terminations, relocations, facilities restructuring, and asset impairments.

“We have a full agenda of initiatives for fiscal year 2003 that require crisp execution,” added Smith. “Our substantial progress in fiscal year 2002 has enabled us to get a jump on many of these objectives.”

All three PSS divisions — Physician, Imaging, and Long-term Care — have undergone substantial changes over the last 18 months and will continue to evolve in FY03.

In FY02, PSS consolidated 19 of its 26 distribution centers in its Imaging division. The moves included the consolidation of two distribution centers — in Apopka, Fla., and Greensboro, N.C. — during the fourth quarter. PSS says it is “on track” to consolidate 17 more distribution centers by the end of FY03.

The company also consolidated five back-office locations in its Imaging division in the fourth quarter to a regional office in Atlanta.

PSS has set the goal of 3 percent to 4 percent revenue growth in its Imaging division for FY03. The business unit posted net sales of $711.7 million in FY02, which was down from $737.9 million in FY01. The Imaging division also had a loss from operations of $2.4 million, compared with a loss of $1.4 million in the previous fiscal year.

R2 filed its suit on June 3 in the U.S. District Court for the District of Delaware, citing three of its patents in its case against ISSI and its mammography CAD system, MammoReader. R2 says the patents detail how R2’s products scan, process and display images.

The complaint asks for a permanent injunction against further infringement and unspecified damages.

ISSI and Howtek Inc. (Hudson, N.H.) jointly countered that R2’s patent infringement suit is “without merit” and ISSI plans to “vigorously defend the lawsuit.”

In a prepared statement, R2 President and CEO Michael Klein said the company believes that “fair competition is healthy and benefits the nations’ providers, as well as consumers of healthcare services.”

He added that R2 has made a “significant investment” in its CAD technology, which includes nine years of product development. R2 says it currently owns or has rights to more than 85 U.S. patents and patent applications.

“As a result,” Klein continued, “R2 intends to vigorously protect its intellectual property and fully enforce its patent rights against any form of infringement.”

R2’s ImageChecker CAD system was designed for use with film-based screening mammography. The company received FDA clearance in 1998 to market the ImageChecker, becoming the first system of its type to receive the agency’s clearance.

In 2001, the FDA expanded the ImageChecker’s clearance to include diagnostic mammograms. This past April, the agency granted clearance for the use of R2’s proprietary mammography CAD technology with GE Medical Systems’ (Waukesha, Wis.) Senographe full-field digital mammography system.

ISSI President and CEO W. Kip Speyer said in a prepared statement that the company’s patent counsel has reviewed R2’s patents “and has advised Intelligent Systems that the patent infringement claims are without merit.”

ISSI’s MammoReader received FDA clearance in January for both screening and diagnostic use.

ISSI and Howtek said the legal action will have no impact in the companies’ pending merger. Under the proposal, ISSI would merge with and into a new subsidiary — Howtek Devices — which will be based in Boca Raton. Howtek’s existing film and photo digitizer operations will be conducted through a wholly owned subsidiary based at Howtek’s current headquarters in Hudson.

As of press time, stockholder approval was pending. The companies were expected to close the transaction by the end of June.

Howtek designs and manufactures digital image scanners, film digitizers and related software for applications in the medical imaging, women’s health and photographic markets.

Imagent — formerly known as Imavist — provides anatomical information about the heart that Alliance says is not obtainable by echocardiography alone.

Imagent has been approved for use in patients with suboptimal echocardiograms to opacify the left ventricle, improve visualization of the main pumping chamber of the heart, and enhance delineation of the endocardial walls of the heart.

Alliance has chosen healthcare products and services provider Cardinal Health Inc. (Dublin, Ohio) and healthcare communications and marketing firm inChord Communications Inc. (Columbus, Ohio) to market and distribute Imagent.

Alliance is developing therapeutic and diagnostic products based on its perfluorochemical and surfactant technologies.

The technology — based on ART’s optical SoftScan platform — is designed to characterize and measure cellular and molecular processes and pathways. It also would be used in drug development and testing and to monitor the efficacy of new pharmaceutical drugs in laboratory animals to advance researchers’ understanding of disease processes.

