Business
President and CEO Menashe Benjamin, Ph.D., founded Algotec Systems in 1993, the weekend after retiring from his position as a colonel in the Israeli army. Only 43 years old at the time and armed with a doctorate degree in medical imaging acquired during 21/2 half years of study at California’s Stanford University, Benjamin retired from the service of his country on a Thursday and started Algotec the following Sunday – the concrete result of a plan that had been percolating for at least a year.

Headquartered in Raanana, Israel, Algotec grew out of a contract with Elscint Inc. (Haifa, Israel), a multi-modality medical imaging equipment manufacturer that in 1998 was sold, in parts, to GE Medical Systems (GEMS of Waukesha, Wis.) and Marconi Medical Systems Inc. (Highland Heights, Ohio), then-Picker International Inc. Prior to the Elscint transaction, Algotec was under a three-year, $5 million contract to assist in the development of Elscint’s global CT, MRI and nuclear medicine businesses.

Fueled by the profits it made on its development of Elscint’s Omni Pro workstation and buoyed by its agreement with Elscint that ceded full rights to Algotec for software it developed, Algotec launched its own specialty product in May 1996: Web-based image-management systems tailored to the medical industry. Today, Algotec manufactures, sells and maintains what it calls an “enabling infrastructure” consisting of various products designed to view, manipulate, store, link and manage the healthcare industry’s already voluminous – and constantly growing – collection of image data.

Algotec employs 55 people worldwide; 42 are based in Israel and the remaining 13 are divided between two fully owned sales subsidiaries – one in Frankfurt, Germany, and the other, Algotec Inc., in Duluth, Ga., outside of Atlanta. The company is in the process of establishing its third fully owned subsidiary in Paris. Algotec works the rest of the global marketplace through distributor networks.

Algotec is privately owned. In 1999, the company posted total sales of just less than $4 million, with the U.S. market accounting for approximately 40 percent, or $1.6 million, of total sales. In 1997, the first year Algotec sold under its own name, the company reported sales of $500,000.

Algotec Systems
4 Hamlacha Street
Raanana, Israel
Tel: 972-9-748-2442
Fax: 972-9-748-2411
www.info@algotec.com

Algotec Inc.
3235 Satellite Boulevard
Building 400, Suite 300
Duluth, Ga. 30096
Tel: 770-291-2022
Fax: 770-291-2039
www.info-usa@algotec.com

T I M E L I N E

1993: Algotec Systems is founded by Menashe Benjamin, Ph.D.

1995: Algotec releases ProVision, a multi-modality diagnostic 3D image processing workstation, sold by Elscint under the name OmniPro; Algotec signs an OEM agreement with Precision Therapy (Miami Beach, Fla.- subsidiary of Elekta Oncology Systems) for marketing its ProVision software in conjunction with Precision Therapy’s Radiation Therapy Planning (RTP) products.

1996: Algotec demonstrates MediSurf, the company’s Web-based image and data access engine, at RSNA’s annual conference; Algotec signs an OEM agreement with Elscint for the MediSurf software.

1997: Algotec receives FDA approval for MediSurf; Algotec introduces ImagiNet, an enterprise-wide infrastructure designed to manage, store, process and distribute medical data and images; Algotec signs an OEM agreement with Picker International (Cleveland, Ohio, now Marconi Medical Systems) for selling MediSurf as part of Picker’s JPACS offering.

1998: Algotec enters into a joint venture with Eclipsys Corporation (Delray Beach, Fla.) to offer hospitals one, comprehensive management system for their medical images and other heath-care information; Algotec signs an OEM agreement with Toshiba Medical Systems (Japan), allowing Toshiba to Web-enable its PACS offerings in Japan; Algotec introduces MediStore multimedia clinical image repository, AutoLook revolutionary wavelet compression, and Volume Rendering technologies at RSNA’s annual conference.

1999: Algotec opens its offices in Duluth, Ga., and its German subsidiary; Algotec introduces the RSNA crowd to MediPrime integrated reading station, Med-e-Mail report/image distribution system and CD-Surf, a CD-ROM application that compiles data for transfer to a referring physician outside an ImagiNet network.

2000: Algotec unveils its Application Service Provider (ASP) model at HIMSS, bringing big-time image-management capabilities to small health-care provider groups.

Chief Competitors
?If Algotec has a philosophy about its competition it is this: Technology makes for strange bedfellows. In this industry, rivals not only expect to cross each others’ paths, they also, in some cases, escort one another into the marketplace.
On one hand, Algotec acknowledges that it faces formidable competition from giant imaging and film companies, particularly GEMS, Marconi, Philips Medical Systems International BV (Best, The Netherlands), Siemens Medical Systems Inc. (Iselin, N.J.), Fuji Medical Systems USA Inc. (Stamford, Conn.) and Agfa Corp. (Ridgefield Park, N.J.).

On the other hand, from its beginnings through 1998, Algotec supplied its high-capacity, advanced-computation ProVision workstation to some of those same competitors that sold it under their own brand names. The MxView from Marconi was an Algotec machine, for example, as was Precision View from Elekta Instrument AB (Stockholm, Sweden).

