Resonex merges R&D and service,looks for buyer to take over firm

July 6, 1995

Company has been approached by imaging vendorsMRI firm Resonexhas merged its equipment service and R&D subsidiaries in acorporate consolidation that paves the way for the company tobe acquired. The Fremont, CA, company has been approached by

Company has been approached by imaging vendorsMRI firm Resonexhas merged its equipment service and R&D subsidiaries in acorporate consolidation that paves the way for the company tobe acquired. The Fremont, CA, company has been approached by severalmedical imaging firms interested in an acquisition, accordingto Robert Perlmutter,who was named CEO as part of the consolidation.

Resonex ceased manufacturing its vertical-field MRI scannerslast year and was taken over by its venture capital backer, TechnologyFunding Secured Investors II, after it defaulted on a $5.3 millionloan (SCAN 3/16/94). Tech Funding reconstituted Resonex into ResonexHoldings Ltd. (RHL), with two subsidiaries: Resonex Service Plusto maintain the installed base of Resonex scanners and ResonexDevelopment Ltd. to develop and market the company's MRI technologyto other vendors.

The new Resonex faced a rebellion by some users upset by thechanges, and one site filed a lawsuit against the company relatingto service contracts (SCAN 9/14/94). Other users alleged thatthe separation of the service and R&D portions of Resonexindicated that Resonex was not committed to upgrading and enhancingits installed base in the future. Some were particularly fearfulthat Tech Funding would sell Resonex off in pieces, leaving noconnection between the service and product development functions.

The consolidation, which was announced to Resonex users May 30,should allay those concerns. Under the restructuring, field serviceengineers from Resonex Service Plus will be integrated with thoseof Resonex Development and will be dedicated to servicing itsinstalled base. Resonex is winding up the engineering contractsit has with outside vendors for MRI technology development.

Perlmutter declined to name the firms interested in acquiringResonex, although he did state that they included medical imagingvendors as well as service companies. Resonex can offer a potentialsuitor a revenue stream coming from 35 customer sites under servicecontracts, as well as patents for the company's vertical-fieldmagnet technology.

A sale would also provide Tech Funding with an exit path fromthe business. The venture capital firm is not interested in runninga medical imaging company over the long term, according to Perlmutter.

In the course of its one-year life span, Resonex Developmentworked with several vendors to adapt its technology to their scanners.For example, Resonex adapted a knee positioning device to workon Siemens' Magnetom Open, Perlmutter said. The device was anoutgrowth of the company's emphasis on orthopedic MRI, using verticalfield magnets and flexible RF coils.

"They are particularly well suited for orthopedic studies,where you need a range of motion and the flexibility of the coilallows for the range of motion," Perlmutter said.

Despite the company's downfall, Perlmutter feels that Resonexlaid much of the groundwork for the explosion in open-magnet designsin recent years.

"There is quite a bit we can be proud of," said Perlmutter. "We helped establish the importance and utility of open-boremagnet technology."