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 		   E-Z-Em, the dominant supplier of barium sulfate contrast mediafor gastrointestinal imaging, agreed last week to invest a minimumof $1.1 million in the three-dimensional image processing effortsof ISG Technologies of Mississauga, Ontario.

   The two firms also plan to cooperate in the development ofnew technology. There will not be a direct marketing relationshipbetween the companies at first, although ISG hopes to benefitfrom E-Z-Em's established position and contacts in the medicaldiagnostic imaging field, said Michael M. Greenberg, ISG president.

   ISG will continue to sell its 3-D workstations through SummitMedical Technologies of Hudson, OH, Greenberg said. The firm willalso continue to supply image processing equipment to Philipson an OEM basis. Combined Summit and Philips sales of ISG technologyin the 1990 calender year amounted to about $10 million, he said.

   This marketing strategy has proved successful for the 3-D company.ISG announced its first profitable quarter since entering themedical field. The firm doubled revenues in the second quarter(end-December) of fiscal 1991 from $1.5 million to $3.2 millionand had a slight profit of $70,000 (see graph). Profits are almostunheard of among dedicated 3-D medical workstation companies,Greenberg noted.

   E-Z-Em has been exploring ways to diversify out of its basebarium business into areas of more exciting growth, and has alreadyentered the field of computer systems. The firm makes and sellsa radiology information system called AIM. Eventually, E-Z-Emexpects to integrate images with the RIS, said Howard S. Stern,chairman, president and CEO.

   E-Z-Em had been exploring investment in HipGraphics, a 3-Dventure initiated at Johns Hopkins University, along with otherimage processing alternatives (SCAN 12/13/89). The company optedfor cooperation with ISG because of its advanced technology andmarket experience, Stern said. "There is no sense reinventingthe wheel," he told SCAN.

   While E-Z-Em's barium business might appear low-tech comparedwith ISG's workstations, the two companies have complementaryvisions of the future, Greenberg said.

   "Our expertise is in an area E-Z-Em has identified asstrategic to them, and their expertise is clearly in an area ofvital interest to us, namely the diagnostic imaging industry,"he said.

   Both companies have developed technology oriented to the surgicalarena. E-Z-Em's Surgical Dynamics subsidiary makes the Nucleotomedevice for treatment of herniated disks. ISG has developed a 3-Dwand that surgeons can use intraoperatively. There is a possibilityfor cooperation in this area in the future along with imagingproduct development, the executives said.

   E-Z-Em's $1.1 million will be used to purchase ISG debenturesthat may be converted to about 6% of ISG stock. The barium supplierwill have an option to increase this equity position to 20% ofISG common shares.			

Articles

E-Z-Em, the dominant supplier of barium sulfate contrast mediafor gastrointestinal imaging, agreed last week to invest a minimumof $1.1 million in the three-dimensional image processing effortsof ISG Technologies of Mississauga, Ontario.   The two firms

E-Z-Em, ISG agree to cooperate in imaging

 		   Delays at the Food and Drug Administration have left Dornier withouta production line shock-wave lithotripter approved for sale inthe U.S. Dornier Medizintechnik of Munich has discontinued productionof its HM-4 lithotripter, while the FDA has not yet approved itssuccessor, the MFL 5000.

   "The problem with being a worldwide manufacturer is youcannot run your production line solely for the U.S.," saidRobert Minton, vice president of marketing for Dornier MedicalSystems of Marietta, GA. "You have to take into considerationthe product needs of all markets."

   "Adequate numbers" of HM-4s to meet forecasted needsin the U.S. have been manufactured, Minton said.

   While there are HM-4s in warehouses, many, if not all, of thesesystems have been contracted for. "It is important to usthat the FDA look favorably on our new product," said RichardCline, vice president of service.

   Dornier is struggling to maintain dominance of a U.S. marketit created in December 1984. Total sales of extracorporeal shock-wavelithotripsy (ESWL) units reached about 71 units in 1987 and thenplummeted, according to Market Intelligence Research of MountainView, CA. Industry sources agree that total sales in 1990 wereless than 30 units. The sluggish market is expected to continuethis year.

   Siemens is challenging Dornier for leadership in this shrunkenmarket and may be succeeding.

   Seventy-five percent of U.S. units installed in 1989 were SiemensLithostars, according to Laura Lee Murphy, Siemens sales managerfor lithotripsy and urology systems. Siemens' final 1990 figuresare not available.

