ADAC builds management as nuclear line picks up

ADAC Laboratories is riding high on sales of its Genesys SPECTsystems and Pegasys nuclear medicine workstation. The medicalimaging vendor, located in Milpitas, CA, will use this momentumto boost its business outside the U.S. and transfer R&D resultsfrom nuclear medicine into digital subtraction angiography andother business lines, according to David Lowe, president and COO.

Lowe, formerly general manager of ADAC's nuclear medicine division,was named president in February. At the same time, former presidentStanley Czerwinski was promoted to chairman and CEO, replacingMichael O. Preletz.

Preletz, a corporate turnaround expert from ADAC investor Hambrecht& Quist of San Francisco, had been in the top slot since ADACslid into large losses six years ago. The firm improved its performancefor a period of two years after that, but its fortunes dippedagain in early 1989 when delays in shipping Pegasys helped reduceearnings and the price of ADAC stock dived (SCAN 1/17/90).

Following the drop in stock price two years ago, the company,along with both Preletz and former president Robert L. Deinhammer,were slapped with a shareholder class action lawsuit (SCAN 1/31/90).Deinhammer subsequently left ADAC.

ADAC settled all of the outstanding shareholder litigationthis year and posted a gain of $525,000 in its second quarter(end-March). Overall, net income nearly doubled for ADAC duringthe second quarter, from $1.7 million in 1991 to $3.3 millionthis year. Revenues rose a more moderate 8.3% during the quarter,from $26.5 million in 1991 to $28.7 million in the same periodof 1992 (see graph).

As head of H&Q's turnaround team, Preletz helped with therecovery of other firms in addition to ADAC. Now that ADAC's financialperformance has been set straight for at least a year, the firmhas been given a full-time CEO. Czerwinski will focus on long-termstrategic planning and international business development, Lowesaid.

"My role is in operational management of the businesson a day-to-day basis with responsibility for results of the currentyear," he told SCAN.

In his new position, Lowe will focus first on two primary objectives:

• continue ADAC's reenergized in-house R&D effortso that the firm can maintain a technical leadership positionin nuclear medicine; and

• transfer the nuclear R&D momentum into ADAC's DSAbusiness.

ADAC introduced a cardiac information system and Sun-basedcardiac workstation at the American College of Cardiology conferencelast month in Dallas. The vendor hopes both of these productswill boost DSA sales, which have been relatively flat over thelast few years, Lowe said.

The DSA products also received a transfer of technology fromADAC's radiology information systems' business. More such transfersare in the works for nuclear medicine. ADAC is planning a relatedproduct announcement for the Society of Nuclear Medicine meetingnext month in Los Angeles, he said.

ADAC MAINTAINS IT IS THE LEADING supplier of SPECT equipment inthe U.S. on a revenue basis. Part of this strong position comesfrom the firm's relatively early leap into the growing multiheadSPECT camera market with its dual-head Genesys camera. Major nuclearmedicine competitors Siemens and GE, however, have jumped intothe multihead niche over the past year.

ADAC's Pegasys workstation technology, based on Sun Microsystems'most recent SPARC 2 microprocessor, provides an advantage overother nuclear computer systems, which gives the dual-head Genesysa continuing competitive boost, Lowe said.

"Siemens' dual head and GE's 90´ (cardiac) dual headstill come with a computer. The Pegasys computer is substantiallydifferentiated over these competitors. We are prepared to useall of Sun's advancements the day they come out," Lowe said.

Nuclear medicine cameras have not been differentiated historicallyby their detector technology, although this could change in thefuture, he said. ADAC picked up valuable R&D detector resourcesin its acquisition of the Danish firm Provivo earlier this year.The firm has maintained the Provivo research facility in Denmarkunder the name ADAC AS.

Provivo also provided ADAC with a thyroid camera for Europeand a mobile nuclear camera for the U.S., which has not yet obtainedFood and Drug Administration market approval, Lowe said.

ADAC received another boost for its international businessthis year when Philips transferred all service responsibilityfor its nuclear medicine cameras to ADAC. The U.S. vendor hadpreviously served as Philips' main nuclear distributor for NorthAmerica. The Dutch multimodality vendor will use ADAC equipmentin large bid situations worldwide where nuclear equipment is required,he said.

Philips decided last year to cease development and managementof its own nuclear medicine systems in order to concentrate onmore profitable imaging modalities. Philips has licensed its nucleartechnology to both ADAC and Digital Design of France (SCAN 10/9/91).

ADAC is eyeing expansion in international markets outside ofEurope, particularly in Asia. The vendor has signed several distributionarrangements in that region and is searching for a partner inJapan.

"We have an opportunity to expand our sales quite dramaticallywith penetration in Asia and the rest of the Far East, which wehaven't sold to at all," Lowe said.

ADAC also recently incorporated as ADAC Laboratories CanadaLtd., in all provinces of Canada. National headquarters for thevendor is located in Vancouver, BC, he said.