Fischer Imaging’s stock slides as first-quarter revenues fall

Company blames drop in Tilt-C orders from GE

Shares of x-ray vendor Fischer Imaging went on a downward spiral this month as the Denver-based company reported a major drop in sales for its first quarter of 1997 (end-March). The company attributed the revenue shortfall to a 50% drop in OEM shipments.

For the quarter, Fischer reported revenues of $12.3 million, down 39% compared with sales of $20.1 million in the first quarter of 1996. The company posted a net loss of $3.9 million, compared with net income of $1.1 million in the same period a year ago. The negative results continue a trend that appeared in the fourth quarter of 1996, when Fischer revenues dropped 36% and the company had a fourth-quarter net loss of $2.6 million (SCAN 2/5/97).

Fischer's release of the numbers came amid a month-long slide in the company's stock, which lost nearly half its value. Fischer shares, which began in early April trading over $5 a share, dropped to as low as $3.13 later in the month.

In both the fourth and first quarters, Fischer blamed the decline on lower OEM shipments, especially a drop in Tilt-C shipments to GE Medical Systems of Milwaukee.

The decline in Tilt-C deliveries to GE is somewhat baffling, as GE's enthusiasm for the tilting interventional C-arm system was a major factor behind the company's acquisition of a $10 million preferred equity stake in Fischer two years ago (SCAN 7/6/95). GE said at the time that it made the infusion to shore up Fischer's balance sheet and maintain its access to Tilt-C.

Fischer has not received any communication from GE as to why it is ordering fewer Tilt-C systems, according to Anthony DeCarolis, Fischer vice president of sales and marketing. GE does not have a product of its own that would replace or compete with Tilt-C, he said.

A decline in sales of specialty-purpose x-ray systems, such as Fischer's Mammotest breast biopsy table, also hurt the company's revenues, DeCarolis said. Fischer is experiencing fierce competition in this segment from U.S. Surgical of Norwalk, CT, and its ABBI breast biopsy table, which consists of a U.S. Surgical driver that is fitted to a specially designed Lorad table.

Fischer hopes to overcome the revenue shortfall by reducing its head count and expenses, and plans to outsource much of its manufacturing to lower costs. The company is also hoping that new OEM agreements will replace some of the lost Tilt-C revenue. One such deal is a new agreement to supply cardiac cath labs to Picker International of Cleveland (SCAN 4/16/97). To boost its breast biopsy sales, Fischer has developed a version of its Mammotome table that can be fitted with an ABBI driver. Fischer has filed a 510(k) application for the modification, DeCarolis said.

It will probably take Fischer some time to recoup the sales it has lost from its OEM partners, and the company may not see much relief through direct sales channels, due to fierce competition with larger rivals, according to John Cumming, CEO of WDI Capital Markets in Hilton Head, SC.

"The loss of the GE business is impossible for anyone to recover from in a matter of months," Cumming said. "When your OEM sales fall off, and you've got Trex, Philips, and GE competing for group purchasing sales...it's a tough market out there."