   Dornier will not comment on market share for the past two years.It has about 80% of the installed base and hopes to retain theleadership role in orders and installations, according to Minton.

   Dornier officials are working with the FDA to answer specificquestions regarding its submission for the MFL 5000. The companyexpects to be back in the game soon with a production line lithotripter.

   "The results of our IDE (investigational device exemption)trials were actually better than for our HM-3s (the first ESWLmachines introduced to the U.S.)," Minton said. "Basedon that track record, we're confident that the machine will gothrough approval fairly easily."			

Delays at the Food and Drug Administration have left Dornier withouta production line shock-wave lithotripter approved for sale inthe U.S. Dornier Medizintechnik of Munich has discontinued productionof its HM-4 lithotripter, while the FDA has not yet

Dornier banks on new lithotripter

 		   Philips and AT&T have agreed to restructure their CommViewjoint venture for the supply of picture archiving and communicationssystems technology. Details of the new structure have not beenfinalized, said Michael P. Moakley, president and CEO of PhilipsMedical Systems North America of Shelton, CT. The two firms remaincommitted to PACS, although they have not been satisfied withthe commercial results of their four-year-long effort.

   CommView focused initially on the development of comprehensivedigital radiology departments, but hospitals proved reluctantto spend large sums of money on technology that could become outdatedand did not provide a new source of revenue. The two companieseventually acknowledged the need to focus on "miniPACS"solutions targeted at specific department requirements.

   The day of comprehensive digital medical imaging will arriveeventually, Moakley said. "There is no doubt it will catchon. The question is when," he said.

   The reorganization will create a single research and engineeringeffort for CommView and reduce redundant expenses at both companies.Resources will also be focused more clearly on marketing existingPACS products, Moakley told SCAN.

   Coincidentally with the decision to restructure CommView, AT&Tdecided to withdraw its bid for the medical diagnostic imagingsystem (MDIS) project of the Department of Defense (SCAN 2/26/90).The decision to withdraw from MDIS will prevent the diversionof resources from support of existing CommView products, saidStephen G. Chappell, director of AT&T Medical Systems.

   "Significant new technology development would have beenrequired in order to meet their (the Defense Department's) requirements.Prospective revenues didn't support the development program wewould have had to put together. It just didn't make good businesssense," Chappell said.

   Advanced Video Products of Littleton, MA, and a partnershipof Siemens and Loral Aerospace of San Jose, CA, are two remainingbidders on MDIS. Both AVP and Siemens continued acknowledge thatthe cost of bidding and fulfilling the MDIS  contract are extensive,while possible revenues are uncertain.

   "It (the MDIS contract) is potentially quite large, butthe request for proposals was worded in an ID/IQ (indefinite delivery/indefinitequantity) manner. They don't have to buy anything they don't want,"said John Perry, vice president of the computer systems divisionat Siemens Gammasonics of Hoffmann Estates, IL. "This isour first military bid response in the PACS business, and it istrue that there was much effort required. It absorbed most ofour senior technical and marketing people for months."

   The war in the Middle East has amplified the uncertainty involvedwith MDIS. Many of the personnel behind the project have beendiverted for an indefinite period, said Henry Kunicki, directorof sales for AVP.

   "MDIS and anything else (involved with military contracts)takes a back seat to what is happening in the Persian Gulf,"he said. "I had expected movement in other (projects), butalmost everything is on the shelf."

   The MDIS contract is a negotiated one, Kunicki said. The militaryis not required to accept a bid and can walk away from the projectif it finds all bids unacceptable, he said. This fact enhancesthe risk for vendors.

THE RESTRUCTURING OF COMMVIEW is in accordance with an effortby Philips to bring its PACS investment in line with market realities,Moakley said.

   "We are in the process of resizing the entire PACS effortin proportion to the market opportunity as we now understand it.The market has not proved as big as we had hoped it would be afterfour years of effort. We are bringing a fresh business approachto the entire PACS/PCR (Philips computed radiography) effort,"he said.

   The overall medical systems picture for PMSNA was bright lastyear, however, he said. Sales grew by 14% over 1989.

   "We had record sales in 1990 and an excellent order performanceacross the board. We see no sign of a downturn in either ordersor sales," Moakley said.

