Diagnostic Imaging Scan - February 26, 2008 - (Page 2) 49% and 50% of revenue. Fonar had a good second quarter of fiscal 2008, but the MR maverick was unable to convert those revenues into profits. On the bright side, the company, whose product sales rely heavily on its Upright Multiposition MRI, narrowed its net loss to $3.8 million from the $5.5 million net loss reported in 2Q06. For the quarter, Fonar revenues grew to $10.7 million from $7.7 million. Product sales increased 92.1% to $4 million from $2.1 million. Fourth-quarter revenues at PACS specialist Emageon dropped 14.7% from the yearearlier period to $28.6 million. The shortfall produced a net loss of a half-million dollars for the quarter compared with net income of $2.1 million in 4Q06. Revenue was down 15.6% for the year ended Dec. 31, compared with the previous year. Net loss in 2007 was $6.9 million compared with $6 million for 2006. The company forecast 2008 revenue in the range of $87 to $89 million and net loss between $4.3 million and $4.9 million. Revenue edged upward for imaging services provider Alliance Imaging in the fourth quarter to $113.6 million from $111.7 million in the comparable 2006 quarter. For 2007, revenue was $444.9 million, which was slightly above the company’s guidance, but still 2.4% below its $455.8 million in 2006. Adjusted EBITDA was $39.7 million in 4Q07, a 3% decrease from the year-earlier period, and $165.6 million for 2007, a 3.5% drop from the earlier full year. The company cited Medicare reimbursement cuts as leading to the shortfalls. Despite the difficult business climate, Alliance last year opened 16 fixed-site imaging centers and a radiation therapy center. At the close of 2007, it was operating 88 fixed-site imaging centers and 12 radiation therapy centers. Fourth-quarter revenues were off 16% at Vital Images compared with the year-earlier period, as the workstation specialist generated only $16.7 million. The shortfall led to a quarterly loss of $1.6 million compared with net income like this. One of the things we have learned is that we can come together. We have seen physician societies bond together very closely. That is the sort of approach we have to take as a community. It will be interesting to see if something like this can happen for CT colonography—if the gastrointestinal societies get together and discuss how to approach CMS and let them know that this is a very valuable tool and their patients can benefit from it. DI SCAN: So the idea is to take a proactive approach? Ryan: Absolutely. We shouldn’t be waiting for the guillotine to drop before we ask why it came down. We need to look at this ahead of time, as an industry. How do we approach the insurance companies, as well as CMS on a broader basis, to prevent situations like this one from happening? A lot of emotion surrounds cardiac CTA, particularly from physicians who have been heavily involved in patient care using this technology. There has to be a better way to address things like this. DI SCAN: This takes us back again to the question of how to do so. Ryan: We need a unified approach. If we come at it from separate directions, the likelihood of success is very low. DI SCAN: So instead of a fragmented approach with individual vendors and physician groups, the vendors should work through NEMA, and the physicians through their societies, to create a single approach that would represent the whole CT community? Ryan: Correct. The physicians, vendors, and societies can all come together. It is important that these three groups take a unilateral approach. But the first thing is to determine the best way to approach CMS and insurance companies. On this, I have no answer. Carlo Medici, head of Bracco global commercial operations. “With this company, we gain a customer segment we are not very familiar with that enlarges our footprint,” Medici said. “But we don’t go too much outside where we are now.” Key products of interest to Bracco are E-Z-EM’s VoLumen, a low-density barium sulfate suspension for CT gastrointestinal studies, and its Empower family of CT and MR injectors. Bracco already has a hand in the injector market. Its affiliate Acist Medical Systems makes injectors, but only for angiographic applications. The E-Z-EM products will extend Bracco’s reach—and at a high level of performance. Software onboard the Empower CT products monitors injector function by looking for signs of adverse patient reactions at the injection site. It also gathers data regarding the operation of networked Empower injectors to provide useful information when analyzing department-wide operations. E-Z-EM also has developed a handheld device that analyzes a finger-prick sample of blood for creatinine levels as an indicator of renal function. The EZ Chem Blood Analyzer has obvious appeal to a maker of MR contrast whose gadolinium base has been associated with nephrogenic systemic fibrosis in patients with impaired kidney function. Of strategic importance to Bracco is the chance to expand into gastrointestinal imaging. In addition to E-Z-EM’s oral contrast product are nutritional prep kits and bowel cleaners, tagging agents, and a carbon dioxide colon insufflation system. Especially interesting is the company’s virtual colonoscopy hardware and software, Medici said. “We believe the market for virtual colonoscopy will grow significantly between 2008 and 2009, with expanding reimbursement,” he said. In recent years, Bracco has been trimming operations outside its core competencies. These have included holdings in cosmetics and chemicals as well as medically oriented businesses, such as the MR and ultrasound vendor Esaote. This paring of noncore assets fits the broad strategy that has brought the company to bid for E-Z-EM, Medici said. Bracco expects to pay $21 per share for E-ZEM. This represents a share price more than 30% above the closing price of the stock in the days immediately preceding the formal bid made four months ago. But E-Z-EM has a healthy balance sheet with no outstanding debt and $44 million in cash, cash equivalents, February 26, 2008 Bracco exec describes pending E-Z-EM acquisition E-Z-EM portfolio would extend MR contrast maker’s footprint Bracco Diagnostics is poised to expand its customer footprint in medical imaging in the next few days or weeks when it acquires E-Z-EM as part of a $241 million cash deal agreed upon by the two companies last October. If the deal goes through, E-Z-EM, the U.S. firm widely known for its barium contrast products and injectors, will extend Bracco’s reach outside of its traditional bounds in MR, CT, and x-ray contrast agents. This expansion is complementary to Bracco’s current offerings, according to Copyright © 1991-2008 CMP Healthcare Media Group LLC
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