iCAD revenues rise on increasing demand for digital CAD

August 9, 2007

Demand for digital computer-aided detection drove a 58% increase in revenue at iCAD in the second quarter to $6.1 million and caused net loss to decrease by two-thirds to $866,000.

Demand for digital computer-aided detection drove a 58% increase in revenue at iCAD in the second quarter to $6.1 million and caused net loss to decrease by two-thirds to $866,000.

President and CEO Ken Ferry predicted in a teleconference Aug. 9 the increased sales of iCAD's digital products for the rest of the year. This comes on the heels of continued adoption of full-field digital mammography, which has penetrated only about 22% of the U.S. installed base.

"Even if 15% (of the installed base) converts to digital mammography every year, it leaves a significant number that are still two to four years away from converting," he said.

The company also is seeing an increased demand for its products internationally. Driving sales are strengthened relationships with GE Healthcare and Siemens Medical Solutions in Europe, Ferry said. The company also expects first-time sales during the second half of 2007 in Japan, primarily through its relationship with GE.

During the remainder of the year, revenues are expected to range between $13.7 million and $14.7 million with a full-year revenue estimate between $26 million and $27 million. Not included in the forecast are any revenues from the sale of CAD products for use with Fuji computed radiography systems for mammography. Fuji CR for mammography has been approved by the FDA for sale in the U.S., but the agency has not yet approved iCAD products for use with the systems.

The company plans an Aug. 10 submission to the FDA in which it will address some outstanding issues, he said. A response is expected later this month.

"We will get Fuji approval (for Fuji CR mammography)," Ferry said. "However, we are not certain as to when."

In the second quarter, sales of iCAD's digital CAD products rose 131% over the prior year period from $1.7 million to $4 million. Operating expenses of $5.6 million were flat compared with the previous year period. Service revenue rose 13% from $745,000 to $841,000.

Sales of products that perform CAD on prior mammography films unexpectedly declined 8% over this period from $1.4 million to $1.3 million. But sales of TotalLook, which supports the digitization and CAD assessment of prior mammography films, more than doubled during the quarter, representing more than 50% of all film-based revenues.

Backlog rose 67% over the prior year second quarter from approximately $900,000 to $1.5 million, indicating a rising demand for CAD products. Between 70% and 75% of iCAD orders ship in the same quarter, according to Ferry.

To meet its goal for the year of revenues between $26 million and $27 million, iCAD must maximize digital product sales internationally and domestically, he said. The company is positioned to do so, thanks in large part to expected growth by GE Healthcare, whose sales had been hampered by lack of capacity. The company has since solved its problems and is gearing up to increase capacity.

Meanwhile, Siemens is pushing hard to grow its share of the U.S. market, having expanded its women's health salesforce. This has already produced a noticeable hike in the purchase of iCAD products.

The strong presence of both GE and Siemens in Europe is expected to translate increasingly into international sales. In addition, GE is in the running to obtain a Japanese government subsidized purchase of some 45 FFDMs, many of which would likely include iCAD software. These orders would stagger in over the course of the year, Ferry said.

Also, iCAD needs to continue to win orders directly from customers buying Hologic FFDMs, he said. In the past, iCAD had provided Hologic with CAD, but the relationship changed after Hologic's purchase last year of R2 Technology.

Ferry said iCAD is also seeking to expand revenues by recruiting other sales partners, as it did in June, when the company cut a deal with Agfa. Under the agreement, Agfa will market and sell iCAD's SecondLook Digital CAD globally for Agfa's CR mammography system. The agreement focuses initially on Asia and Europe, pending FDA approval of Agfa's CR-based mammography in the U.S.

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