Imatron's HeartScan subsidiary buys 10 ultrafast CT scanners

Shipments expected over next 15 months

Imatron made a major commitment to growing its HeartScan imagingcenter subsidiary with the announcement last week that HeartScanhas ordered 10 ultrafast CT scanners. Imatron said it is the largestorder for its products by a single customer in the company's history.

The South San Francisco, CA, company estimated the value ofthe order at $20 million for equipment, service contracts, andaccessories. The scanners will be installed at new HeartScan centersto be opened in the next 15 months.

The order is an example of the synergies Imatron hopes to realizethrough the HeartScan concept. HeartScan, in which Imatron ownsa large minority position, operates imaging centers in San Francisco,Houston, and Seattle. The centers use radio advertising to persuademiddle-aged consumers to drop in for a low-cost coronary arteryscan.

Imatron intends to evolve HeartScan into a separate businessthat will be a source for scanner sales as it establishes newcenters. On June 26, Imatron announced that it had completed a$16 million private placement for HeartScan that will be usedto open new centers. In exchange, a group of institutional investors,including SC Fundamental Value Fund and Cramer Rosenthal McGlynn,both of New York City, and Gruber & McBaine of San Francisco,received a 40% preferred stock position in HeartScan. These sharescan be converted into Imatron common stock, and must be convertedinto HeartScan common stock in the event that HeartScan goes publicthrough an initial public offering in the next two years.

Third-party financing will pay for the HeartScan equipmentplacement announced last week. Proposals from several equipment-leasingcompanies are under consideration, according to Dale Grant, presidentand COO of HeartScan. He said that Imatron's strategy has longbeen to create a large and predictable customer base for its high-speedscanners.

"HeartScan is shaping up to do all of that," he said.

According to Grant, the list of planned HeartScan center sitesunder negotiation includes physician groups affiliated with PrincessGrace Hospital in Monaco, Cedars-Sinai Medical Center in Los Angeles,Johns Hopkins Medical Center in Baltimore, Duke Medical Centerin Raleigh-Durham, NC, Mount Sinai Medical Center in Miami, andAlta Bates Medical Center in Berkeley, CA.

It has been onward and upward for Imatron since the March publicationof the first large-scale study of the coronary artery scan technique(SCAN 3/13/96). Research conducted by Dr. Bruce Brundage, chiefof cardiology at Harbor-UCLA Medical Center in Torrance, CA, andpublished in the journal Circulation, provided an answer to criticswho contend that the tests don't measure actual coronary disease.

Another study published in Circulation in June confirmed theseresults, Grant said. According to research conducted by cardiologistsat St. Francis Hospital in Roslyn, NY, coronary calcium was themost powerful predictor of future coronary events among 1200 asymptomaticpatients tracked for two years after coronary artery exams.

Imatron's stock performance skipped a beat with the good news.The stock, which languished at less than $2 per share last year,jumped to a high of $8.38 in June, then settled back to around$5.50.

This spate of good news hasn't convinced every observer thata profitable future awaits Imatron. A recent round of insiderselling at the company caught the eye of San Francisco Chroniclebusiness writer Herb Greenberg, who wondered in a June 18 columnwhy Imatron executives were selling stock if everything was goingso swimmingly. He noted that company insiders and investors --including Grant, president and CEO Lewis Meyer, and CFO Gary Brooks-- had registered to sell 2.6 million shares.

Grant declined to comment on the reasons for the trading, althoughhe pointed to a lack of complaints from stockholders, who haveseen their holdings appreciate 20-fold in two years.

"Stock options are part of our compensation at Imatron.We are entitled to exercise those options. That's what they'refor," he said.

In any event, the impact of the insider selling on Imatron'sstock valuation will be limited if the company continues to produceclinical studies validating its technology. And Imatron intendsto move the HeartScan concept overseas while at the same timeboosting international sales of its scanners to non-HeartScancustomers.

As part of Imatron's international growth strategy, John Robertsonwas hired in May as Asia-Pacific sales director. Prior to joiningImatron, Robertson was manager of international sales trainingand education for ultrasound vendor ATL of Bothell, WA. At thesame time, Allen Ruszkowski was promoted to vice president ofinternational sales and marketing and Cri Hilmer was appointeddirector of sales covering Latin American, African, and MiddleEastern territories.