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Ranks of CAD industry narrow with merger of CADx and iCAD


Union streamlines distribution, boosts R&D fundsReflecting the need to widen distribution channels for new products and centralize financing for continuing innovation, two companies on opposite ends of the computer-assisted

Union streamlines distribution, boosts R&D funds

Reflecting the need to widen distribution channels for new products and centralize financing for continuing innovation, two companies on opposite ends of the computer-assisted detection spectrum-CADx and iCAD-have merged. The integration combines the privately owned, high-end, technologically driven CADx with publicly held and value-oriented iCAD. As a result of the union, the new company will have access to products that run the gamut of CAD offerings, an improved overall cost position, and a ready source of cash.

Terms of the agreement specify that CADx and Qualia Computing will operate as an independent subsidiary of iCAD. Dr. Steven Rogers, president and CEO of CADx and Qualia Computing, will become the chief scientific officer of iCAD and will serve on the company's board of directors. W. Scott Parr will remain iCAD's president and CEO. iCAD founder Robert Howard will continue as chair of the board.

iCAD, based in Nashua, NH, will issue 4.3 million shares of common stock in exchange for all outstanding shares of CADx Systems and its parent company Qualia Computing, both in Beavercreek, OH. The sum represents approximately 16% of the outstanding shares of the two companies as computed on a postmerger basis. iCAD also will pay $1.55 million in cash and execute a $4.5 million 36-month promissory note to obtain the shares of Qualia Computing that are owned by two institutional investors.

"The companies complement one another and together will have the money and the vision to grow and keep up in this game," said Peter Farrell, vice president of CADx.

The merger brings together under one corporate umbrella companies with complementary patent and intellectual property portfolios in CAD, as well as optical technologies. CADx is known for its Second Look breast cancer detection software, which allows radiologists to choose between three operating points: one with the highest sensitivity for finding potential malignancies, a second for increasing specificity and reducing the total number of markers reviewed, and a third for optimizing sensitivity and specificity. In addition to CAD for full-field digital mammography, CADx has invested more than $50 million to develop CAD systems for the early detection of colon cancer and lung cancer using low-dose spiral CT.

iCAD markets the iQ system, which received FDA approval in early November. The low-cost CAD system is designed for breast imaging centers that perform fewer than 20 mammograms a day. In conjunction with Fischer Imaging, iCAD offers iAD, which can be used in imaging centers that acquire film and digital mammograms.

Over the next few months, the two companies will convert and conform their separate technologies into a unified product line. This integration will bring to iCAD's MammoReader more seamless connectivity and make image management less obtrusive by eliminating the need to push and shove mammograms over a network.

The linkage will give CADx the opportunity to join iCAD in promoting CAD among imaging centers that either don't have an extra $200,000 to spend on cancer detection algorithms or would rather invest six figures in another diagnostic tool. For imaging centers that perform only about 20 cases a day, iCAD offers two options: iQ CAD for a one-time purchase price of $69,000 or a no-money-down loan program that charges $6.50 a case.

The union also will enhance distribution networks. Combined, CADx and iCAD have more than 300 CAD mammography systems installed worldwide. CADx distributes its products through a variety of channels, including SourceOne Healthcare Technologies, which serves major medical group purchasing organizations. It also has development, distribution, and licensing agreements with OEMs such as GE Medical Systems, Hitachi Medical Systems, Hologic, and Fischer Imaging.

For its MammoReader products, which include a single digitizer analyzer and CAD results printer, iCAD has distribution arrangements with National Imaging Resources and other dealers. The new iQ CAD system for low-volume mammography centers is being distributed through Merry X-Ray. A recent partnership with i3 Archive, a distributor of health images and data, brings iCAD's CAD technology to the National Digital Mammography Archive, which offers access to a national database of digital mammography images along with relevant clinical and demographic information and CAD algorithms. Both iCAD and CADx have purchasing arrangements with corporate and group purchasing organizations such as CareCore, Consorta, Kaiser-Permanente, Premier, and Radiology Partners.

"CADx will continue to sell and go through the channels it developed at the high end, as well as utilize newly available lower end channels," said Janet Sterrit, vice president of medical products for Howtec Devices, a division of iCAD. "We will coexist and be strengthened."

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