Biosound serves as base for Esaote global drive

December 4, 1991

Esaote Biomedica's purchase of Biosound last year (SCAN 8/15/90)was a pivotal move in the Italian vendor's plans for expansionin the world ultrasound marketplace, according to Fabrizio Landi,director of Esaote's ultrasound division.Biosound, an

Esaote Biomedica's purchase of Biosound last year (SCAN 8/15/90)was a pivotal move in the Italian vendor's plans for expansionin the world ultrasound marketplace, according to Fabrizio Landi,director of Esaote's ultrasound division.

Biosound, an Indianapolis-based supplier of ultrasound equipmentto the private-office cardiovascular market, functions as Esaote'sU.S. subsidiary. Biosound sells the Genesis line of color-flowDoppler cardiac scanners developed in a cooperative effort betweenthe two companies.

Esaote scanners are also funneled through Biosound to InternationalUltrasound Systems of Rochelle Park, NJ. International Ultrasoundsells the Esaote AU 530 system under its own label. The firm obtainedexclusive North American rights last year for Esaote's high-frequency(up to 15 MHz) 530 scanner (SCAN 11/7/90).

International Ultrasound subsequently signed Teknar as exclusivedistributor of the Esaote scanner in the American urological market.

Esaote's ultrasound product strategy differentiates the firmboth from Japanese vendors that dominate the market in Europeand major American high-end radiology system suppliers, Landitold SCAN.

"Our target is to become more of a global player in ultrasoundby responding to specific needs of the market. Our growth willnot be in every area," he said. "Private-office (physicians)are among our major customers. Mid-sized hospitals will be importantfor us in the future. We are not competing with the major (radiologyultrasound) players in the U.S."

While Esaote doesn't plan to tackle Acuson, ATL and the othermajor radiology ultrasound vendors, it has adopted some of theircompetitive tactics. The Genesis product line was Esaote's firstattempt to duplicate an upgradable strategy pioneered by the U.S.radiology ultrasound firms, Landi said.

Japanese scanners that sell well in Europe tend to be lessexpensive, general-purpose systems suitable for both private-officeand hospital work. Although the market is changing, upgradabilityremains less of a concern in Europe than among U.S. doctors. Europeansaren't as apt to object to buying a new ultrasound system everyfew years, Landi said.

"We came from a tradition oriented to making many products.Genesis was the first product (for which) we tried to follow theAmerican way. We have sold the same product through Biosound fortwo years, but every year we add new features," he said.

ANNUAL SALES OF ESAOTE'S OWN ultrasound equipment have grown from$10 million to $80 million over the four years since the Genoavendor was created through a merger of two Italian medical companies(SCAN 3/2/88). In addition to the products it manufactures, Esaotedistributes Hitachi ultrasound, MRI and CT equipment in Italy,Landi said.

Esaote is not primarily a multimodality imaging vendor. Expansionoutside Italy will focus on the vendor's own ultrasound productsas well as a separate line of cardiac testing and monitoring equipment,he said.

Ultrasound is Esaote's largest business by far. With Hitachiproducts included, Esaote's ultrasound sales will amount to about$100 million of the company's expected $130 million 1991 revenue.The vendor expects to sell about 1200 ultrasound systems thisyear, Landi said.

Esaote's international expansion is backed by parent Finmeccanica,a $5 billion Italian conglomerate. An infusion of financial andtechnical resources has helped Biosound improve its performancedramatically, according to Gerald D. Erb, executive vice presidentand COO.

"We will close the year out at nearly $20 million inrevenue, and we will be profitable," Erb said. "Thatwill be the best financial performance Biosound has had in sixyears. This has been due both to the Genesis line and the greaterfinancial horsepower behind the company, which has enabled usto invest in marketing, sales and service support."

Biosound's primary role initially will be to assist Esaotewith sales and marketing support in the U.S. and other internationalmarkets, such as Latin America, where Biosound was active as anindependent company. Esaote intends, however, to expands Biosound'scontributions in research and development.

"We are increasing the technological basis of Biosound,"Landi said. "In the future, we will cooperate in developingproducts on both sides of the ocean."

Biosound was a leading supplier of peripheral vascular ultrasoundequipment in the early 1980s, but proved unable to keep up withthe development of linear-array color systems. As a result, thecompany shifted resources into developing its sales, marketingand service strengths, Erb said.

Esaote took a minority position in the U.S. company five yearsago. At that time, the two began technical cooperation which shiftedBiosound from a vascular to cardiovascular product focus, he said.

Esaote invested in intraluminal developer Endosonics, anotherU.S. ultrasound firm, this year (SCAN 3/27/91). The Italian companyreceived distribution rights for Endosonics systems in Italy,France and the Soviet Union. More significantly, however, Esaote--andBiosound--will cooperate with Endosonics in developing futureproducts based on the intraluminal technology.

"We believe intravascular ultrasound has a great future.Our technical cooperation with Endosonics as well as our relationshipas a distributor and shareholder, will improve our ability toparticipate in this market worldwide," Landi said.

BRIEFLY NOTED:

  • Imatron continued its financial turnaround in the thirdquarter (end-September). Revenue doubled for the period, from$2.7 million in 1990 to $5.3 million this year. Imatron had aslight profit of $314,000 in the third quarter, compared to aloss of $1.5 million in the same period last year (see graph).

The high-end CT developer received a boost earlier this yearwhen it entered into a technical cooperation and marketing agreementwith Siemens. Although Siemens will not market Imatron's existingUltrafast CT scanner, this vote of confidence by the large Germanmedical imaging vendor--as well as an infusion of capital--appearsto be helping sales efforts. Siemens paid the smaller firm $4million in the first quarter of this year as part of the agreement.

Imatron broke off its North American distribution agreementwith Picker International shortly after it signed on Siemens (SCAN4/10/91). The firm now handles sales directly in this region.

Imatron scanners are being installed at the National Institutesof Health in Bethesda, MD, UCLA's Harbor General Hospital, theMayo Clinic in Rochester, MN, and Tokyo University in Japan. Thecompany expects to have a total of 46 installations in place worldwideby the end of the year.

  • Strong MRI sales fueled an 18% boost in quarterly revenuefor Elscint, another medical imaging vendor that has managed adramatic financial turnaround. MRI units sold so far this yearhave increased substantially over the same period of 1990, accordingto Shmuel Parag, president and CEO of the Israeli firm. Revenuefigures were not broken out by modality.

Overall revenue for the third quarter (end-September) amountedto $47.5 million, compared to $40.2 million in the same periodlast year. Net income rose 25%, from $3.6 million in the thirdquarter of 1990 to $4.5 million this year. Elscint took advantageof its improved results to raise additional equity. The firm initiatedan offering last month of 5.25 million shares of common stockat $5 per share.