Analogic expands business into medical systems

February 16, 2000

With more medical device companies opting to outsource as a way to expand their presence in the increasingly complex digital imaging market, some OEM suppliers are taking advantage of the opportunity by adopting a market-oriented approach designed to

With more medical device companies opting to outsource as a way to expand their presence in the increasingly complex digital imaging market, some OEM suppliers are taking advantage of the opportunity by adopting a market-oriented approach designed to provide more turnkey products to their customers. One such company is Analogic, a long-time components supplier to the medical imaging industry.

The Peabody, MA-based firm recently announced a new strategic plan that focuses its resources into autonomous business units and lays the groundwork for several new divisions, including digital radiography and ultrasound in the near term and possibly computed radiography and software solutions in the long term. This is a major shift from the company’s traditional approach, in which several technology-oriented divisions were designed to serve multiple markets, including medical, industrial, and telecommunications.

Analogic also plans to break out its Computer Telephony product group for an IPO, possibly sell off some noncore assets, and create a New Technology Development Group that will be headed up by Bernard Gordon, founder and CEO of Analogic.

“We are not intending to depart from our OEM structure,” said Thomas Miller, who has been president and COO of Analogic since last October (SCAN 9/1/99). “There is an unfulfilled demand for systems versus components, and once you get into the systems business, there is a need to better orient yourself so you have a depth of understanding of market needs.”

In fact, many of Analogic’s OEM customers are already outsourcing some of their noncore businesses to Analogic, he added. For example, Analogic is now engineering both ultrasound and digital x-ray systems for Kodak, including the family of DR systems introduced by Kodak at the RSNA meeting in November (SCAN 12/15/99). In addition, Philips featured a computed tomography system engineered by Analogic in its booth at the RSNA meeting.

“As many companies start to look at themselves as solutions providers, it offers us the opportunity to offer imaging systems rather than imaging components,” Miller said. “We would like to ultimately become a full-service, full-product-line medical imaging developer and manufacturer for OEMs.”

Less-than-robust financials over the past year are also playing a part in Analogic’s new product strategy. The company reported sales of $280 million for 1999 (end-July), down from 1998’s $294 million; net income for the same period was $19.5 million, compared with $24 million for 1998 (SCAN 10/27/99). Medical components, subsystems, and systems—including imaging—currently account for 78% of Analogic’s annual revenues.

“The company has been experiencing fairly solid growth, but we had stalled a bit and had gotten to a point where we needed to sit back and reassess where we were going to be able to accelerate our growth again,” Miller said.

One area where the company is confident it will begin to see such growth in the near future is digital radiography. Analogic first delved into the DR market last year with the acquisition of medical-detector assets from Noranda Advanced Materials, a Canadian firm that had been developing an amorphous selenium-based digital detector product for three years. Through its Anrad subsidiary, which will now become a subset of the new DR division, Analogic continues to work with some OEM partners to develop and refine an amorphous selenium-based DR system but has no definite timeline for commercial introduction of its first DR products.

“We have reason to believe that we can hit a cost point and an image-quality point that are better than any of the other approaches being considered,” Miller said. “And we have solid contracts that make us very confident this will be a profitable business for us.”