   NV Philips, the Dutch parent of Philips Medical Systems International,is engaged in a corporate-wide restructuring effort, however,which will result in a decline in medical staff of about 1500people. Most of the reductions are occurring in Europe. PMSI hasclosed plants in France and Italy and is consolidating operationsbetween Best, the Netherlands, and Hamburg, Germany, Moakley said.

   PMSNA, on the other hand, expects to have a net decrease inpersonnel of only 60 this year. The North American unit will actuallybe rebuilding its staff following a trimming of 150 positionsthis month, he said.

   "There will be a regrowth in areas, particularly serviceand ultrasound," he said. "I am going to redeploy (resources)into other areas of the business."

   PMSNA should finish the year out with over 2400 employees.Fewer cuts were needed in North America this year, because theoperations here were restructured significantly in 1989, he noted.			

Philips and AT&T have agreed to restructure their CommViewjoint venture for the supply of picture archiving and communicationssystems technology. Details of the new structure have not beenfinalized, said Michael P. Moakley, president and CEO of

Philips and AT&T plan restructuring of CommView PACS joint venture

 		   Two top managers in the Philips picture archiving and communicationssystems business resigned late last year. Philips remains stronglycommitted to its CommView PACS joint venture with AT&T despitethe departures, said Janet Collins, director of corporate communications.The executives who tendered their resignations were Anthony Lombardo,director of Philips' international PACS business, and AnthonyLandau, domestic PACS director.

   The top-level resignations could presage PACS policy changesat the Shelton, CT, headquarters of Philips Medical Systems NorthAmerica, however.

   "Senior management here is evaluating the management structurefor PACS," Collins said. "The market has opened andmatured enough for us to focus more on the profitability sideas opposed to development and introduction (of new PACS technology),which has been our focus over the past few years."

   Such a move would be in line with a worldwide restructuringeffort under way at NV Philips, the parent company of PhilipsMedical Systems International of the Netherlands. All PMSI businessunits, including PACS, will be more strongly focused on profitability,according to Hans van Bree, president and CEO (SCAN 11/7/90).

   Philips expects to appoint new management to the PACS businessin the first quarter of this year, Collins said.

   Lombardo left Philips to join Sony Medical in Park Ridge, NJ,as vice president of sales and marketing. Landau has taken a positionwith a company outside the medical imaging field, Collins said.

 Mediq of Pennsauken, NJ, has retained Smith Barney tohelp reshape the diversified health-care company and former mobileimaging services leader. "Non-core" businesses willbe spun off in the process of narrowing Mediq's health-care focus,the company said.

   Although Mediq sold its MRI and CT fleet to MTI nearly threeyears ago (SCAN 4/13/88), the firm still provides mobile imagingservices in ultrasound and other modalities and has a fixed-siteimaging services business. It also runs a third-party scannerservice company, Mediq Equipment and Maintenance Services of Arlington,TX.

   MEMS is not one of the units targeted for spin-off, said aMediq spokesperson. There have been rumors in the industry thatthe maintenance business is for sale.

 Amerisys did not go to the auction block as expected lastmonth (SCAN 12/26/90). The formerly dealer-owned x-ray companyhas apparently been placed in involuntary bankruptcy, which hasprevented the sale of its assets.

 GV Medical of Minneapolis laid off half of its 60-personstaff this month. The laser angioplasty developer is in the processof developing a second-generation laser system (SCAN 2/26/90),following sluggish clinical acceptance of its Lastac system. Themove will reduce annual costs by $1 million and allow GV to continueresearch into the new system, said president James R. Grabek.

   GV received some positive business news this month as well.The company signed on Itoman & Co., a $4 billion Japanesetrading company, as a distributor in the Japanese market. Itomanhas placed an initial shipment of two Lastac systems, which willbe shipped this quarter, Grabek said.

Two top managers in the Philips picture archiving and communicationssystems business resigned late last year. Philips remains stronglycommitted to its CommView PACS joint venture with AT&T despitethe departures, said Janet Collins, director of

Managers depart Philips PACS unit

 		   Declining Medicare reimbursement for magnetic resonance imagingscans combined with bargain-shopping by managed-health-care groupsspells trouble for high-field MRI centers, said Leonard F. Vernon,president and CEO of Imaging Management Associates. Centers thatcan ride the low-cost MRI wave, however, stand to profit substantiallyfrom the trend, he added.

