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Hand-carried ultrasound heads for over $1B in five years

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GE Medical Systems, SonoSite, and Zonare will drive hand-carried ultrasound to $1 billion in worldwide revenues in the next five years, according to long-standing ultrasound analyst Harvey Klein. He expected these three companies, the current leaders in this sector, to continue to lead in the years ahead. He put SonoSite at the top of the U.S. market in 2006 sales, followed closely by GE, and described the worldwide competition between these two companies in 2006 as very close.

GE Medical Systems, SonoSite, and Zonare will drive hand-carried ultrasound to $1 billion in worldwide revenues in the next five years, according to long-standing ultrasound analyst Harvey Klein. He expected these three companies, the current leaders in this sector, to continue to lead in the years ahead. He put SonoSite at the top of the U.S. market in 2006 sales, followed closely by GE, and described the worldwide competition between these two companies in 2006 as very close.

The hand-carried market is the fastest growing of any ultrasound segment, Klein said. He estimates that sales of medical diagnostic ultrasound units generate more than $4 billion globally each year. Last year, the hand-carried segment grew 41%. Over the coming five years, it will post an average 22% annual growth.

Some of this growth will come from increasing sales in expanding markets, such as emergency medicine and anesthesiology, said Klein, who has studied the global ultrasound market for 25 years. Some will come from the development of new, even smaller units, such as the one Siemens Medical Solutions introduced at the 2006 RSNA meeting (DI SCAN, 12/6/07, Siemens develops palm-size ultrasound scanner). Much of the growth, however, will come at the expense of cart-based sales, as miniaturization boosts the performance of hand-carried systems to compete more effectively with their larger kin.

Klein estimates that the U.S. market in 2006 for hand-carried systems was $198 million. The rest of the world accounted for $199 million. Growth last year over 2005 was virtually the same inside as outside the U.S.

Not surprisingly, vendors last year sold the most hand-carried ultrasound units in history, which technically began when ATL spun off SonoSite as a publicly traded company in the late 1990s. Initially, the fledgling company expected to sell units for about $7000, but distribution costs made this impossible, and soon the cost per unit edged up to $14,000 and has since gone well beyond.

The realities of the marketplace have led Klein to question whether the PDA-like devices, such as Siemens' new palm-sized prototype and one expected soon from GE, will add much growth to the overall picture. The price of these units is expected to be substantially below the going rate for hand-carried systems, possibly in the range of $3000 to $5000.

"At that price, how do you get it in the hands of customers? How do you train those customers? And how can you make money selling the devices?" he said.

Klein uses weight to differentiate hand-carried systems from others. To be considered a hand-carried unit, the system must weigh less than 11 pounds. About a dozen companies worldwide have such systems, among them Bard, GE, Medison, SonoSite, and Terason. Making weight, but hovering on the perimeter is Zonare's z.one, which the company calls a "convertible" system. Klein considers it a hybrid but classifies it as hand-carried because z.one comes with a full cart but allows the basic scanning platform to be used separately.

When SonoSite founded this marketplace, execs talked up the idea of revolutionizing ultrasound by putting its technology in the hands of physician gatekeepers such as family members and general practitioners, as well as emergency room staff and other nontraditional ultrasound users. These markets - some 15 or 20 splinter segments including surgery, anesthesiology, general practice, and internal medicine - will help propel hand-carried sales in the future. The largest markets for the systems, however, will be the same as for ultrasound at large: radiology, cardiology, ob/gyn, and surgery.

"There is no particular market driving growth; really, it's a combination," Klein said. "As the performance of the small systems gets better, they will compete more effectively against the cart-based ones. And that is the key point."

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