Digital x-ray vendors breathe easier after consortium buys control of dpiX

Xerox will maintain 20% stake in company, however

The supply of thin-film transistor (TFT) arrays for use in digital x-ray systems firmed up with the announcement last week that a consortium of vendors plans to acquire a majority interest in flat-panel x-ray developer dpiX of Palo Alto, CA. The acquisition will mean that medical imaging companies have avoided another potentially damaging interruption in the supply of the components used to manufacture digital x-ray systems.

The current crisis began when technology conglomerate Xerox announced last month that it intended to either sell dpiX or shut it down if a buyer could not be found (SCAN 4/14/99). Xerox executives said that dpiX had not made the progress the company had expected since the subsidiary’s launch in 1996. DpiX develops amorphous silicon arrays that can be used in either digital x-ray detectors or active-matrix liquid crystal displays (AMLCDs) for image viewing applications.

Although dpiX is a relatively young company, it has staked out a niche as one of the few U.S.-based suppliers of the thin-film transistor arrays used for x-ray detectors and AMLCDs. Its TFT arrays are found in flat-panel x-ray detectors made by a number of companies, and thus the company’s failure would have had wide-ranging repercussions in the industry.

Xerox’s announcement prompted three of dpiX’s largest customers to form a consortium to buy the company and avoid an interruption in the supply of panels. Joining together are Trixell of Moirans, France and Varian Medical Systems of Palo Alto on the healthcare side, while defense firm Planar Systems of Beaverton, OR, is also participating. Both Trixell and Varian use early-stage dpiX arrays to manufacture their own digital x-ray detectors, while Planar makes AMLCD displays sold to the U.S. government for defense avionics applications. The three companies acquired an 80.1% stake in dpiX from Xerox, which is retaining a 19.9% position in dpiX.

The consortium members declined to comment about their future plans for dpiX until the deal is closed, which is expected in early June. Meetings between dpiX executives and consortium members will take place the week of June 7 to determine future strategies for the new dpiX, said dpiX president Timothy Da Silva.

In any event, Da Silva will remain in that post in the new company. Da Silva joined dpiX on March 5, and was previously vice president of operations for Xerox’s New Enterprise companies. Trixell president Gerard Daguise has been named chairman of dpiX’s board of directors. Daguise is also vice president of the radiology business unit of Thomson Tubes Electroniques, which joined with Siemens and Philips to form Trixell.

DpiX’s manufacturing plant in Palo Alto will be maintained, and there will be no disruption in the supply of TFT arrays, Da Silva said. A new holding company, PhSiTh LLC, has been created by Trixell’s member companies (Philips, Siemens, and Thomson-CSF) to represent its interests in the takeover of dpiX. Each of the Trixell companies owns one third of PhSiTh. Further financial details of the transaction, such as the percentage of dpiX each consortium member owns and the overall purchase price, were not released.

Trixell decided to participate in the consortium to reinforce its supply of TFT arrays, said Jean Chabbal, general manger for Trixell. Trixell also maintains an alternative source for TFT arrays, which it declined to identify. The company will continue this dual-source supply strategy for the foreseeable future, Chabbal said. Planar also has another supply source, an Asian company, in addition to dpiX, but elected to participate in the consortium to solidify its TFT supply, said Jack Raiton, CFO.

The white-knight rescue of dpiX should help medical imaging avoid a repeat of the supply problems that plagued Sterling Diagnostic Imaging when its array supplier, Optical Imaging Systems, was shut down by a parent company. Sterling subsequently found a new supplier, but the company’s rollout of its DirectRay digital x-ray system was affected.

Yet another supply interruption could have cast doubts on the commercial viability of digital x-ray, a technology that so far hasn’t lived up to market hype. Participants in the dpiX consortium hope that some of these doubts can be removed with the acquisition.

“It’s true that the digital x-ray market is starting slowly, but we expect that our partnership with dpiX will help speed up this market, because now is the right time,” Chabbal said. “The market is certainly more and more informed about the new technology and is waiting for the products.”