In addition, some established competitors have agreed to be distributors, extending Algotec’s reach into markets the young company might not be able to penetrate on its own. Toshiba America Medical Systems Inc. (Tustin, Calif.) peddles Algotec-brand products in Japan, while Shimadzu Corp. (Kyoto, Japan) distributes Algotec’s products in Australia and throughout Europe. Elekta pitches ProVision worldwide and

Marconi sells MediSurf, Algotec’s Web-based image and data access engine, to the global market.

Algotec takes into account all those avenues when it puts aggregate sales of ProVision at some 700 hospitals worldwide. That number is the combined sales total of models produced for competitors, units sold through distributors and workstations sold by Algotec’s own sales staff.

Toward the end of 1998, Algotec stopped manufacturing for other companies and now sells its products only under its own name.

Principal Products
Using the Internet to read imaging data generated at a hospital in Toronto, Algotec unveiled its first product at the annual meeting of the Radiological Society of North America (RSNA) in November 1996. This Web-based clinical and data access engine, tagged MediSurf, introduced the principle of using a standard browser – such as Netscape or Internet Explorer – on any computer, in any location, to view and process clinical-quality images.

Currently, MediSurf is installed in approximately 120 hospitals worldwide. The company says the FDA approval it received for this Web-based image-management system in 1997 was the first such approval of its kind.

Algotec followed MediSurf’s debut with a product line dedicated to extending and enhancing the company’s core concept of Web-based image-management systems. It begins with ImagiNet.

ImagiNet is Algotec’s total management system – the Algotec umbrella, so to speak. The company describes it as a globally available, enterprise-wide, technological infrastructure that manages, stores, processes and distributes medical data and images. ImagiNet provides the basis for a virtual computerized patient record (CPR) by allowing access to all healthcare information. Inherent in ImagiNet are the following applications:

? MediStore is an archiving architecture that offers both short-term and long-term archiving applications. The first layer, a more-immediate online archive, holds the newest images and permits speedy access to those images. The second layer, or near-line archive, stores months-old images as part of a patient’s medical record. Access to this archive proceeds at a slower pace, since it is unlikely that the images, once read, will continue to be needed for diagnosis.

MediStore will continue to perform – even if failures occur elsewhere in the system – due to built-in software redundancies and what the company calls “smart routing” throughout the system.

Algotec’s MediFlow software application controls the workflow of images within hospitals. Once a patient has a CT scan, for example, MediFlow directs the image from the scanner, registers it in the online archive, then sends it to a radiologist’s workstation for viewing. After the image is read, MediFlow returns the processed image to the archive and makes it possible for the radiologist to prepare a report. The report then is matched with its image and archived.

? MediPrime is a Windows NT-based reading station that integrates workflow considerations at the radiologist level as well as the system-wide level.

? ProVision, a fully DICOM-compliant, UNIX-based system, is a multimodality workstation that features 2D viewing and 3D image-processing capabilities. It is highly compatible with multislice CT scanners that require high processing capacity and extreme computation power. It is Algotec’s most advanced workstation, offering multiplanar reformatting, 3D multi-tissue manipulation, CT and MR angiography, vessel tracking, volume rendering, virtuoscopy, 3D image fusion, the MediSurf teleradiology server, communication and archiving applications, and full support for print services in color and black-and-white.

? “You’ve Got Mail” takes on a new connotation with Algotec’s Med-e-Mail application for referring physicians to receive reports and image information with minimal effort on their part. The Med-e-Mail program compiles key images of a study and an accompanying report and automatically sends the package to the doctor via e-mail.

While ImagiNet represents Algotec’s comprehensive, cream-of-the-crop product package, the company also has products independent of that system. Some of its more recent development efforts have resulted in products that take into account other, notably smaller, segments of the healthcare-provider market.

Last November at RSNA, Algotec trumpeted its newest product at that time: CD-Surf. CD-Surf allows a physician who is not connected to a hospital’s ImagiNet system to receive the results of a scan. Basically, patients carry their information to their doctors on CD-ROMs. The physicians read and process the images using a standard Web browser.

The company has orders for CD-Surf in Germany, France, Canada and the United States. Deliveries are expected to begin in August.

At the annual meeting of the Healthcare Information Management Systems Society (HIMSS) in April, Algotec displayed its brand-new application service provider (ASP) product, which targets smaller healthcare facilities, physician groups and the like.

Because some healthcare provider groups cannot afford up-front costs of a PACS installation, Algotec offers a PACS in an ASP model. This option reduces up-front costs dramatically – from an average $2 million to approximately $400,000, according to company officials, depending upon the size of the facility. The subscribing facility’s operating budget then covers the fee paid per-procedure, which Algotec estimates at less than the price of film for the same procedure. Customers sign a long-term contract with Algotec for the service.

The ASP model operates within a full PACS environment, so customers are assured secure access to high-quality images and service at a lower financial investment.