   IMA of Jersey City, NJ, began as a single limited-partnership-ownedMRI center in 1987. The firm went public last June following thecombination of several partnerships into one operating company.It gained a listing on the NASDAQ market late last year. IMA nowoperates eight MRI centers and plans to expand further with theacquisition of independent physician-owned centers, Vernon said.

   Virtually all of IMA's MRI scanners are low-field Toshiba Accesssystems. The firm markets low-cost, non-claustrophobic imagingto referring doctors and HMOs and PPOs, he said.

   While many radiologists still like the pretty pictures thathigh-field MRI scanners produce, they accept low-field imagesonce they gain experience and realize the images are of diagnosticquality, Vernon said.

   Low-field MRI systems break even at a much lower throughputlevel than high-field units, so a center can sell low-field MRIservices to managed-care groups for substantially less per scan.IMA's fee for an MRI examination is $600 or less, while some high-fieldcenters charge over $1000, he said.

   "People with high field have to pump 10 to 15 (patientsthrough the center) a day to break even. My break-even (point)is below four (patients)," Vernon said.

   About 30% of IMA's gross revenue comes from contracts withseven HMOs and PPOs. The company earned $4 million in direct equity-proportionedrevenue from its centers in 1990 and expects to earn $8 millionto $10 million in revenue this year, he said.

   Vernon likes the open design of the Access system, which isa marketing plus for claustrophobic patients, he said. The Toshibaname, low examination price and low siting costs are other marketingadvantages of the system, he said.

   "If you are going to have a low field unit, you have tohave something to market with it," Vernon said.

   IMA is not wedded to Toshiba, however. The company is consideringthe Hitachi low-field MRI system and purchased an Instrumentariummobile MRI this month. It plans to upgrade the Instrumentariumunit to that vendor's new 0.1-tesla Mega-4 system (SCAN 10/24/90),he said.

   "We were going to buy an Access (MRI), but Hitachi iscoming in with nice deals and we are thinking about that. Hitachiis Toshiba's biggest competition for the Access," he said.

   The center firm also carries its low-cost, compact-system philosophyto computed tomography imaging. IMA runs three GE CT Max systemsand has a fourth on order, Vernon said.

Declining Medicare reimbursement for magnetic resonance imagingscans combined with bargain-shopping by managed-health-care groupsspells trouble for high-field MRI centers, said Leonard F. Vernon,president and CEO of Imaging Management Associates. Centers

Center firm sells MRI to managed-care groups

Morgan W. Nields, chairman and CEO of Fischer Imaging, has investedconsiderable time and resources in developing business connectionsin the Soviet Union. He has traveled to that country a half-dozentimes since joining Comed, a U.S./USSR joint venture, two yearsago (see previous story).

The Soviet economy offers "significant downstream opportunities"as it restructures to a market-based system over the next 10 years,Nields told SCAN. His Soviet connections have also opened up businessopportunities for Fischer in the rest of Eastern Europe.

Medical imaging markets in Eastern Europe are changing rapidlyand much of the business is up for grabs, which is enticing toa vendor less established in Europe, Nields said.

"We could bang our heads trying to sell our equipmentin France and Germany and make very little headway against Siemens,Philips and GE," Nields said. "The risks are higherin Eastern Europe, but things are moving fast there, and a smallcompany can find opportunities in those fast-moving markets."

Soviet executives introduced Nields to the general directorof a large computer manufacturer during a trip to Bulgaria inDecember. Fischer is exploring possible cooperation with thatcompany in assembling x-ray equipment in Bulgaria, which wouldthen be shipped to the Soviet Union. German and Japanese medicalimaging competitors are also interested in the business, he said.

As the Soviet Union and the countries of Eastern Europe implementhard-currency-based trading this year, the Eastern Europeans mustmake products their larger neighbor wants to exchange for oil,gas and other goods that have international commercial value.Such products would likely include state-of-the-art medical imagingequipment, Nields said.

Morgan W. Nields, chairman and CEO of Fischer Imaging, has investedconsiderable time and resources in developing business connectionsin the Soviet Union. He has traveled to that country a half-dozentimes since joining Comed, a U.S./USSR joint venture,

Soviet ties lead Fischer east

 		   Tight reimbursement and improvements in low-field technology havecombined to force down the prices of magnetic resonance imagingsystems sold in Japan and Europe. Japanese MRI prices have beendeclining for at least two years, and this trend has spread toEurope and other international markets as well.

