Park Medical treads water as it awaits close of search to find strategic partner

Company has struggled with cash flow since inception

Canadian gamma camera developer Park Medical Systems is in a holding pattern as it awaits the outcome of negotiations to find a strategic partner that will help it out of a cash crunch. Park executives say they are in due diligence with one potential partner, and others have expressed interest. The company is expected to make an announcement on a partner in the next several weeks.

Park, of Lachine, Quebec, has been struggling with cash-flow problems that have hobbled the company all year. In a cost-cutting restructuring in February, the company eliminated its direct field sales force in the U.S. Park announced in March that it would begin looking for a strategic partner to help market its products (SCAN 3/5/97 and 4/2/97).

Park's digital gamma camera technology is well regarded, but the company's progress has been slowed, due to its small size and limited access to cash since it began marketing its Isocam line of single-head and dual-head systems in 1994 and 1995, respectively. The company started successfully enough, selling $10.8 million (Canadian) in fiscal 1996 (end-July) and moving into fiscal 1997 with a backlog of orders worth $8 million (Canadian).

But Park had trouble sustaining that momentum. Even though clinicians loved its technology, many potential customers were leery of buying from the firm, due to concerns about its long-term viability, according to Richard Mullen, president and CEO.

"What we were finding out was that we were trying to operate on a nonlevel playing field," Mullen said. "If there were GE labels on these systems, they'd be selling like hotcakes."

Park underwent another round of layoffs just before this month's Society of Nuclear Medicine meeting in San Antonio, a move that Mullen said is temporary, as many of those workers will be offered their jobs back once a strategic partner is found. The Montreal Gazette quoted a Park employee as saying that 30 people were laid off. Daniel Gagnon, a high-level Park employee, joined Picker International April 1 as head of the vendor's Advanced Development Group. Park now has about 50 employees worldwide, including its U.K. subsidiary.

Mullen declined to name the company with whom Park is in negotiations, other than to say it is a firm that has an interest in ensuring that Park's technology goes forward. Indeed, since the SNM meeting, several other potential partners have expressed interest in the company, Mullen said. That's good news for Park, although it will draw out the process, he said.

In the meantime, Park continues to manufacture and ship gamma cameras, and to spend money on R&D. The company also brought a full-size booth to this month's SNM conference in San Antonio. At the meeting, Park emphasized its Molecular Coded Aperture Technology (MCAT), a method for improving image quality that is applicable at both low- and high-energy ranges. Park received Food and Drug Administration clearance for the technique in March, although it still requires some clinical validation before shipments can begin, the company said.

Park displayed its work in developing a SPECT version of MCAT, which was previously applicable only to planar images. Park has achieved a system resolution with the technique of 6 mm, and MCAT's sensitivity is five to eight times that of a conventional gamma camera, according to Raffi Kayayan, manager of advanced applications. MCAT SPECT could prove useful for imaging tumors deep in the body, or for breast imaging. The company hopes to show MCAT images of fluorodeoxyglucose (FDG) at this year's Radiological Society of North America meeting.

Park also highlighted version 3.0 of its workstation software, which includes iterative reconstruction algorithms as well as new features enhancing the workstation's usability, Kayayan said. On the gantry side, Park showed the auto-contouring ability of Isocam, and gantry software enhancements that include multiple-rotations SPECT and customized SPECT orbits.

While Park continues its search for a strategic partner, Mullen said he has been encouraged by the response the company has received from potential customers. Rather than switch to another vendor, many have decided to hold off on making a camera purchase until the financial turbulence around Park settles.

"It is surprising that so many of those people still haven't bought a system," Mullen said. "They say that if we get our act together pretty soon, they are still going to buy our camera."