Algotec is betting that those benefits will ease the pain of equipment-procurement decisions for small healthcare providers which may find it more difficult financially to keep up with the advances in technology

Key Management

Algotec Systems
President and CEO???
Vice President, R&D???
Vice President, Sales???

Menashe Benjamin, Ph.D.
Yossi Reichman
Andre Henig

Algotec Inc.
General Manager
Vice President, Marketing??

Charles “Chuck” Armstrong
Kobi Margolin

Strengths
An admitted David among Goliaths in the healthcare technology field, Algotec nonetheless considers itself a leader in Web technology for medical image management systems.

The company points to its pioneering efforts with MediSurf and having what it asserts is the first patent for the concept of a Web-based image and data access engine. Being first is not what makes Algotec a leader, however. Staying ahead of the field with top-notch product development is what enables the company to maintain its leadership position, company founder Benjamin says.

Why would a customer choose an Algotec product over those of a competitor?

Algotec peels off five reasons, in rapid-fire succession: functionality; speed; ease of use; speed of deployment; and maintenance.

The company views maintenance as one of its strengths. It sees that strength as necessary to its overall goal of providing imaging centers and hospitals with an enabling, Web-based infrastructure that allows those facilities to manage their image data without having to bother with the day-to-day intricacies of the data-management process.

As a result of its ability to manage and maintain all its installations remotely over the Web, Algotec says it can respond promptly to customer concerns anywhere in the world from any of its offices. That strategy is designed to assure customers that problems will be solved quickly, a service fundamental to Algotec’s prized principle of customer satisfaction.

Algotec also regards its ISO9001 certification, received in 1998 in accordance with general industry quality standards and specific medical-industry standards, as a designation that strengthens its position in the marketplace. Some OEMs would not work with Algotec if the company did not have the ISO seal of approval. And an in-depth audit every six months assures that Algotec continues to meet those standards.

Weaknesses
Algotec’s major challenge – one it believes it shares with small, innovative companies everywhere – is brand recognition, in both the European and U.S. markets.

A company the age and size of Algotec lacks the reputation and deep pockets of its larger, more financially secure competitors, which succeed in part due to name recognition and financial resources. As a result, Algotec feels it needs to prove itself every time out.

One industry analyst agrees that Algotec suffers a weak presence in the U.S. market – a situation he says will not be solved by time and technology alone. To curry success in the U.S. PACS market, Algotec – like any other independent hoping to sign main hospital systems – needs to strengthen its U.S. sales and service infrastructure.

In U.S. PACS, it helps to have a cost-effective, state-of-the-art product – and Algotec has that, no doubt about it, the analyst says. But while PACS customers may expect reliable hardware and smart software, they place more importance on the relationship with their vendor, or what analysts call the “comfort factor.”

The nature of the PACS market is such that hospitals are buying relationships, he explains. While hospitals look to technology to deliver imaging information quickly and cost-effectively, they are, at the same time, extremely cautious about interrupting the relationship between radiologists and primary-care physicians. Having a representative on-site to nurture a one-on-one relationship is a business necessity for success in the PACS market.

Approximately 90 percent of the problems that crop up in PACS can be diagnosed and resolved remotely, he notes, and yet success hinges on more than technological know-how. It also requires more than an offer of cost savings with an ASP model.

While Algotec’s ability to manage and maintain all its installations remotely over the Web is admirable, one observer opines, the company will need to bolster its sales and service operations to make further inroads into the U.S. PACS market.

Outlook
Algotec feels it is well-positioned as world markets progress toward full-digital technology. The company predicts that half the Western world will be fully digital five years from now – a probability that offers immense opportunity for any and all companies in the business of healthcare information technology.

Until now, there have been barriers, both technological and financial, to creating a fully digital system of communication that would benefit hospitals and imaging centers. Analog X-ray – which Algotec estimates contributes 60 to 65 percent of the clinical information that needs to be managed and communicated – has been a major hurdle.

Currently, medical text makes up only about 5 percent of medical data generated in the United States in megabytes, with medical images accounting for the remaining 95 percent. As improvements in technology continue to target the imaging community and X-rays slowly, but surely, become digital, opportunities to interpret, communicate and manage those images will be there for the taking.

A fully digital healthcare information environment also will impact favorably on healthcare costs, Algotec says.

As recently as two years ago, when technology was less available and thus played a less influential role in healthcare information management, prices soared for hardware, software and accessories. Since then, prices have declined steadily. In five years, as economies of scale continue to transform the healthcare landscape, Algotec expects that prices will be less than in today’s market.

Algotec also anticipates that the companies which will emerge as winners in the battle for healthcare information technology market share will be those that complement – not compete – with each other. To that end, Algotec is nurturing a two-year-old joint venture with Eclipsys Corp. (Delray Beach, Fla.) that began with small talk at a HIMSS conference.

As a vendor of image-management systems, Algotec has joined forces with HIS vendor Eclipsys to offer hospitals an overall information-management system. The alliance already has one installation in a Columbus, Ohio, hospital and is bidding on a second proposal, also in the United States. end.gif (810 bytes)