ADAC plans purchase of PET partner UGM Medical

September 29, 1999

Company also adds mobile CPET unit to product lineRallying from its 1998 accounting troubles, ADAC Laboratories continues to focus on medical imaging technologies it believes offer strong growth and profit potential, such as PET imaging. To that

Company also adds mobile CPET unit to product line

Rallying from its 1998 accounting troubles, ADAC Laboratories continues to focus on medical imaging technologies it believes offer strong growth and profit potential, such as PET imaging. To that end, the company this month announced both an acquisition and a new CPET product that it expects will strengthen its position in the increasingly viable PET sector.

Milpitas, CA-based ADAC agreed to acquire its long-time PET partner, UGM Medical Systems, further cementing a relationship that started in 1993 when the two firms began collaborating on ADAC’s Epic digital detectors and its Molecular Coincidence Detection (MCD) high-energy imaging option for gamma cameras (SCAN 12/14/94). The cash transaction is expected to close in October. Terms were not released.

ADAC has worked particularly closely with UGM since 1997, when it lured the firm away from GE Medical Systems by signing a contract for UGM’s low-cost PET cameras. Previously, GE had been selling UGM systems under the Quest label (SCAN 12/17/97). ADAC launched the UGM cameras at the 1998 SNM show under the trade name CPET, with such modifications as curved sodium iodide detectors developed by scintillation crystal firm Bicron of Newbury, OH (SCAN 6/1/98).

With the acquisition of UGM, ADAC will add UGM’s engineering expertise and PET technology patents to its portfolio, as well as UGM’s manufacturing facilities in Philadelphia and approximately 24 employees.

“UGM is a true leader in engineering of PET technology. They’ve developed innovations in positron imaging, and invented the technology that went into MCD. So we’re acquiring a major engineering powerhouse,” said Mohamed Elmandjra, vice president of marketing for ADAC’s Medical Systems division.

Bringing UGM into the fold will also streamline ADAC’s operations, Elmandjra said, and allow ADAC to improve its gross margins. The firm will no longer have to pay the equipment transfer price associated with a distributor agreement.

In addition to its intended acquisition of UGM, ADAC has also announced the introduction of CPET-MX, a mobile dedicated PET scanner targeted for mobile service providers and/or freestanding clinics. CPET-MX is based on the same Curved Crystal Technology (CCT) found in its parent camera, and ADAC plans to begin shipping the unit around the time of the RSNA meeting.

ADAC has already received an order for five CPET-MX units from P.E.T. Scans of America. The systems will be used in the Northeast region in mobile coaches P.E.T. Scans will purchase from Medical Coaches Inc.

After restating its earnings last year, ADAC has watched its stock price decline as investor confidence faltered, and observers believe that the company’s market share has decreased from its high of 50% of annual U.S. nuclear medicine sales (SCAN 8/4/99). By focusing on PET imaging—both MCD technology and dedicated systems—and on its non-nuclear radiation therapy planning and healthcare information systems businesses, the company expects to improve its overall performance, Elmandjra said.

ADAC’s increasing focus on dedicated PET units has caught some market watchers by surprise, since the company has long emphasized coincidence imaging systems. But ADAC holds that MCD and PET imaging are complementary technologies, rather than competitive ones, according to Elmandjra.

“We want to offer a continuum of solutions in coincidence imaging,” he said. “Dedicated PET is not for everyone. You have to have a patient load that justifies a dedicated unit. Coincidence imaging can benefit a large segment of the population, and our strategy is to give people access to all kinds of products, starting with MCD, then MCD/AC, then CPET and CPET-MX.”

In other ADAC news, the company this month named Neil Laird to the post of senior vice president and chief financial officer, replacing interim CFO Robert Bunje. Laird comes to ADAC from Coherent Medical Group, where he was vice president and chief operating officer.