Ultrasound sales slump in not-so-roaring '90s

U.S. ultrasound system sales remain becalmed in the doldrums causedby recession and health-care reform. This slow growth contrastsstarkly with the boom years of the ultrasound market in the late'80s. Despite the current scanner sales slump, however, vendorsare optimistic about the long-term prospects for diagnostic ultrasounddemand.

The ultrasound market grew by single-digit percentages in 1990and 1991. Revenue fell 2% to $850 million in 1992 and is expectedto drop 4% in 1993. In comparison, sales rose more than 20% annuallyfor each year between 1985 and 1989, according to a study of theultrasound market by Diagnostic Imaging Technology Reports (seegraph).

Information on the ultrasound study, Diagnostic Ultrasound:Market Trends and Clinical Practice in the U.S., can be obtainedfrom project manager Sharon Cauchi at 415/905-2550.

Average scanner selling prices are declining. They fell 3%in 1992 after a 1% decline in 1991. However, the downturn in systemprices was softened by a trend toward greater purchases of high-performancesystems.

The first half of 1993 was dismal. Equipment orders were downas much as 20% compared to the same period last year, accordingto David Perozek, president of ATL. Sales may have declined asmuch as 10% in the first quarter. Sales from the four main sourcesof ultrasound equipment demand--radiology, cardiology, vascularimaging and ob/gyn--were flat or faltering.

"The overall market is soft," said Bruce Moore, presidentof Diasonics Ultrasound.

The market for equipment designed for private physicians isparticularly poor. Impending restrictions on physician self-referralhave discouraged potential customers from expanding their ultrasoundservices.

"The office market is scared to death," said PhilipSmith, Toshiba America Medical Systems vice president of ultrasoundbusiness operations.

Demand for inexpensive ultrasound systems capable only of gray-scaleimaging has deteriorated, according to several industry sources.Sales of low-end systems began a downward slide in 1989. The trendis accelerating because of anxiety about self-referral regulationand the advent of new ob/gyn applications that require color Doppler.

"Nobody is buying black-and-white boxes anymore. You eitherhave to buy something that has color Doppler or a system withan upgrade path leading to it," said David J. Wight, radiologymarketing manager at the ultrasound group of Siemens Medical Systems.

There is nearly universal confidence among industry officialsthat the obstacles to ultrasound's renewed expansion will be short-lived.They note that of all the high-tech diagnostic modalities, ultrasoundis most likely to thrive in the climate that will emerge fromnational health-care reform. The potential diagnostic power ofthis imaging modality is just beginning to be tapped, they claim.

"If we thought this technology had plateaued, we wouldnot be spending so much money on R&D," Diasonics' Mooresaid.

Procedural growth encourages optimism. More than 50 millionultrasound studies were performed in the U.S. in 1992, accordingto Harvey Klein, president of Klein Biomedical in New York City.The total increased 13% last year. Ob/gyn procedures rose 17%.Radiology procedures increased more than 12%, and echocardiographystudies rose nearly 9%.

Industry officials don't anticipate revived equipment purchasinginterest, however, until facility administrators understand theimplications of health-care reform. The vendors are frustratedby Clinton's decision to postpone announcement of the plan. Theyblame the secrecy surrounding the process for increasing purchaseranxiety.

With prospects for enactment this year fading fast, manufacturersfear that apprehension about Clinton's reform package will carryover to 1994. If that happens, the sales slump reported in thefirst two quarters of 1993 could be prolonged further.

VENDORS ARE SLASHING PRICES on systems regardless of the intendedmarket. Discounts for high-end radiology systems were as largeas 20% last year, Moore said. The average selling price for high-endradiology systems in the first two quarters of 1993 was $20,000to $30,000 lower than it was a year ago.

Manufacturers' financial performances have suffered from thesenegative trends. Acuson announced in June that it would lay off250 employees (15% of its work force) (SCAN 6/16/93). The companyreported disappointing first- and second-quarter earnings afterseeing its net income drop 59% and its net sales fall about 2%in 1992.

ATL reported that revenues were up 2.6% in the first half of1993. Net income plummeted to $123,000 for the first half of 1993,compared to $989,000 in the same period last year.

Diasonics Ultrasound took an $18.5 million loss (excludingnonrecurring charges) on sales of $205 million in 1992. It lost$6.5 million in the first half of 1993, compared to a $13.4 millionloss in 1992.

Radiology, cardiology and ob/gyn accounted for 89% of totaldollar sales in the U.S. in 1992. Radiology sales totaled nearly$350 million, or 41% of the total. Cardiology generated about$285 million and ob/gyn equipment sales, $110 million.

The radiology segment of the U.S. market fell at the same 2%rate as the overall market. Cardiology revenues were down 6%,while ob/gyn revenues rose by 5%. The $52 million vascular marketremained unchanged.

Acuson remains the leader in the radiology market segment witha 43% market share. However, positive sales response to high-definitionimaging (HDI), introduced in 1991, gained ATL several market sharepoints.

Toshiba and Diasonics also improved their positions in theradiology segment last year. Toshiba sales totaled $42 million(8% share) in this segment. Acoustic Imaging held on to fifthposition, despite losing two market share points.

Hewlett-Packard is the dominant force in echocardiography.It controlled half the U.S. market last year. Acuson and Toshibaare HP's biggest competitors, with 20% and 12% market shares,respectively.

Interspec and Biosound, a subsidiary of Italy's Esaote Biomedica,compete in the private office market for more moderately pricedequipment. Interspec held a 5% share and Biosound had a 2% sharelast year.

ATL's varied product line and experience in ob/gyn, gainedwith the acquisition of ADR in 1982, helped the company achieveleadership in this market segment. The company held a 30% sharein 1992.

Aloka and GE tied for second place with identical 18% sharesin the U.S. ob/gyn market last year. Aloka, based in Japan, hashistorically positioned itself as a mid-tier company in termsof price. Its ob/gyn product line is distributed in the U.S. throughCorometrics, a division of American Home Products.

GE hopes demand for its RT 3200 Advantage II scanner will propelit to market leadership in ob/gyn, according to Jeff Peiffer,marketing manager. The company has doubled its share in this marketin the past two years, he said.

Acuson ranks fourth in ob/gyn. The firm has focused its effortson regional centers of excellence staffed with perinatologiststo monitor problem pregnancies initially diagnosed at privatepractices. These regional referral centers are producing revenuegrowth. Fewer than 20 ultrasound systems were sold to these specialistsin 1988, but more than 200 systems were sold to the same marketlast year, according to Dennis Meister, Acuson ob/gyn productmanager.

Shimadzu improved its ob/gyn market position in the U.S. in1992. The company held a 9% share. About 250 low-cost Shimadzusystems were sold by its U.S. dealer/distributor network.

ATL and Acuson retained their first and second rankings inthe U.S. peripheral vascular market in 1992. They had 35% and29% shares, respectively. Siemens ranked third, with a 12% share.

Siemens owes its position to the R&D efforts of QuantumMedical Systems, which launched the Q-2000 system a few monthsbefore the company was acquired by Siemens in 1990. Siemens subsequentlymoved its world ultrasound headquarters to Issaquah and is expandingstaff and facilities there.