   "Japan has the most competitive prices," said RalphAndreas, vice president of international for Toshiba America MRIin South San Francisco. But MRI prices in general can't go muchlower, he said.

   The price of a popular 0.5-tesla superconductive system inJapan plummeted from 200 million yen ($1.5 million) to 100 millionyen ($735,000) between 1988 and 1989. The price continued to fallin 1990 to about 70 million yen ($514,000)--about half the U.S.price, according to the Japanese newspaper Nippon Kogyo Shimbun.

   MRI prices in Europe were considerably higher than in the U.S.,but have dropped significantly. Prices in Japan, however, aremuch lower than those found in both the U.S. and Europe.

   Tightly controlled reimbursement rates are forcing a majorreduction in prices outside the U.S., according to ChristopherJ. Peabody, senior vice president of international operationsat Picker. Customers in international markets are seeking magnetvalues at 0.5 tesla and below.

   "A lot of shopping is done on the basis of lowest installedprice," Peabody said.

   Prices in Europe have fallen about half as far as those inJapan. Mid-field systems sold for about 13 million francs ($2.5million) in France in 1987. Today, 0.5-tesla systems list in the9 million franc ($1.7 million) range. List price for a popularhigh-field system was 16 million francs ($3.1 million) in 1987and has dropped about 25% to 12 million francs ($2.3 million),according to Dr. Robert Lavayssi-ere, general secretary of theheavy equipment branch of the Private Practicing Radiologists'Union.

   "This current (downward) price trend will force some ofthe smaller competitors out, and in the long run prices will flattenout," Andreas said. "There also has to be more consistencyin pricing between the various geographical markets."

   For the time being, however, reimbursement will probably continueto decline and the price of MR systems will have to follow, hesaid.

   "It is like a mini price war and it's unfortunate, becauseyou have to put more R&D into MRI than into any other imagingmodality," Andreas said.

THE INTERNATIONAL BATTLE FOR MARKET SHARE is another reason forfalling prices. Toshiba holds more than 50% of the medical imagingequipment market in Japan, and is struggling to retain it. Thetough MR price competition at mid and high field is largely dueto the efforts of "a very aggressive American company,"said Tadatoki Yoshida, senior manager of Toshiba's MR businessgroup in Tokyo.

   Michael A. Silver, director of MRI programs at Instrumentarium,advanced a different scenario. Japanese mid-field prices are fallingbecause of Toshiba's effort to squeeze Hitachi in low-field competition,he said.

   "Toshiba seems to have targeted Hitachi as a major competitor.They are dropping their (mid-field) system prices into the low$500,000 range," Silver said. The result is that 0.2-teslasystems lose their price advantage over 0.5-tesla systems, hesaid.

   Pressure from Toshiba within Japan is forcing other vendorslike Hitachi into more aggressive selling in all modalities inEurope and the U.S., Silver said.

   Hitachi, however, claims to have edged into the number-oneslot for MRI units installed in Japan, according to ChristianWetzel, director of marketing for Hitachi, Europe (see chart).A 0.5-tesla system that the company does not plan to export madeup almost a third of Hitachi's 1989 sales.

   Philips is also looking for market growth at lower fields.Since the first delivery of its 0.5-tesla T5 in 1988, Philipshas received more than 200 orders worldwide and has installedalmost 100, said Maarten van Herk, director of Philips' worldwideMRI business. Roughly 60% of those systems are outside the U.S.,he said.

   While the overall MRI market continues to grow, the high-fieldportion of it is shrinking, according to Joseph Vacca, directorof MRI for Philips in North America. Sales of 1.5-tesla unitshave shrunk from about 50% to about 30% of the market in the pastfew years, he said. The bulk of sales remains in North America.

   With angiography available at mid field and mid-field subsecondimaging under development, Philips and other manufacturers indicatethat spectroscopy is about the only 1.5-tesla feature that won'tmigrate to 0.5-tesla machines.

Tight reimbursement and improvements in low-field technology havecombined to force down the prices of magnetic resonance imagingsystems sold in Japan and Europe. Japanese MRI prices have beendeclining for at least two years, and this trend has spread