Agfa looks to bright future for technical, medical imaging

Agfa plans to double the size of its medical imaging operation within the next five years, at least in part by continuing its trend of making acquisitions that enhance the company’s performance. Some of the cash that might help fuel those acquisitions could come from the sale of other Agfa business units. But an unsolicited offer from Schroder Ventures to buy Agfa’s Consumer Imaging group was rejected in mid-June because Agfa’s board of directors deemed the bid unacceptable.

The loss in potential cash is being offset, however, by a rising flow of revenue, much of which is coming from medical imaging. In its first-quarter earnings report, issued in mid-May, the Agfa-Gevaert Group reported a 10% increase in sales for its Technical Imaging segment, which in recent years has been dominated by medical imaging.

“Medical imaging continues to do well,” said John Glass, CEO and president of Medical Imaging.

Glass attributed much of that success to recent acquisitions, which since 1999 have included Vari-X, Sterling Diagnostic, Quadrat, and Talk Technology. Since its surge began three years ago, the medical imaging sector has grown to represent roughly 85% of Technical Imaging’s business and is now the number one contributor to Agfa’s overall corporate results, which totaled $996.1 million in the first quarter, Glass said.

“Medical imaging is the key contributor when you look at Agfa’s cash flow and earnings,” Glass said. “The expectation among our shareholders is that medical will continue to be the strongest element of Agfa going forward.”

The shift in earnings toward technical imaging-largely supported by medical imaging-is accentuated by the acquisitions, a trend Glass expects will continue to drive the success of medical imaging.

“Overall, the diagnostic imaging industry and healthcare information technology (IT) have been growing, so we’re participating in a number of growth markets,” Glass said. “In one way we’re just partaking in the growth of the markets as a whole, and at the same time we happen to have some good products at the right time.”

Agfa also reported last month a 20% increase in sales for new digital solutions, growth that Glass once again attributed largely to medical imaging. Key products include Agfa’s Impax line of PACS products and its wide range of computed radiography products, including the ADC Solo and Compact.

“We see CR continuing to grow at roughly 15% a year,” he said. “In PACS, we see a growth rate of 14% to 20% per year as well.”

The company is on sure footing despite some setbacks, Glass said. Earlier this year, Bayer announced plans to sell its remaining 30% stake in Agfa-Gevaert, calling the company “no longer of strategic importance” to Bayer. Bayer once owned 100% of Agfa.

“Medical imaging continues to grow at about industry rates and continues to evolve such that Technical Imaging is the crown jewel of Agfa,” Glass said. “By inference, medical imaging is a crown jewel as well. We expect that medical imaging will continue to be a growing piece of the Agfa pie.”