Picker diversification keeps profits growing

Picker International has maintained rising revenues and profitsover the last year despite sharp declines in the U.S. MRI market.The Cleveland vendor's business health can be partially attributedto its strategy of product and geographic diversification, accordingto Cary J. Nolan, president and CEO.

Picker formed a partnership with linear accelerator supplierVarian a year and a half ago to utilize Picker's three-dimensionalvolumetric CT technology for therapy simulation (SCAN 12/16/92).The Varian relationship, which was later expanded from U.S. tointernational markets, signaled Picker's move away from a purelydiagnostic imaging business focus.

Last year, Picker began supplying low-cost permanent-magnetMRI technology through its Picker Nordstar joint venture withInstrumentarium of Finland (SCAN 2/10/93). The vendor also grabbedinstant share in the Japanese nuclear medicine market last yearthrough a distribution relationship with Shimadzu.

Picker may initiate new product ventures, either solo or throughpartnerships, as early as this year, Nolan told SCAN.

"Our business strategy is based on expansion into unservedmarkets," he said.

Picker, a subsidiary of GE Co. (GEC) of the U.K., has realizedconsistent revenue and profit improvements over the last severalyears. Total revenue grew from $814 million in fiscal 1991 (end-March)to $897 million in 1992 and $950 million last year, for a two-yearincrease of 16%. Picker expects to reach the $1 billion revenuemarket this fiscal year, Nolan said.

Profits rose faster than revenues over the last two years forthe medical imaging vendor, although this performance will likelyslow in fiscal 1994, he said. Picker's profit jumped 38% overthe last two complete years, from $47 million in 1991 to $55 millionin 1992 and $65 million in 1993.

"It would be hard to maintain that (profit) pace, butwe will continue to grow (in 1994)," Nolan said.

Picker has geared up a new therapeutic/imaging technology effortshown first at the 1992 Radiological Society of North Americaconference. The vendor worked closely with the Cleveland Clinicin developing frameless stereotactic sonic localization, a formof computer-assisted surgery. Over 200 neurosurgery procedureshave been performed using this technology, he said.

"This is a significant business venture. We will probablystart up our own business unit for it this year, and market thatdirectly," Nolan said. "We have not been in the surgicalbusiness before."

The technique uses ultrasound pulses from an intraoperativeprobe to localize the surgical area of concern, which is thendisplayed for the surgeon, using previously acquired 3-D CT orMRI data, according to Linda Eastwood, high-field MRI productmanager for Picker.

MUCH OF PICKER'S EXPANSION has been fueled by growth in internationalsales. Five years ago, about 80% of the vendor's business wasU.S.-based, Nolan said. Now Picker realizes nearly half of itsrevenue from business outside its home market.

Picker's European business has grown despite a 9% drop in theannual European market across imaging modalities, he said. Thisregional activity should pick up again in fiscal 1994 with thereintroduction of U.K. sales last summer. Latin American saleshave risen for Picker, but the hottest market is in the Far East.

Picker manufactures CT in China through a joint venture, Nolansaid. Ties with Shimadzu in Japan garnered share in this relativelymature--but large--Asian market.

"In one year, we have taken over a significant marketshare in the Japanese nuclear business with Shimadzu. We havein excess of 25% of the Japanese nuclear market, having startedfrom zero a year ago," he said.

A drop in prices for all medical imaging modalities requirescost-cutting efforts and efficiency improvements to shore up thebottom line, Nolan said.

"The price pressure is unrelenting. Average prices forMRI and CT over a long period of time have declined 4% to 5% ona year-over-year basis," he said. "That (price decline)is accelerating into the 8% to 9% range in MR, CT, nuclear medicineand, to a lesser extent, x-ray."

Picker's new MR plant in Cleveland should reduce the manufacturingcycle time for that modality by 60%, he said. Installation timesfor MRI and CT are also dropping dramatically, which results inlower overall system costs.

"You can install a high-end CT overnight at an ideallyprepared site in comparison to eight man-weeks previously,"he said. "There is no question that all the companies areworking on reducting the cost of magnets. The same can be saidof electronics. The cost of computers is coming down."