Megaslice scanners trigger second-half surge in CT market

July 18, 2005

Due in part to a robust second half, the CT market in the U.S. enjoyed extraordinary sales growth in 2004. Record sales were noted in the third and fourth quarters, according to industry estimates.

Due in part to a robust second half, the CT market in the U.S. enjoyed extraordinary sales growth in 2004. Record sales were noted in the third and fourth quarters, according to industry estimates.Revenue from new equipment sales in the U.S. rose 8% from 2003 to 2004, surpassing $1.3 billion. Prospects for continued growth through this year appear good, as orders at the end of 2004 were running another 8% ahead of shipments. Units shipped were about 7% ahead of the previous year, according to sources, indicating a rise in the average selling price.Introduction of 64-slice scanners had a lot to do with the success of CT in the U.S., where new technologies are adopted quickly and a bigger-is-better attitude drives sales. The late-year release of megaslice scanners boosted the market in the latter half of 2004, according to Bappa Choudhury, vice president of the CT division for Siemens Medical Solutions."The 32- and 64-slice systems drove the surge," he said.When the megaslice scanners, hyped at the 2003 RSNA meeting, suddenly became a commercial reality just prior to the following year's meeting, a huge shift in perception occurred, said Thomas van Elzakker, director of radiology CT and global CT marketing and strategy for Philips Medical Systems. He described the CT market as extremely innovative and fast moving."When larger coverage, higher slice scanners became available, more people wanted to buy them," he said.The positive perception of 64-slice scanners shows no sign of letting up, said Scott Shubert, global marketing manager for CT at GE Healthcare."A very strong clinical market for CT will be driven primarily by the adoption of thin-slice multidetector scanners that can handle a great number of clinical applications," he said.As Shubert and van Elzakker suggest, year-end results bolstered by a second-half jump hold the promise of an even better year in 2005, in stark contrast to a year ago, when vendors struggled to ship just $600 million in new systems on sales driven by heavy discounting. These sales proved to be the trailing edge of the 16-slice products. Vendors were banking on the introduction of next-generation systems (32-, 40-, and 64-slice) to revitalize CT purchases. At the same time, customers were awaiting the appearance of such products.Increased market activity with systems featuring more than 16 slices accounted for more than $38 million in shipments during 2004, with an estimated $255 million in superpremium scanners waiting to be filled at year's end.The late surge pushed the CT industry past what had been a $1.2 billion ceiling for U.S. shipments of CTs in both 2003 and 2004. Breaking through that ceiling had become increasingly difficult as price erosion gripped the industry, forcing vendors to sell more units to achieve the same revenue as the past year. The biggest effect was felt in what Choudhury termed the midtier market, which now includes the 16-slice scanners."It was not so long ago that those scanners were selling for $1.2 million," he recalled. "Now they sell for anywhere between $700,000 and $800,000."By comparison, the new 64-slice scanners carry price tags commensurate with their superpremium status, going as high as $1.7 million. This contributes to a reversal of the erosion, as street prices go up and unit volumes decline. At the end of 2004, the backlog in quad- and dual-slice scanners edged below the number shipped in 2004, as did the backlog for scanners capable of 16 slices per rotation. Industry pundits ascribed this to a strong shift toward the next generation of 32-, 40-, and 64-slice systems.Looking ahead, Doug Ryan, director of the CT business for Toshiba, expects more growth in the CT market in 2005, but not at 2004 levels. He expects the market to stabilize, with 3% to 4% growth. Shubert anticipates higher sales growth. He bases that optimism on the belief that lower slice systems (quad-, eight-, and 16-slice scanners) will continue to command interest from buyers and that cardiologists will propel demand for 64-slice scanners more than they already have. Shubert speculates that the interest of cardiologists in the new breed of superpremium scanners could help produce double-digit growth during 2005."Cardiologists are beginning to buy the 32- and 64-slice CT scanners. If some of that adoption takes place in the second half of this year, we could easily see up to 20% growth for the year," he said.Potential benefits in patient comfort, safety, and productivity regarding CT angiography of the coronaries are driving the interest of cardiologists. Cardiologists also fear that they may lose control over this anatomic segment to radiologists.Philips is actively courting cardiologists with the introduction of its Brilliance 64-slice system, a compelling piece of technology (priced around $1.7 million) placed on display in October at the JFR (Journées Françaises de Radiologie) meeting in Paris and again at the RSNA meeting. The firm's installed base of cardiovascular systems should help sell 64-slice systems, according to company execs. Meanwhile, Siemens has weighed in with two 64-slice configurations: Sensation Cardiac and Sensation 64 (radiology). Interest in the Sensation Cardiac among cardiologists is high, but this interest hasn't yet translated into big dollars, said Choudhury, who advised prudence when making forecasts about sales."I would be cautious," he said. "The percentage of CTs that we sell to cardiologists, and that most manufacturers sell, is still relatively small compared to radiology: 5%t to 10% of our volume goes into cardiology."That experience is not shared across the industry, however. Ryan indicated that about 30% of Toshiba's CT business is from cardiologists buying the scanners for their practices. Toshiba is pulling in these specialists with its Aquilion 32 and 64, whose names reflect the number of slices per rotation. These two systems are bolstered by software such as SurePlaque, which is designed for vascular studies.Van Elzakker clarified that it isn't even just the availability of 64-slice systems that is drawing cardiologists to CT. The modality itself is generally attractive."It's true that the 64-slice scanners are what interest them most, but it's not so much the slice element as the total coverage provided," he said.The larger the number of slices, the more area covered per rotation."This results in shorter scan times, shorter breath-holds, and less movement overall," he said.Vendors are making other arguments, hoping to switch customers' attention from the number of slices to clinical benefits conferred by this next generation of technology. Harjeet Kapur, director of CT marketing for Siemens Medical Solutions, said the company is trying to sharpen the cardiac focus with images demonstrating improved resolution over previous generations. This could indicate a significant trend in 2005: Even though the 64-slice scanner generated the most excitement in 2004, the bigger-is-better mentality may not prevail on all fronts. Van Elzakker perceives a coming shift in focus away from more slices, as customers discover more uses for the lower end, fewer slice systems.While most of the buzz has been generated by the megaslice scanners, resulting in a decline in the fewer slice market, quad-, eight- and 16-slice systems remain the lion's share of sales."These machines still perform routine clinical applications extremely well," Shubert said.He noted that GE has launched new products in the quad-, eight-, and 16-slice segment with its Lightspeed VFX scanner line. Doing so plays well among community hospitals, which are looking for advanced scanning capabilities that fit their often austere budgets.Van Elzakker said megaslice technology - and the enormous amounts of data generated - may have another market effect, this one in the area of clinical software applications.CT market growth in 2005 may further benefit from the development of niche products as vendors branch out with products aimed at oncology and other areas. Currently, according to Shubert, niche products are a fairly small segment of the CT market. These niche products should, however, have increasing impact. For instance, in oncology, so-called wide-bore multislice scanners that promise increased accuracy and faster throughput are appearing in the market."This is a strong area, even though it's not growing at the level of the cardiology market," Shubert said. This market may be self-limiting, however, as these systems are more expensive than the simulators to which oncology departments have grown accustomed. Still, Ryan sees a huge opportunity due to buying cycles."A lot of existing oncology systems are now in the seven- to 10-year-old bracket, which is typically when an oncology CT device would be replaced," he said.Wide-bore products won't be limited to oncology. Vendors see an increased need for scanners designed for specific uses, such as pediatrics, interventional radiology, and others."There is a lot of talk about dedicated cardiac CT scanners or dedicated neurology scanners. So niche markets in CT are definitely developing," Elzakker said.