Imatron divests HeartScan center to private imaging services company

LifeTest deal falls through due to financing woesUltrafast CT developer Imatron shifted its corporate strategy last month when it agreed to sell its South San Francisco HeartScan coronary artery disease risk-assessment center to Imaging Technology

LifeTest deal falls through due to financing woes

Ultrafast CT developer Imatron shifted its corporate strategy last month when it agreed to sell its South San Francisco HeartScan coronary artery disease risk-assessment center to Imaging Technology Group, a private medical imaging services company. The deal was settled after an agreement for the sale of the entire HeartScan subsidiary to another company fell through. Imatron now plans to divest the subsidiary piecemeal rather than as an entity.

Imatron sold HeartScan-San Francisco on Feb. 25 for $1.5 million in cash to ITG, a newly established, diagnostic imaging services company also based in South San Francisco. The deal was financed by GE Capital as part of the marketing alliance signed in June between GE Medical Systems and Imatron (SCAN 6/24/98).

South San Francisco-based Imatron started HeartScan in the early 1990s in an effort to make its Ultrafast CT scanners available to leading cardiologists, as well as to build a business that could provide the public with early-stage diagnosis of coronary heart disease. The company’s goal was to have 70 centers established by 1999, but Imatron was able to establish only five by mid-1998. The firm attributed HeartScan’s slow growth in part to difficulty in obtaining insurance reimbursement for its ultrafast CT coronary artery scans. The subsidiary became a drain on Imatron’s profits, and the company began looking for an acquisition partner.

Imatron found a potential partner in LifeTest America, an Atlanta-based owner, operator, and manager of four heart disease risk-assessment centers across the U.S. LifeTest agreed to pay $7.4 million in cash and assume equipment-related lease liabilities (SCAN 8/5/98). But the deal disintegrated because LifeTest was unable to drum up the necessary investment capital.

Renewing its search for an acquisition partner, Imatron changed its strategy: Rather than trying to sell HeartScan whole, it decided to sell each of its centers individually. In addition to its South San Francisco center, HeartScan Imaging operates three others in Houston, Washington, DC, and Pittsburgh. The company also provides ultrafast CT systems to a third-party operator in Portugal—HeartScan-Iberia of Cascais.

ITG was incorporated last month for the purpose of buying the South San Francisco center, according to its chief financial officer, Jeffery Anton. The company’s president is Inyoung Boyd, wife of Douglas Boyd, the inventor of the ultrafast CT system and founder of Imatron. In addition to Boyd and Anton, the company employs four people.

HeartScan centers have relied heavily on direct-to-consumer advertising to generate referrals, and ITG plans to continue in a similar vein, such as through cable television advertising, to increase the center’s clientele. ITG is open to the purchase of other HeartScan centers, Anton said. ITG is also exploring whether ultrafast CT technology’s applications can be expanded.

Imatron’s revised strategy of selling the centers individually makes sense in the context of the market, according to Dale Grant, president of HeartScan.

“In our little segment of the business, there are very few companies that have a national scope,” Grant said. “But there are many candidates within given markets who have a regional perspective. It seems extremely unlikely that there is someone out there with an appetite (for all the remaining centers).”

Imatron and HeartScan are in discussion with other buyers for the sale of the remaining HeartScan facilities, and hope to sign definitive agreements with one or more partners this quarter.