Resonex forms venture in orthopedic centers

August 12, 1992

Independent MRI vendor Resonex will use its 50% position in anAtlanta imaging center company as a vehicle to build sales inthe growing orthopedic imaging niche, according to Gerald D. Knudson,president and CEO. Resonex of Sunnyvale, CA, helped form

Independent MRI vendor Resonex will use its 50% position in anAtlanta imaging center company as a vehicle to build sales inthe growing orthopedic imaging niche, according to Gerald D. Knudson,president and CEO.

Resonex of Sunnyvale, CA, helped form Matrix Services lastApril in partnership with a Texas physician group. The servicefirm is actually run by Larry Carpenter, president and CEO ofAtlanta-based Diversified Imaging Services. Diversified is a mobileimaging operator.

About $15 million has been committed to set up centers usingResonex MRI systems. Matrix plans to open three centers this summerand three more by year-end, Knudson said. Unlike Fonar, anothersmall MRI vendor that opted to build centers to house its ownsystems, Resonex does not consider itself a center company, hesaid.

Matrix provides a means to the end of expanded orthopedic salesof the Paradigm MRI scanner. This niche has become increasinglyattractive to Resonex since the firm showed its kinematic jointimages at the Radiological Society of North America meeting inDecember, he said.

"Fifty percent of our business is focused in that marketplace.And that has developed since the RSNA. This market is made upof a combination of orthopedic groups and orthopedic radiologists,primarily in sports medicine clinics," Knudson told SCAN.

Resonex is awaiting Food and Drug Administration approval fora knee imaging system with a special coil and positioning devicethat lies inside the magnet bore, he said.

"Next to neurology, (orthopedics) may be the biggest marketfor MR," he said.

While the potential of orthopedic imaging is significant, thereis also less direct competition from the major vendors in thisniche, Knudson said. The new applications focus has allowed Resonexto shift a greater portion of its business out of the hospitalarena where the major vendors play. While hospitals make up 50%of Resonex's installed base, they form 45% of its current backlog,he said.

"At one time, we were going nose-to-nose with the GeneralElectric's of the world. Superconducting magnets service one typeof population base. They're fighting it out for those same patients.The patient population that Resonex serves is one that the superconductivemagnets have difficulty with."

International sales are also picking up for Resonex, said BarclayDorman, director of marketing. The firm has a backlog of over30 systems, half of which come from markets outside Western Europeand the U.S.

The Western European market is in the midst of an MRI pricewar and is currently unattractive to Resonex, he said.

"Eastern European countries offer good potential for thenext three to five years. India is a good market, as is the MiddleEast, particularly Egypt. Iran is a market with opportunities.In the Asia/Pacific market, Korea is opening its doors once againto MRI offshore manufacturers. Those doors had been closed forthe past few years," Dorman said.

Resonex had been hoping to find funds to support its expansionthrough an initial public offering in the U.S., but missed thewindow of IPO opportunity for medical firms earlier this year,Knudson said.

"The IPO is still part of our strategy, but the marketplacechanged so quickly and drastically that it is now being plannedfor 1993," he said.