ART’s SoftScan optical breast imaging device produces functional images to simultaneously depict blood volume and blood oxygen content. With the combination of images, SoftScan is designed to detect anomalies in the breast that previously went unnoticed and may be better able to determine if a tumor is malignant or benign.

Richard Boudreault, ART’s vice president of research-and-development, said ART’s molecular imaging technology “may help accelerate drug development by providing objectively identifiable biomarkers which indicate treatment efficacy.”

According to ART, drug development time has increased to more than 11 years and the average cost per new drug is about $800 million, based on U.S. dollars. Much of the cost comes from pre-clinical trial expenses involving toxicity and efficacy testing on animals.

ART initially will target drug research companies and laboratories for its molecular imaging technology.

The company in May acquired the assets and intellectual property rights of computed radiography (CR) company Phormax Inc. (Sunnyvale, Calif.). Terms of the transaction were not disclosed.

For the last eight years, Alara has designed, manufactured and marketed medical imaging products based on storage phosphor technology.

Alara will add Phormax’s CRView CR device, which can read storage phosphor imaging plates as large as 14-by-17 inches in one minute or less. CRView is FDA-cleared.

The CRView also opens another market avenue for Alara, whose own CR line includes the DenOptix for dental applications. Alara supplies the DenOptix for Dentsply International Inc. (York, Pa.).

Alara also manufactures the MetriScan bone density system for the detection of osteoporosis. The table-top device for in-office bone mineral density (BMD) testing scans a patient’s fingers to estimate BMD.

The capital infusion is designed to cover approximately half of Palatin’s expenses, as the company completes the FDA review process for the imaging agent. The additional funding is dependent upon certain milestones.

The Mallinckrodt-Palatin partnership began in August 1999, when Mallinckrodt agreed to pay Palatin a licensing fee of $500,000 and an additional $13 million to purchase 700,000 restricted unregistered shares of Palatin preferred stock. Mallinckrodt also agreed to share equally LeuTech development expenses before FDA clearance and partner in LeuTech’s marketing.

Milestone payments of an additional $10 million were to be paid on FDA approval of the first LeuTech indication and when certain commercial sales goals were achieved. Palatin would manufacture LeuTech and receive a transfer price on each product unit and a royalty on LeuTech net sales.

Under the amended pact, the $10 million milestone payment schedule to Palatin has been revised to coincide with LeuTech’s anticipated marketing approval and achievement of future sales goals.

LeuTech is a radiolabeled monoclonal antibody for diagnosing infections. The labeled antibody binds to white blood cells that collect at the site of an infection. A picture is then taken with a gamma camera to locate the site of infection.

Palatin initially researched LeuTech for the diagnosis of equivocal (hard to diagnose) appendicitis. Palatin currently is conducting additional clinical trials in osteomyelitis (an infection involving bone and bone marrow) and post-surgical infection and planning trials in fever of unknown origin, inflammatory bowel disease and pulmonary imaging.

“We have been working closely with Palatin to fully address the outstanding issues raised by the FDA and are confident about the progress that has been achieved,” said Mark Thom, president of Mallinckrodt’s Imaging division, in a prepared statement.

Carl Spana, Ph.D., president and CEO of Palatin, said that the company is “on track” to file an amendment to LeuTech’s Biologics License Application (BLA) in the second half of this year. The company hopes to receive FDA clearance in the first half of 2003.

Since its acquisition two years ago, Mallinckrodt has been part of Tyco Healthcare, a business unit of Tyco International Ltd. (Pembroke, Bermuda).

Toshiba America Medical Systems Inc. (TAMS of Tustin. Calif.) has received two supply contracts from the Veterans Administration National Acquisition Center (VANAC). One award covers the supply of TAMS’ multi-slice Aquilion CT scanners to the VA’s 170 medical centers and other federal agencies worldwide. The contract is for a one-year period and may be extended for as long as five years. TAMS also will supply x-ray and vascular systems to VA medical centers, clinics and other federal agencies. This pact is for one year, with an option for two more years.

Instrumentarium Imaging Inc. (Milwaukee) has become the sole-source provider of mammographic imaging equipment for members and affiliations of Sioux Valley Hospitals and Health System (Sioux Falls, S.D.). The pact includes Instrumentarium’s Performa and Alpha RT mammography units, as well as the Diamond breast care system.

