MR industry sets new record in unit sales and revenues

March 19, 2003

2002 marks second consecutive record yearMR vendors are on a roll. The industry in 2002 shattered previous records for the U.S. shipment of MR units and revenues obtained from their sale, exceeding the marks set a year earlier by

2002 marks second consecutive record year

MR vendors are on a roll. The industry in 2002 shattered previous records for the U.S. shipment of MR units and revenues obtained from their sale, exceeding the marks set a year earlier by more than 20%.

Last year, vendors shipped 1175 new MR scanners, garnering about $1.5 billion, according to industry sources. This eclipsed the previous high-water mark for the industry set in 2001, when vendors shipped nearly 1000 units valued at more than $1.2 billion. Last year's efforts were supplemented by about $150 million in upgrades and peripheral equipment, as well as the shipment by major vendors of close to $100 million in used MR scanners, bringing the total MR market revenues in 2002 to an excess of $1.75 billion.

The MR industry has been booming since 1998, when revenues from shipped scanners leaped almost $400 million to approach a billion dollars. The next year the industry topped that milestone and has remained above it ever since.

Industry executives were cautiously optimistic throughout much of last year, noting the momentum of MR sales but recognizing that a sluggish economy and international problems could dampen interest at any time. Vendors now are in a wait-and-see mode.

"We have seen some slowing this first quarter," said Valerie Moger, director of MR for Philips Medical Systems North America. "We're trying to determine if we are in a slowdown or if it is just part of a cycle."

Last year, customers were buying mostly high-performance systems tricked out with powerful gradients and programmed to handle the most sophisticated studies. About 75% of the 2002 revenues obtained from the shipment of new MR units in the U.S. came from systems operating at 1.5T or greater.

A relatively small chunk of this income, less than $60 million, came from the sale of scanners operating at more 1.5T. Most of these were 3T scanners, which carry price tags of $2.3 to $2.5 million.

Through all of last year, only about 25 of these scanners were shipped to sites in the U.S.-one third the number predicted by industry pundits a couple of years ago when GE, Siemens, and Philips were pushing to get 3T scanners into production.

Industry executives are adamant, however, that the 3T market is about to take off. Orders are up substantially, according to Moger, who expects demand for 3T to eat into the demand for 1.5T systems.

"We are working on a lot of orders, and we will grow those shipments in 2003 and beyond," she said.

Of all the world's markets, the U.S. is the most likely to provide fertile ground for the sale of these systems, given buyers' predilection for high-performance products. So far, however, most sales have been wrapped in special deals, according to Robert Bell, principal of the consulting firm R.A. Bell and Associates in Encinitas, CA. That may soon change.

"The more progressive groups in large urban areas are starting to recognize that 3T has a place in community medicine," he said. "We will probably see 3T take a measurable fraction of the high-field market over the next few years."

Bell predicted that 3T orders will account for between 100 and 150 units ordered in 2003.

Like 3T, the market for open systems continues to hold unrealized potential. This segment, however, is trending down rather than up. The introduction of open systems operating at 0.6T to 0.7T has failed to reenergize interest in this segment, as vendors sell fewer but more expensive scanners.

"Sales activity is split about 50-50 (between low-field and higher field open products)," said Sheldon Schaffer, vice president and general manager for MRI at Hitachi Medical.

Revenues are substantial, however. Last year, U.S. sites purchased open MR units worth more than $340 million.

This market could dramatically shrink in the future, Bell said. Demand for open systems is already being hit by high-performance cylindrical systems whose compact shape minimizes patient discomfort associated with claustrophobia. Toshiba America Medical Systems has bucked this trend, according to Anita Bowler, Toshiba MR product manager. The company has maintained the allure of its 0.35T Opart superconducting system by adding gradients that produce results akin to open higher field systems.

"We are seeing increased demand in the imaging center market, much of it coming from entrepreneurs," she said.

The industry as a whole has been very successful in the outpatient marketplace, according to reports from operators of imaging center chains and mobile services. Both Radiologix and Alliance Medical attribute drops in their patient volume to heightened competition (see "Scan providers struggle to maintain patient volumes," page 4). Radiologix counted 115 new MRI units installed last year at competing sites in the 17 states where the company operates imaging centers.

"About half of these sites are run by groups that have not been sources of recent competition," said Stephen D. Linehan, president and CEO of Radiologix.

Vendors have increasingly been supplementing income from sources other than new units. Last year, the U.S. installed base received about $160 million in software and hardware upgrades. Major manufactures garnered nearly $80 million last year shipping pre-owned MR scanners to customers in the U.S.

If demand for new units tapers off, income from these sources can be expected to increase, as the installed base seeks to squeeze more from what it already has and new customers look for bargains in other people's castoffs. And there are some very good bargains, according to Bell.

"We're seeing true short-bore magnets coming on the secondary market for between $400,000 and $500,000," he said. "This is excellent technology and certainly capable of handling bread-and-butter protocols."