Elscint companies target growth in MRI and ultrasound with new alliances

December 14, 1994

Israeli firm to acquire Otsuka's clinical MR businessThe dust is beginning to settle after a year of frenzied corporateactivity at Elscint and its parent Elbit. This month's RadiologicalSociety of North America meeting saw the Haifa, Israel,

Israeli firm to acquire Otsuka's clinical MR business

The dust is beginning to settle after a year of frenzied corporateactivity at Elscint and its parent Elbit. This month's RadiologicalSociety of North America meeting saw the Haifa, Israel, companiesbegin to sort out their strategies in MRI and ultrasound, twomodalities they have targeted for growth.

In MRI, Elscint's U.S. subsidiary announced that it has signeda letter of intent to acquire the clinical MRI business of OtsukaElectronics. Elscint displayed that vendor's 1.5-telsa scannerin its booth under the product name Esteem and will begin shippingthe unit in the second quarter of 1995 at a list price of $1 million.Elscint said earlier this year that it was interested in the Otsukabusiness, which has been looking for a corporate partner sincethe summer (SCAN 9/28/94 and 8/10/94).

In ultrasound, Elscint's parent Elbit said that it would foldits recent corporate acquisitions into Elbit Ultrasound Group,with Diasonics and Ausonics products sold under the Diasonicslabel. Elbit acquired Diasonics and Australian ultrasound vendorAusonics earlier this year (SCAN 7/27/94 and 8/10/94).

Elbit Ultrasound Group will combine the worldwide distributionchannels of Diasonics and Sonotron, Diasonics' European subsidiary.In addition to Ausonics and Diasonics products, the group willsell ESI 5000, a PC-based color-flow Doppler system formerly marketedby Elscint's Elscintec subsidiary. That product will also carrythe Diasonics label. Cardiac ultrasound systems, meanwhile, willbe sold under the label of Vingmed Sound, which Sonotron purchasedfrom Interspec in 1990 (SCAN 12/12/90).

At the RSNA meeting, Elbit was careful to preserve the corporateidentities of its subsidiaries. Ultrasound industry observershave been watching Diasonics closely since the acquisition forsigns of a culture clash between the Milpitas, CA, firm and itsnew Israeli owners. Diasonics and Elscint maintained separatebooths at the RSNA meeting, however, and there were no outwardsigns of any change in direction at Diasonics. Bruce Moore remainsCEO at the firm, although CFO Shawn O'Connor is leaving the companythis month. Omar Ishrak remains vice president of product development.

Elbit will take advantage of synergies inherent in collaborationsbetween its new acquisitions, which are involved in two majorjoint product development efforts. Engineers at Ausonics' laboratoriesin Australia are working with Diasonics to integrate aspects ofits premium Masters Series technology into Ausonics' low-costportable systems. In addition, Diasonics and Elscint engineersbased in Haifa are working together to develop a new mid-pricedultrasound platform, according to Moore.

Elbit's plan to be an ultrasound powerhouse was matched byElscint's reinvigorated effort in MRI. The company has had difficultytranslating its success to the U.S. Elscint is hoping to improveits U.S. prospects by dramatically expanding its MRI offeringsto cover nearly every price point. New MRI systems include:

**Esteem, the 1.5-telsa scanner formerly marketed by Otsuka;

**Privilege, a 0.5-tesla magnet featuring a novel design thatlooks more like a race car than an MRI scanner (SCAN 11/23/94);

**Prestige, a new version of Elscint's 2-tesla platform; and

**Magna-Lab's Magna-SL, which Elscint will market in Europe,South and Central America, Asia and the Far East under an OEMagreement signed with the Hicksville, NY, developer last month(see story, page 2).

The new products have given Elscint a chance to reshape itsMRI lineup to fit the new environment of cost-effective medicaltechnology, according to Dr. Thomas Spackman, president of Elscint'sU.S. subsidiary.

"The flatness in the market in the past couple of yearsgave us an opportunity to rethink where we wanted to be in theMRI business," Spackman said. "We needed a product linethat gives us something special in the market. That was why wepurchased the Otsuka system."

Elscint will retire the Otsuka name, but will maintain Otsuka'sFt. Collins, CO, plant as an MRI R&D center for Elscint, accordingto Donald Southard, vice president of sales and marketing. Otsukapresident John Heinrich will remain, as will as Otsuka's salesand marketing team, which will also be based in Ft. Collins.

Elscint hopes its strong financial position will reassure customerswho were interested in Otsuka's low-price, high-field MRI technology,but were leery of the company's staying power and the commitmentof its Japanese parent, Otsuka Pharmaceutical.

"The problem with Otsuka was that its customers didn'tthink they were a going concern. Otsuka (Pharmaceutical) is azillion-dollar conglomerate, but (the MRI) division was almosta spin-off," Southard said. "My sense is that the customersare very assured by the fact that a larger company is now participating."