Algotec Inc. (Duluth, Ga.) will supply supplemental software technology to Eastman Kodak Co.’s (Rochester, N.Y.) Health Imaging division for integration into Kodak’s picture archiving and communications systems (PACS). Kodak will handle the integration, as well as manufacture and market the PACS products, and provide post-sales service and support.

Intermountain Health Care (IHC of Salt Lake City) has licensed Amicas’ (Newton, Mass.) Enterprise Office software. The software will capture, store, index and give ICH healthcare providers access to some 1 million radiology studies generated annually within the healthcare system. Images will be distributed electronically through IHC’s electronic medical record and securely through Amicas’ browser-based interface. IHC owns and operates 22 hospitals in Utah and Idaho.

Siemens Medical Solutions (Iselin, N.J.) is partnering with Duke University Medical Center (Durham, N.C.) to study cardiac magnetic resonance (MR) imaging. Duke has agreed to purchase two Siemens’ Magnetom Sonata MR systems for research, clinical use and the education of physicians in cardiac MRI. Siemens also reached an agreement with Research Corporation Technologies (RCT of Tucson, Ariz.) for a nonexclusive license to patent rights for RCT’s tissue harmonic ultrasound imaging technology. RCT manages the harmonic imaging technology for the University of Rochester’s (N.Y.) Center for Biomedical Ultrasound. RCT received the U.S. patent in March 2001.

Colorado Medtech Inc. (Boulder, Colo.) has moved into its new corporate offices to 4801 North 63rd St. in Boulder. The company expects to consolidate all of its Colorado operations into its new location over the next few months.

US Oncology Inc. (Houston) will install Impac Medical Systems Inc.’s (Mountain View, Calif.) integrated oncology management system in more than 75 domestic cancer centers operated by US Oncology. Impac’s system will act as the hub for treatment planning and delivery devices connecting equipment from multiple vendors. The system will help manage advanced radiation treatments, an integrated electronic medical record (EMR) with image management capabilities, and business functions, such as scheduling and authorizations tracking. Impac’s EMR, business functions and other applications will be hosted at Impac’s Redwood City, Calif., ASP (application service provider) data center.

Instrumentarium Imaging Inc. (Milwaukee) will supply its computer-aided detection (CAD) mammography products for Premier Inc.’s GPO (Charlotte, N.C.). Instrumentarium makes the MammoReader CAD analysis system to help radiologists find suspicious lesions during a second review of mammograms.

CorVel Corp. (Irvine, Calif.) is expanding its national healthcare management services and its preferred provider organization (PPO). The company in May closed on its acquisition of AnciCare PPO Inc. (Miramar, Fla.). AnciCare provides medical imaging services, such as MRI, CT, and bone scans, as well as scheduling, report management and reimbursement coordination for a range of medical imaging services in more than 30 states.

Danish ultrasound manufacturer B-K Medical A/S has moved into its new headquarters in Herlev, Denmark, a suburb of Copenhagen. The new facility covers some 100,000 sq. ft, making it twice

as large as B-K’s previous operation in Gentofte. The new building has space for production, R&D, sales and marketing, and administration.

Novation (Irving, Texas) has awarded Amersham Health (Princeton, N.J.) a three-year, sole-source contract to provide its line of brachytherapy products to the group purchasing organization’s (GPO) members. Amersham Health’s products include the OncoSeed prostate brachytherapy seed, Rapid Strand and EchoSeed Iodine-125 seeds and TheraSeed, a Palladium-103 seed. Novation members also will have access to prostate brachytherapy accessories, such as the implant needles used for each procedure.

Quantum Medical Imaging Inc. (Ronkokoma, N.Y.) has released its new Q-Rad Tomo Servo-driven tomography radiographic system. Q-Rad Tomo

is designed for a high-volume hospital or medical imaging clinic and can perform all tomography procedures. It features a digital display window for

complete system navigation for tomographic examinations.

Tenet Healthcare Corp. (Santa Barbara, Calif.) and Viatronix Inc. (Stony Brook, Ill.) have signed a three-year, preferred-vendor agreement for Tenet hospitals to offer Viatronix 3D virtual colonoscopy system for colorectal cancer screening. Using helical CT images, Viatronix V3D-Colon module reconstructs 3D views of the interior of a patient’s colon for analysis by a physician.

