Interspec shifts strategic gears

June 5, 1991

Interspec is a changed company, in more ways than one. The cardiologyultrasound vendor has regained financial health and expanded itsmarket opportunities as a result of several strategic decisionstaken over the past year, according to Edward Ray,

Interspec is a changed company, in more ways than one. The cardiologyultrasound vendor has regained financial health and expanded itsmarket opportunities as a result of several strategic decisionstaken over the past year, according to Edward Ray, president.

Recent changes at Interspec include:

  • The signing of a cooperative product development andmarketing partnership in October with German imaging giant Siemens.The two firms will manufacture and sell a mid-tier radiology ultrasoundscanner (SCAN 10/24/90).

  • Sale of Vingmed Sound of Norway to Sonotron, a whollyowned European subsidiary of Diasonics (SCAN 12/12/90). The salewas completed in January. Interspec initially retained U.S. distributionof the Vingmed CFM color-flow Doppler cardiology ultrasound system.

  • The end of Interspec's U.S. distribution agreementwith Vingmed, effective June 1 (see story, page one). Interspecwill switch its sales efforts to focus on the firm's Apogee CXcolor-flow system, which received Food and Drug Administrationmarket approval last month. Apogee CX uses Vingmed color technology,although this has been modified and developed further by Interspec.

"Over a year ago, we decided to sit back and rethink everythingwe were doing," Ray told SCAN. "It was clear that wehad too much debt, and that was not a very comfortable situation.I wanted to clean up our balance sheet. We also looked for waysto expand our market reach and improve distribution."

The Ambler, PA, firm purchased Vingmed in 1987, taking overU.S. sales and service from Diasonics (SCAN 11/11/87). Sonotroncontinued to sell Vingmed scanners in Europe.

Ironically, Sonotron was so successful selling the Vingmedline that Interspec became uneasy. Half of Vingmed's sales weremade by that company. Sonotron was gaining too much leverage overpricing and other business decisions, Ray said.

"It made no sense for us to be in a position where wewere dependent on Sonotron for a major portion of the Vingmedsales," he said.

Interspec purchased Vingmed both to gain access to the colortechnology and to establish a base for ultrasound sales in Europe.The U.S. firm had hoped to build its own sales organization inEurope, but ended up spending much of the funds needed for thisexpansion on upgrading the installed base of Vingmed scannersin the U.S., Ray said.

By selling Vingmed to Diasonics, Interspec almost doubled itsnet worth, paid back all its short-term debt and put cash in thebank. That financial injection will help the firm maintain anaggressive research and development program, he said.

Interspec realized a $7.4 million net gain on the sale of Vingmedin the first quarter of 1991 (end-February). Without revenue fromthat sale, Interspec would have had a slight profit of $238,000for the quarter, compared to a loss of $1.2 million in the firstquarter of 1990. The firm's net income of $7.6 million for theperiod this year also included a $253,000 tax-loss carryforwardcredit. Revenues rose 21% from $14.3 million in the first quarterof 1990 to $17.4 million this year (see graph).

THE SIEMENS AGREEMENT OFFERS Interspec an entree into the radiologymarket, access to Siemens' ultrasound technology and extensiveworldwide distribution and service capabilities, he said.

"Through our alliance with Siemens we are no longer constrainedto operate in just the cardiology market. Radiology is a wholeother market that is larger than the cardiology market. With resourcesfrom Siemens, we will more than double our served-market horizon,"Ray said.

A radiology scanner developed by the two firms should be readyfor market sometime next year. Interspec will handle sales inthe U.S. and Canada, he said.

Interspec uses application-specific integrated circuits (ASICs)and surface-mount technology in manufacturing Apogee. The firmhas also developed an advanced annular phased-array transducerfor the system. Interspec will combine this technology with Siemenstransvaginal and transrectal probes when developing the radiologyscanner, Ray said.

Apogee CX will compete with the Vingmed Sound system in theprivate-office cardiology field, but it also offers Interspecan opportunity to break into the hospital market. The basic color-flowApogee CX sells for $85,000. Shipments began in May, he said.

BRIEFLY NOTED:

  • Picker International's Health Care Products divisionsigned a two-year group purchasing agreement last month with UniversityHospital Consortium, valued at about $20 million. Picker HCPis a major distributor of radiologic supplies and accessories.UHC, of Oakbrook, IL, is an alliance of 54 university hospitals.

A majority of UHC members have signed on to purchase contrastagents and accessories exclusively from Picker during the durationof the agreement. Picker will also provide cost estimates to othermembers considering participation, the vendor said. Contrast agentsin the agreement include barium from E-Z-Em and Smith & Nephewas well as Magnevist, a gadolinium-DTPA magnetic resonance imagingagent manufactured by Schering and handled in the U.S. by theGerman firm's Berlex Laboratories subsidiary.