Cash infusion quashes rumors of Sopha distress

Sopha Medical Systems last month completed a recapitalizationplan in which the French government's CEA-I industrial divisionincreased its equity stake in the gamma camera maker to about80% of Sopha's stock. The transaction comes after the French pressincorrectly reported that Sopha, based in Buc, France, was filingfor bankruptcy, according to Randy Weatherhead, Sopha vice presidentof marketing.

CEA-I previously held 32% of Sopha's shares (SCAN 1/29/92).CEA-I is the for-profit division of the French government's AtomicEnergy Commission. The division was formed to help French companiesdevelop and export advanced technology products.

CEA-I increased its stake in Sopha by buying out the sharesof Madaleine de Participation, the holding company owned by Sopha'sfounder, Francois Blamont. The bankruptcy rumors started afterSopha's shareholders asked for a mediator to help speed up thebuyout negotiations. That request was misinterpreted by a Frenchnewspaper, according to Weatherhead.

"The shareholders had sought a mediator to acceleratethe agreement with CEA-I," Weatherhead said. "The firstarticle that appeared (in the French press) claimed we were inbankruptcy proceedings, which was not the case."

Sopha's competitors in the U.S. also picked up on the storyand had been spreading rumors about the company's viability, accordingto Sopha spokesperson Suzanne Ugast.

The CEA-I recapitalization also included the infusion of about$20 million in new capital. The money was necessary because ofSopha's strong growth in the past six years. Sopha's U.S. revenueshave risen from $4 million in 1987 to $45 million last year, accordingto Weatherhead.

"Our cash requirements have increased proportionally,"he said.

Sopha has also made several major investments over the pastfew years, including the purchase in 1991 of a 51% share in Magnetech,a small French MRI developer (SCAN 5/22/91).

The new capital will be plowed into Sopha's nuclear medicineoperations, not Magnetech, Weatherhead said.

Weatherhead believes that CEA-I's backing should erase anydoubts in the minds of conservative buyers about Sopha's viabilityin the U.S. market.

"I think this will solidify our position against someof the big companies," Weatherhead said. "CEA is a $7billion division of a much larger entity (the French government),and that will enhance our position from a sales standpoint."

BRIEFLY NOTED:

• Diagnostic Imaging received an anonymous letter this weekwith original and translated copies of the French newspaper LesEchos article on Sopha (see above). Negative comments in the articlewere underlined, in an apparent effort to assist us, and elaborationswere added in the margin.