Sales of MCD upgrade contribute to strong year-end results at ADAC

Company reports good news on FDG reimbursement

ADAC Laboratories reported last week that sales of its Molecular Coincidence Detection high-energy imaging upgrade for gamma cameras rebounded in the company's fourth quarter (end-September). The Milpitas vendor said that various factors are converging to improve the sales outlook for MCD, which enables ADAC gamma cameras to image fluorodeoxyglucose, a radioisotope commonly used in PET studies.

ADAC made the statements while reporting fourth-quarter and year-end financial results that show that the company continues to generate momentum. The vendor is seeing healthy growth in nearly all its businesses, although its information systems unit continues to struggle due to delays in commercializing a new laboratory information system product.

For the year, ADAC reported revenues of $282.3 million, up 17% compared with $240.8 million in fiscal 1996. The company's net income for the year was $16.8 million, which includes a $5.9 million charge related to its acquisition of information systems firm Cortet. Without the charge, ADAC would have had net income of $22.5 million, compared with net income of $16.6 million in fiscal 1996.

For the fourth quarter, ADAC's revenues of $72.5 million represented a 12% increase over the $64.9 million reported in the same period a year ago. The company's net income for the period was $6 million, compared with $4.8 million in the fourth quarter of 1996.

Among the highlights for ADAC in the quarter was the rebound in MCD purchasing. In the previous quarter, MCD sales failed to meet expectations, with the company shipping only 15 upgrades, compared with a forecasted figure of 25 (SCAN 8/6/97). In the fourth quarter, ADAC shipped 22 MCD upgrades.

ADAC executives said MCD's outlook has improved for several reasons. The company received 510(k) clearance in October for its attenuation correction upgrade for MCD, so hospitals no longer have reason to postpone MCD purchases due to concerns about obsolescence. Also, positive clinical results of MCD were presented by Dr. Henry Wagner at the European Association of Nuclear Medicine Congress in August (SCAN 9/3/97).

Perhaps most significant is the fact that the reimbursement situation for FDG studies seems to be on the verge of a breakthrough: The Health Care Financing Administration appears ready to recommend Medicare reimbursement of FDG for lung cancer studies, making it easier for clinicians to get paid for such exams (SCAN 10/1/97).

FDG's position will also be improved when the Food and Drug Administration reform bill under consideration by a conference committee of the Senate and House of Representatives is finally passed. In addition to reforming the FDA, the legislation includes a section that would place a four-year moratorium on FDA regulation of PET radioisotopes like FDG, according to ADAC CEO Andrew Eckert.

Cyclotron-produced PET radioisotopes were covered by state practice-of-pharmacy rules until 1995, when the FDA decided to take over regulation of the radiopharmaceuticals. HCFA is often reticent about granting reimbursement to products and drugs that are not approved by the FDA, so if FDG is removed from the agency's jurisdiction it can only help the reimbursement situation for lung cancer and could lead to quicker reimbursement decisions for other applications as well.

"If this legislation is enacted, it will enable HCFA to make a coverage decision on FDG studies, since FDG when produced in accordance with certain pharmacy standards will be deemed during the moratorium to be approved for all indications," Eckert said.

Besides MCD, ADAC reported improvement in other areas of its business. Revenues in its core ADAC Medical Systems unit, which includes its gamma camera business, were up 13% in the fourth quarter. The information systems division continues to post losses, although ADAC is taking steps to improve the unit's profitability.

In other ADAC news, the company late last month acquired Southern Cats of Ontario, CA, a refurbisher of CT and x-ray equipment with annual revenues of $4.7 million last year. The acquisition enables ADAC to expand its refurbishing operations from nuclear medicine equipment to the much larger CT and x-ray markets, which ADAC estimates are worth a total of $500 million worldwide. n