Fonar benefits from HMCA business

MRI firm Fonar continues to be hit by a slowdown in scanner sales, but that's being offset by strong revenues from its Health Management Corporation of America physician practice management subsidiary. Acquisitions related to HMCA led to a 57% increase in revenues for Fonar's 1998 fiscal year.

For the year (end-June), Fonar had revenues of $27.6 million, compared with $17.6 million in 1997. The Melville, NY-based company reported a net loss of $5.7 million, compared with net income of $56.1 million last year, when the company recorded one-time gains related to its patent victories over other MRI vendors.

The shift in Fonar's business strategy is evident after a quick look at the makeup of the company's revenues: HMCA contributed $21.1 million in revenue to Fonar's 1998 results, while MRI product sales contributed only 15% of the firm's revenues. Scanner sales generated 27% of revenues in 1997.

Fonar pointed to lower scanner sales as the main factor in the firm's year-end loss, although higher expenses from items such as increased R&D spending and manufacturing and office facilities expansion also played a role. Despite the decline in scanner sales, Fonar president Dr. Raymond Damadian remains optimistic about prospects for the company's Quad scanners. He also believes in the market potential for the company's work-in-progress technology, including its OR 360 operating room scanner and Stand-Up MRI offering (SCAN Special Report 12/97). Most of the design work on OR 360 has been completed, and a prototype is 90% finished, according to documents filed with the Securities and Exchange Commission.

In addition, Fonar is negotiating with two universities to install and begin clinical trials of a breast MRI scanner under development. The company is working with these universities to jointly secure research funding for its breast scanning and treatment program.