Picker offers happy end to DDD start-up effort

February 26, 1992

When Dynamic Digital Display was acquired this month by PickerInternational (SCAN 2/12/92), it achieved what most small, start-upcompanies hope for. The three-dimensional workstation developerearned a return on years of investment and gained an

When Dynamic Digital Display was acquired this month by PickerInternational (SCAN 2/12/92), it achieved what most small, start-upcompanies hope for. The three-dimensional workstation developerearned a return on years of investment and gained an opportunityto exploit its technology's commercial potential through the marketingand distribution resources of a larger, more established corporation.

"Our overall effort since we started the company and obtainedventure capital was to become a partner with a large imaging firm,"said David A. Talton, co-founder, former president and currentvice president of engineering. "This is an excellent opportunityfor us to take the technology that has been developed and getit to market in a much broader fashion. I am happy and gratifiedby this outcome."

The market for 3-D medical image processing and visualizationtechnology grew more slowly than DDD anticipated at its formationin 1985. But clinical demand has progressed along the generalpath expected, Talton said.

"Visualization has become an important component of bothCT and MR. There is a wide variety of new techniques that aregaining broad interest," he said.

In today's tight medical market, more than ever, sales prowessis key to product success.

"For a small company to survive in this marketplace, it needsto be aligned in some way, shape or form with major companiesthat have a need for its product and technology," said LeeSmith, DDD president and CEO. "Otherwise you aren't ableto build a sales force that covers the 6000 hospitals and halfas many imaging centers in the U.S. that may have a need for yourproduct."

Commercial opportunities for independent medical workstation companiesare limited both by a lack of market mass and financial wherewithal,Smith said.

Venture capital is less available to fuel growth than in pastdecades, due to changes in the tax structure, interest rates andother factors. Unless a start-up company wants to remain a smallboutique operation, it has to find an exit path for its venturebackers and obtain sufficient resources to expand, he said.

Exit paths for venture capital include acquisitions such as Picker's,private stock placements, leveraged buyouts or initial publicofferings. Investments by larger companies or alignment with acompany for product development and marketing remain the onlyoptions for most small companies to grow sufficiently after that,he said.

Picker intends to maintain DDD's current staff and engineeringfacility outside Philadelphia as its visualization business developmentgroup. This gives the smaller firm an opportunity to combine theadvantages of both a small and large company, Talton said.

"There are cultural differences between small companies andlarge, but we have been working closely with Picker for more thana year and the cultures are melding well," Talton told SCAN."Hopefully, we will have the best of both worlds: being ableto pursue exciting things, plus having the financial and marketingsupport to obtain broad distribution of our new products."

BRIEFLY NOTED:

  • Endosonics filed a registration statement with the Securitiesand Exchange Commission last month to undertake an initial publicoffering of 2 million shares of common stock. The firm expectsan initial share price between $11 and $13 and hopes to initiatethe offering in the first week of March.

Endosonics sells intraluminal ultrasound systems and is developinga combined balloon angioplasty and ultrasound catheter calledOracle, which is in clinical testing. The firm signed internationalmarketing and research and development agreements last year withboth Dornier Medizintechnik of Germany and Esaote Biomedica ofItaly (SCAN 6/5/91).

Proceeds from the offering will be used to build the Endosonics'U.S. sales and marketing organization, expand manufacturing capacity,finance continued R&D and support general corporate expenditures.

  • Silicon Graphics of Mountain View, CA, will repurchase135,000 shares of its convertible preferred stock from CompaqComputer for $150 million. Compaq bought the stock last year tocement a cooperative workstation development agreement (SCAN 4/24/91).The agreement fell apart last month. At that time, Compaq madea final $3.75 million royalty payment to Silicon Graphics.

Silicon Graphics makes advanced three-dimensional visualizationtechnology for medical imaging and other technical fields. Compaqof Houston, a major personal computer manufacturer, decided thetechnology was too advanced for the applications it was targeting.Each share of the convertible stock purchased by Compaq couldhave been exchanged for 20 shares of Silicon Graphics common stock,or about 12% of shares outstanding.