In addition, the rollout of BrachySeed Pd-103 and other developments are prompting Cytogen to increase its revenue forecast for 2002.

BrachySeed Pd-103, intended for the treatment of prostate cancer and other localized tumors, joins BrachySeed I-125 in Cytogen’s product portfolio. The company released BrachySeed I-125 — which contains radioactive iodine — in 2001. Cytogen also offers ProstaScint, a monoclonal antibody-based imaging agent to gauge the extent and spread of prostate cancer.

Cytogen is the exclusive marketing partner for both BrachySeed I-125 and BrachySeed Pd-103 in the United States.

Brachytherapy involves implanting small, rice-sized radioactive seeds directly into the prostate or other localized tumors to confine and target treatment within the cancer site.

BrachySeed Pd-103 is designed to inject a more energetic radiation dose from palladium-103 to the tumor. Cytogen says BrachySeed Pd-103 may be suitable for certain, more aggressive forms of prostate cancer and may be an alternative to iodine-based seeds.

Draximage — the radiopharmaceutical subsidiary of Draxis Health Inc. (Mississauga) — manufactures both iodine and palladium BrachySeed products.

With the June marketing of BrachySeed Pd-103 and other products, Cytogen says it expects total revenues this year to range between $12.5 million and $14.5 million.

Cytogen revenues include licensing and contract fees, as well as royalties from the sale of Quadramet, a therapeutic radiopharmaceutical for relief of pain from cancer that has spread to the bone. Quadramet is marketed by Berlex Laboratories Inc. (Montville, N.J.).

Biostream Inc. (Cambridge, Mass.) announced two appointments. The medical imaging pharmaceutical company appointed James A. Buchanan as chief executive officer and named William Eckelman, Ph.D., as the chair of its scientific advisory committee. Over the last 25 years, Buchanan has held executive positions in general management, marketing and new business development for companies, which include metals and materials firm Olin Corp. (Norwalk, Conn.), food company General Mills Corp. (Minneapolis) and toymaker Hasbro Inc. (Pawtucket, R.I.). Eckelman currently serves as chief of the National Institutes of Health’s (NIH of Bethesda, Md.) positron emission tomography (PET) department at the NIH Clinical Center.

American Medical Sales Inc. (AMS of Hawthorne, Calif.) has promoted J. Greg Perry to vice president of sales and marketing. Perry will handle the company’s domestic and international sales, as well as the marketing and technical divisions of the company. AMS’ line of medical imaging products includes motorized viewers, film illuminators and a digital viewing workstation called the Catella system.

The American College of Radiology (ACR of Reston, Va.) has named Harvey L. Neiman, M.D., as the organization’s new executive director. Neiman, chairman of the ACR’s board of chancellors, succeeds John Curry. Neiman will take over the executive director’s duties in January 2003. Neiman currently serves as chairman of the department of radiology at Western Pennsylvania Hospital (Bloomfield, Pa.) and as a clinical professor of diagnostic radiology at the University of Pittsburgh (Pa.) School of Medicine.

Wuestec Inc. (Mobile, Ala.) has added CEO to the title of its president, Byeong Keon Son. He replaces Bruno Wuest as CEO, who founded Wuestec in 1991 and served as chairman since 1994. Wuest will continue in this position. Son will oversee Wuestec’s strategic direction, product development, distribution and financial performance. He joined Wuestec as president in 2000, following a stint as a consultant with Gemini Consulting (New York City). He also served for 10 years with Samsung Corp. (Seoul) in various positions, including general manager in 1990.

Del President and CEO Samuel E. Park credited buying contracts and internal strategic decisions for the company’s progress in its mid-year FY02 report.

“We have raised prices on certain products to a more competitive level; eliminated unprofitable product lines; and consolidated certain facilities and responsibilities,” Park said. “We have a healthy backlog, as of April 26, 2002, of approximately $37 million, a strong balance sheet, and we anticipate improvement in sales and gross margins in the second half of fiscal 2002.”

In its first fiscal quarter, ending Oct. 27, 2001, Del’s net sales declined 12 percent to $19.5 million, compared with $22.1 million in the first quarter of FY01. Del also posted a net loss of $1.5 million, compared with a loss of $376,000 in the year-ago quarter.

