MR vendors reach new heights in U.S. market during 2004

August 15, 2005

Revenue from the sale of new MR scanners to U.S. customers rebounded in the second half of 2004, enough to push the MR industry past its year-earlier revenues and into a dead heat with those achieved in 2002.

Revenue from the sale of new MR scanners to U.S. customers rebounded in the second half of 2004, enough to push the MR industry past its year-earlier revenues and into a dead heat with those achieved in 2002.

In calendar 2004, MR vendors made about $1.48 billion in new MR scanner sales, according to consolidated industry estimates. This eclipsed the 2003 total of $1.42 billion and edged out 2002's high-water mark of $1.47 billion.

It was a remarkable recovery, as vendors had shipped in the first half of 2004 only about $650 million in new MR scanners. Revenue grew primarily from the success of the industry's most expensive scanners, 3T whole-body units. More than 80 shipped in 2004, nearly double the number in the previous year. These scanners accounted for about $175 million, up markedly from the previous year's record revenue of $90 million. The average selling price of a 3T scanner in 2004 was about $2.1 million. This was down slightly from the average $2.2 million paid per scanner in the previous year, an expected drop as price erosion typically accompanies increasing volume.

Some prospective customers were still hesitant, however, about climbing onto the 3T bandwagon, according to Bob Giegerich, director of MR and nuclear medicine business units at Toshiba America Medical Systems. Giving customers pause were the immaturity of the coil technology and concerns over energy deposition in patients, both of which restrain clinical applications.

"We saw a lot of people who held off as long as they could, trying to decide what to buy, and I think they basically went to 1.5T," he said.

The American subsidiary of Toshiba benefited from such decisions through the sale of its 1.5T Vantage. The scanner, which features an ultrashort bore and noise-quieting technology, is Toshiba's first high-field scanner to make a substantial dent in the U.S. market. By late spring, about a year and a half after its commercial release, some 150 Vantage units had been installed, half in the U.S. By the end of 2005, the company expects to have 300 installed worldwide, as it expands its marketing beyond the U.S. and Japan into Europe.

The decision to enter Europe comes at a good time. Philips reports that the market for MR grew on that continent some 10% last year.

"And this was not just Western Europe but former Soviet republics and the Middle East," said Jacques Coumans, vice president of global marketing for Philips MR.

Coumans reports "reasonable" growth in Asia driven by China. He described Japan as stable in the wake of a decline in reimbursements. The limiting factor in China is more a shortage of skilled professionals to operate the machines and diagnose MR scans than money.

"In spite of that, we expect growth in China both in the low-field open segment and the 1.5T and 3T segments," he said.

As in previous years, most of the U.S. revenues during 2004 came from the sale of new MR units. This is continuing in 2005. Unit sales and revenue from 3T, however, will continue to account for more of the total income. The 3T portfolio of major vendors can be expected to account for as much as 25% of this total - close to twice last year's numbers.

GE Healthcare doubled the number of units shipped last year compared with 2003, according to John Chiminski, vice president and general manager of the global MR business. He expects the number shipped this year to double again.

"The 3T system is turning into a clinically viable, relevant scanner," he said. "We have 85% of our 3T sales going to nonacademic, nonluminary sites. About 30% are going into imaging centers."

As the number of sales increase, percentage growth naturally begins to moderate. Vendors expect 3T to continue achieving high double-digit sales growth through the rest of the decade, however.

This growth will follow expanding clinical capabilities and increased productivity, according to Nancy Gillen, vice president of the MR division at Siemens Medical Solutions. Both will come from the greater signal strength produced at 3T.

"But whether 3T will someday become the dominant field strength, as 1.5T is today, remains to be seen," she said.

The high price of 3T systems and a slight increase in the average selling price of 1.5T scanners last year combined to give vendors a revenue edge over the previous year, even though they sold fewer units overall. Industry estimates peg the total number of scanners shipped in the U.S. during calendar 2004 at nearly 1170, about 20 fewer than were believed to have been sold in the U.S. in the previous year. Last year, 730 or so were 1.5T systems, down from 770 such units sold in the U.S. in 2003.

Prices actually increased slightly, as 1.5T scanners averaged $1.4 million in 2004 compared with $1.3 million the year earlier. Meanwhile, 3T scanners are likely to hold their value, commanding prices near or above the $2 million mark, despite increasing volumes.

"There might be some slight erosion over a two- or three-year period, but the differentiation these scanners bring and the clinical benefits they offer allow us to keep their prices very high," Chiminski said.

Open MR scanners were a drag on the market last year, as vendors sold around 340 units compared with roughly 380 in 2003. Revenues slipped accordingly in 2004 to approximately $290 million from about $315 million in 2003.

Running counter to this trend, and helping to mitigate the losses, was an apparent uptick in shipments by Fonar of its Upright MRI. Increased demand for Oni Medical's 1T extremity scanner also added to the total open market.

Whether Philips' 1T open system, Panorama 1.0T, will have much effect in the coming months on the relative health of the open marketplace is difficult to say. Sales of this scanner, which only became commercially available late last year, are not expected to hit their stride until the end of 2005.