Nelson redirects Advanced NMRto emphasis on imaging services

ANMR drops R&D and manufacturing programs

Bogged down by unproductive research and development, AdvancedNMR this month adopted a new strategy that involves sweeping changes,including an end to its involvement in product R&D and manufacturing.

A shift in emphasis to imaging services will be facilitatedby ANMR's wholly owned subsidiary Medical Diagnostics (MDI). ANMRplayed the role of white knight in a $28 million friendly takeoverof the profitable New England mobile imaging services companyin May 1995 (SCAN 5/10/95). MDI is substantially larger than itsparent company. In 1994, the operator of two freestanding centersand 10 mobile MRI routes generated sales of $20 million, comparedwith $5.2 million for ANMR.

ANMR's manufacturing operations have revolved around productionof InstaScan, a $500,000 echo-planar imaging upgrade for GE's1.5-tesla Signa scanner. It was never wildly popular, and customerinterest in InstaScan waned after GE introduced an EPI packagefor its new Horizon high-field MRI series last year. ANMR haltedits marketing effort for InstaScan in June (SCAN 6/19/96).

The decision to focus on imaging services came after CEO andchairman Jack Nelson concluded that the firm's emphasis on advancedproduct development was bleeding it dry.

"We felt we should focus on capitalizing on what MDI coulddeliver to the marketplace, namely fixed MRI and rehabilitationservices, which seem to be attracting a growing market and wherethere is a lot of room for consolidation," he said.

Staying the course was less attractive, according to Nelson.

"We were looking at the continuing burn of R&D, ofsagging sales and lower margins for InstaScan," he said.

The Wilmington, MA, company will eliminate R&D and productionof its InstaScan and head coil technologies with the goal of eventuallyhalting manufacturing, Nelson said. The company started gearingdown operations earlier this year. Since January, 20 engineers,scientists, and manufacturing personnel have been let go.

According to Nelson, the company will maintain enough manufacturingcapacity to supply GE with 3- and 4-tesla MRI scanners as stipulatedin an exclusive contrast that expires in June 1999. ANMR has shippedthree 3-tesla scanners this year to customers lined up by GE'ssales force. Installations were completed at the University ofCalifornia at Los Angeles and Nigata Hospital and Densounken Hospital,both in Tokyo. No backlog of the $3 million ultra-high-field systemsexisted as of May 15, Nelson said.

Nelson is not sure how the strategic shift will affect ANMR'sR&D collaboration with Elscint at the University of Texasat San Antonio Research Imaging Center. The two companies aredeveloping a specialized MRI head gradient coil for functionalimaging. As of May 7, discussions with Elscint had not been heldto determine what will happen next, Nelson said.

"Presumably, we are going to take a hard look at any expensesin that direction and be much more focused," Nelson said."Seeing that the results are more tangible and immediatein the service industry, we will probably abandon other opportunitiesin R&D almost completely unless there is some overwhelmingreason for us to change our thinking."

As part of its new strategic focus, Nelson announced that,subject to stockholder approval, ANMR will adopt a new name moresuitable to the makeover. That change and alterations to the company'sboard of directors to fit its new mission will be addressed atthe next annual meeting, he said.

ANMR will also open wholly owned and operated Aurora BreastImaging centers. They will be equipped with Aurora MRI scannersdeveloped and manufactured by ANMR's majority-owned subsidiaryAdvanced Mammography Systems. AMS retains independent manufacturingand R&D capabilities to support Aurora, Nelson said. The locationof the first Aurora Breast Imaging center will be announced inSeptember.

Food and Drug Administration 510(k) clearance for the 0.5-teslaAurora -- the industry's first dedicated MR mammography scanner-- was secured in February (SCAN 3/13/96). The initial productionunit was installed for clinical testing at the Breast ImagingCenter at the University of Texas Medical Branch in Galveston.

ANMR will write off substantial expenses connected with InstaScanand head coil technology and will write down inventory and costsassociated with reducing its R&D operations. Through the ninemonths ending June 31, ANMR reported a loss of $4 million on totalrevenue of $22 million.

ANMR last week released financial results for its third quarterthat indicate a net loss of $1.7 million on revenues of $7.1 million.The figures compare with a net profit of $393,000 and revenuesof $4.3 million in the third quarter of 1995. ANMR's income figuresincluded its share of losses from Advanced Mammography Systems.