In the second fiscal quarter, ending Jan. 26, Del’s net sales rose 5 percent to $24.4 million, compared with $23.2 million in the second quarter of FY01. Del’s net loss was $171,000, compared with a net loss of $1.5 million in the year-ago quarter.

As for FY02, Del also is holding to its original estimate that its total net sales will be between $97 million and $100 million.

“We expect gross margins in the second half of fiscal 2002 will continue to improve, although the most substantial gain will be in Q4,” Park added.

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.

Development costs for its pending products resulted in a net loss for Magna-Lab Inc. (Lynnfield, Mass.) in its fiscal year, ending Feb. 28. The net loss increased to $4.5 million, compared with a net loss of $1.9 million in FY01. The FY02 net loss includes a loss from operations of $4.7 million, including non-cash charges of $1 million, compared with a loss from operations of $2.1 million in FY01. Magna-Lab said the increased loss from operations in FY02 is due to planned increases in expenditures in sales and marketing, costs related to regulatory and reimbursement activities for its Illuminator products, and development expenditures to prepare Illuminator products for commercial production and the development of its Artery View products. The company reported no revenues in FY02 or FY01.

Net revenues at US Diagnostic Inc. (USD of West Palm Beach, Fla.) continued to slide in the first quarter, as the company proceeds with its divestiture of medical imaging centers. Net revenues decreased to $11.3 million, compared with $17 million in the first quarter of 2001. USD’s net loss was $900,000, compared with a net loss of $1.2 million in the year-ago quarter. The revenue decline was due to the sale and closure of 13 imaging centers in 2001. USD currently owns and operates 22 fixed-site medical imaging facilities.

A big jump in sales of its solid-state digital gamma camera and the expansion of nuclear imaging services to new markets powered Digirad Corp. (San Diego) to fine growth in 2001 and the first quarter of 2002. The company reported revenues of $32 million for 2001, compared with $7 million in 2000. In the first quarter, revenues increased 42 percent to $9.1 million, compared with $6.4 million in the first quarter of 2001. First-quarter results were highlighted by record revenues of $4.2 million in Digirad’s service division. The total is up 24 percent from $3.4 million in the year-ago quarter. The company did not release profit-loss results.

Fonar Corp. (Melville, N.Y.) posted results from its third fiscal quarter, ending March 31. Revenues slid slightly to $11 million, compared with $11.4 million in the third quarter of FY01. Fonar also posted a net loss of $5.1 million, compared with a net loss of $2.8 million in the year-ago quarter. For the nine-month period, revenues increased to $30.9 million, up from $30.8 million in the same period of FY01. The net loss increased to $13.6 million, compared with a net loss of $9.7 million in the year-ago period. Fonar attributed its greater loss to increased interest and financing costs, less investment income, and lower revenues from its physician and diagnostic services management subsidiary, Health Management Corp. of America (HMCA).

One-time charges of $2.7 million resulted in a deeper net loss for North American Scientific Inc. (NAS of Chatsworth, Calif.) in its second fiscal quarter, ending April 30. Net sales fell 2 percent to $5 million, down from $5.1 million in the second quarter of FY01. NAS recorded a net loss of $4.9 million, compared with a net loss of $9,000 in the year-ago quarter. The one-time charges included a write-off of costs associated with the initial composition of NAS’ Apomate technology and a charge for the write-down of net deferred tax assets. For the six-month period, net sales rose to $9.9 million, up 6 percent from $9.4 million in the first half of FY01. The net loss — including the one-time charges — was $4.8 million, compared with a net loss of $246,000 in the year-ago period.

Increases in operating expenses cut into Palatin Technologies Inc.’s (Princeton, N.J.) bottom line in its third fiscal quarter, ending March 31. Revenues dropped to $99,000, compared with $143,000 in the third quarter of FY01. The company’s net loss increased to $4.3 million, compared with a net loss of was $2.6 million in the year-ago quarter. For the nine-month period, revenues totaled $182,773, compared with $1.7 million in the same period of FY01. The company’s operating costs are related to the development of three products, including LeuTech, a contrast agent for infection imaging.