Signal Medical Services outlasts MTI non-compete

Blue Cross/Blue Shield of Connecticut has acquired a 60% equityshare of Signal Medical Services, an imaging services firm basedin Farmington, CT. The deal was closed last month after Signalrejected an offer from venture capitalists from Atlanta. BlueCross/Blue Shield will take a long-term view of its investment,said Barry E. O'Brien, Signal's president and CEO.

"They're service- and quality-oriented, and will provideus with the input, support and experience we need for the companyto become known as a reliable partner," he said.

O'Brien would not comment on the size of the deal, but it wasreportedly in the $2.2 million to $3.5 million range.

Signal's core business is fixed-site MRI. Its officers formerlyconstituted the entire top management team of Linc ScientificImaging (LSI). They left after Linc was acquired by Mobile Technology(MTI) of Los Angeles late in 1990 (SCAN 6/19/91). Since a non-competeagreement with MTI expired March 1, business is booming, he said.

"We've signed one former LSI customer in Massachusettsto a two-year, mobile lithotripsy account," O'Brien said.

Signal also has a letter of intent in hand from four Northeasthospitals for fixed-site MRI systems. The MRI deals are all forat least five years, and Signal expects to conclude its equipmentnegotiations with either GE, Picker or Siemens over the next fourmonths.

O'Brien's "best estimate" is that 2000 fixed-siteand 400 to 500 mobile MRI systems are operating in the U.S., andthat 1500 to 2000 out of 6000 hospitals are using mobile MRI.

"I expect another 500 (hospitals) to go from mobile tofixed site in the next 36 months. The technology has matured,referral patterns have matured and clinical applications are increasing,"he said. "The promise of mobile MRI has been largely met."

But the promise of mobile PET imaging remains unfulfilled.Signal has neither bought any PET scanners nor sold any PET contracts.

"We're waiting for the reimbursement landscape to be moreclearly known," O'Brien said. O'Brien doesn't expect manyPET purchases until the Food and Drug Administration review ofFDG-18, a PET radioisotope, is completed by the end of the year.

"It's a $4 million to $4.5 million investment for a cyclotron,"he said. "The best outlook for PET is on a shared, mobilebasis with a cyclotron centrally located for up to 10 hospitals."

Meanwhile, the outlook appears bright for Signal. The five-personcompany hopes to have a new vice president of sales and marketingon board by June 1, and is filling new, open slots for two regionalvice presidents.