Glamour technologies promise to lead imaging sales to new heights

September 19, 2001

The MR and CT industries may be only months away from achieving record sales performances in the U.S. Second-quarter revenue and third-quarter trend analyses indicate that the sales of high-performance equipment, buoyed by rising open sales, may have

The MR and CT industries may be only months away from achieving record sales performances in the U.S. Second-quarter revenue and third-quarter trend analyses indicate that the sales of high-performance equipment, buoyed by rising open sales, may have enough momentum to carry these two disciplines to a new high-water mark by the end of the year.

In the first half of 2001, vendors garnered $579.5 million from the sale of MRI equipment in the U.S.: $335.6 million in the first quarter and $243.9 million in the second. Demand is continuing near 2Q levels, according to industry sources, leading some to speculate that this year’s MRI sales, even if the fourth quarter tails off, will shatter the previous record of $1.074 billion set in 1999.

CT has also been on a tear. In the first six months of this year, vendors have sold $497.1 million worth of CT scanners to U.S. customers. The highest annual revenues for CT equipment ever achieved in the U.S. were $783 million last year, about $286 million-or one good quarter-more than current cumulative sales.

Sales for both modalities, especially CT, have slowed from the blistering pace set in the first quarter of the year. In the first quarter, CT brought in $305 million compared to $191 million in the second quarter. But even at this reduced pace, CT vendors should be able to crush last year’s record.

This one-two punch of MRI and CT sales has vendors’ spirits at an all-time high. Dennis Cooke, general manager of global MR for GE Medical Systems, is especially pleased with the sale of open MR systems.

“We are seeing enormous growth year over year,” Cooke said.

Industry leaders anticipate, however, that demand for both CT and MR will flag in the fourth quarter, as customers wait to see what new wares manufacturers will bring to the RSNA exhibit floor. Any dip in sales will likely not be enough to derail either modality. But it could be a harbinger of lower figures next year, according to John Zimmer, vice president of marketing for Toshiba America Medical Systems.

“It’s hard for anyone to imagine that we can continue at the feverish pace we have been enjoying for the past 18 to 24 months,” Zimmer said.

Philips Medical has a uniquely optimistic perspective as a result of its impending merger with Marconi Medical Systems, which may be only days or weeks away. Marconi CT is the yin to Philips MR yang. Philips has struggled with CT over the last three years partly because of its failure to offer a multislice scanner. The proposed merger would immediately establish Philips as a leader in this market segment.

“The healthy outlook of the global CT market has been a major consideration in Philips’ plans to acquire Marconi,” said Gerard Winkels, senior director of marketing for Philips CT.

Winkels spent last week immersed in meetings believed to be aimed at finalizing the merger.

“The combined technological power of Philips and Marconi will accelerate our vision to evolve CT into the true volumetric arena, where cardiac and cancer detection applications become feasible,” he said.

Adding Marconi’s CT business could be just what Philips MR needs. The company has been doing well in MR, but it could do better if the staff were able to compete for package deals that bundle high-performance MR and multislice CT scanners, according to Jacques Coumans, Ph.D., global marketing director for Philips MR.

“It will be like putting a booster rocket on our backs,” Coumans said.

CT and MRI are able to outshine other modalities through a combination of premium-priced equipment and sales in relatively high volumes. While angiography, cardiac cath, and PET scanners carry million-dollar-plus price tags, each of these weighs in with annual sales of only a few hundred units, at best. Both MRI and CT appear to be on track to sell more than 900 units this year.

The U.S. is the top market for imaging’s glamour twins, but other parts of the world are similarly infatuated. And they are adding to the industry’s coffers. MR sales in France and the U.K. are booming on the heels of increased government reimbursement for the modality, industry executives agree. “The one exception is Germany,” Coumans said. “They have been behind the eight ball because of the pending new reimbursement system.” and China is becoming increasingly interested in MRI. Cooke predicted that this developing nation could generate more MRI annual sales than Japan, which currently accounts for about 350 units, according to industry estimates.

“We see bimodal demand,” Cooke said. “There is strong interest in value products in the open segment and burgeoning interest in the premium tier.”

Against this rosy backdrop, however, are macroeconomic signs that do not bode well for the future of either MRI or CT. Other high-tech industries, including consumer electronics and telecommunications, have imploded, leaving vendors in those industries sounding an increasingly plaintive string of profit and sales warnings.

MRI manufacturers haven’t seen bad times since the crash of 1993, when revenue dropped some 40% thanks to a broad recession. But there are similarities now that few in the industry are willing to acknowledge. Just prior to the drop, sentiment in the industry was euphoric. Sales had pushed MRI equipment revenues in the U.S. to all-time highs. There seemed no reason the good times would not continue to roll. Absent from the current market is the fly in the medical industry ointment that many believe drove imaging into recession: the healthcare reform initiative spearheaded by the Clinton administration. This initiative never happened, but the fear, some believe, was enough to trigger a series of events leading to the industry’s fall, from which it did not recover for several years.

There is no specific trigger in sight today. And MRI has evolved dramatically since that time. Product lines now offer a wide range of choices and prices addressing patient comfort at mid- and high-field. Specialty applications in cardiology and neurology are coming on strong. Their growth may be further impelled by the near-term introduction of production-line 3-tesla systems.

Only GE is currently mass-producing a whole-body 3-tesla scanner, but that is about to change. Philips will soon install a whole-body coil at its luminary site in Zurich. The company expects to have five more installed by the end of the year.

CT has less going for it. The spur to this modality’s resurgence, the introduction of multislice scanners, came three years ago. Early adopters have all bought the systems and the technology has rapidly diffused to mid- and even low-tier product lines. Dual-slice scanners have displaced single-slice scanners at the mid-tier. Soon eight- and 16-slice scanners may push quad-slice systems to mid-tier and dual-slice scanners to the bottom rung. When that happens, the multislice boom will likely taper off.

The worst case scenario is that neither CT nor MRI will manage a soft landing, but will be felled by the economic pressures that have brought down other sectors of the economy. The events of Sept. 11 are putting added pressure on the economy and some experts fear it will be enough to cause a worldwide recession.

Against this gloomy backdrop, CT and MRI executives are upbeat. And for good reason. Sales numbers are encouraging. Product offerings have never been more robust. And synergies resulting from corporate consolidation promise steadily increasing productivity and technological advancement. If these factors win out, the future will be bright.