GE acquisition of Applicare appears close to completion

GE acquisition of Applicare appears close to completion

Dutch PACS software developer would maintain OEM deals

The rumored purchase of Applicare Medical Imaging by GE Medical Systems is apparently nearing conclusion. A source close to the situation confirmed that an agreement between the two firms has been reached, and a final contract signing was expected by the last week in May.

Although the companies declined to comment on the deal, rumors regarding a potential GE-Applicare deal had been circulating in the market for the last few months (PNN 4/99). A possible business combination between the firms was the talk of the exhibit hall at last month's Symposium for Computer Applications in Radiology in Houston.

If finalized, the acquisition would give GE an important boost in penetrating the European PACS market, due to Applicare's extensive distribution network on that continent. Applicare, on the other hand, would gain the backing of a medical imaging powerhouse that could help position it even more strongly for growth in a consolidating marketplace.

It will be interesting to see what decisions GE might make regarding the integration of Applicare's product line into the GE portfolio. The Milwaukee-based company recently released its PathSpeed NT-based workstation product line, and like Applicare, offers a Web-based image and report distribution offering.

In any event, a deal would lead to a new beginning for Applicare, a small company that has had a strong impact in the PACS market, particularly in last five years. Founded in 1987 by CEO Ruud Kroon, Applicare began its corporate life as a relational database management software company. In 1992, however, the company decided to move into more of a niche market where competition would not be as fierce, and it chose medical imaging.

Applicare was one of the first companies to release NT-based PACS software; a teleradiology offering was completed in the summer of 1994. But the company's big break was its inclusion in 1996 on the U.S. military's Digital Imaging Network-Picture Archiving and Communications Systems (DIN-PACS) project team led by IBM. At the time, many industry observers believed that the company's highly regarded NT-based software played an important role in the award to IBM.

In addition to its participation on IBM's PowerPACS team, the company markets its PACS offerings through distributors and through OEMs such as Picker International and Kodak's Cemax-Icon division. Kodak had offered an OEM version of RadWorks software since late 1997 as Kodak's Digital Science Medical Viewing Station, and proceeds from this arrangement were a major factor in funding the company's growth. Kodak acquired the Cemax-Icon group as part of its acquisition of Imation's medical imaging business (PNN 9/98), however, and the companies have settled on Cemax-Icon's AutoRad offering as their primary workstation. Fremont, CA-based Cemax-Icon will continue to provide the RadWorks workstation as customers wish (PNN 3/99). Linthicum, MD-based Meta Solutions serves as the firm's U.S. distributor for RadWorks.

Applicare's OEM and distribution channels have had a key role in its success, and the company has emphasized in previous communications regarding the purchase rumor that it would continue its OEM channel distribution strategy (PNN 5/99). Indeed, the company has been active in adding more vendors to its already formidable roster of OEM clients.

Fellow IBM DIN-PACS team member ADAC Laboratories will sell RadWorks in combination with the Houston, TX-based company's QuadRIS offering. ADAC will initially sell RadWorks within the U.S. and Canada, but also holds an option to extend sales to the rest of the world, Kroon said.

Konica Medical Imaging of Wayne, NJ, has signed on to use RadWorks as a front end for its NetStar PACS and teleradiology products in the U.S, while Merge Technologies has signed a letter of intent with Applicare to sell RadWorks.

Merge decided to partner with Applicare in response to customer requests, mostly in Europe, for an integrated image management system that includes workstations, said Bill Mortimore, president of the Milwaukee-based company.

While one might think the GE purchase of Applicare would make the Dutch company's OEM clients nervous about future product supply, the opposite seems to be the case. Picker International has received a guarantee from Applicare that it would supply the company with RadWorks for five years. In addition, Picker sees GE's endorsement of Applicare's technology as a benefit to its PACS sales efforts, according to Timothy Hansen, president of the Cleveland company's Picker Medical Systems division.

"It enables us to say to customers, this is the same product you could get from GE or IBM," he said. "It's a big endorsement, and we're expecting an uptick in sales."

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