SonoSite mints new strategy for hand-carried ultrasound

November 6, 2007

SonoSite engineers have tailored the design of their latest products to fit niches outside the standard bounds of diagnostic ultrasound. It’s all part of a new strategy that differs markedly from the one the company has followed through much of the decade since its founding. Although this strategy poses risks as well as opportunity, it is designed to balance the company’s current position against its future objectives.

SonoSite engineers have tailored the design of their latest products to fit niches outside the standard bounds of diagnostic ultrasound. It's all part of a new strategy that differs markedly from the one the company has followed through much of the decade since its founding. Although this strategy poses risks as well as opportunity, it is designed to balance the company's current position against its future objectives.

During the month of October, SonoSite launched five hand-carried systems--one, a doff of the hat to its traditional market, general diagnostics, and the other four tightly focused on market niches and indicative of where the company plans to go. No longer satisfied with making of the bulk of its revenue from a general-purpose system, SonoSite is taking aim at four areas of opportunity: emergency medicine, anesthesiology, intensive care, and intervention.

"We looked at the markets that were using our products and saw that they didn't need a full-up machine because they are not doing diagnostic ultrasound," said Dave Willis, vice president of competitive strategy and innovation for SonoSite.

Company engineers crafted a series of 8.35-pound packages that are streamlined in design (no more than a few buttons) and carry as low a learning curve as possible to handle specific clinical missions. The first system to be unveiled, S-FAST, provides quick results for emergency medicine physicians (DI SCAN10/16/07,Second point-of-care ultrasound unit debuts. These physicians have been relying on ultrasound scanners with far more functionality than they really need, SonoSite executives told DI SCAN.

The second, S-Nerve, guides nerve blocks, a procedure that is often done blindly with a consequently low success rate. S-nerve addresses that problem.

The third, S-ICU, is intended for use in intensive care units to guide peripherally inserted central catheter and central line placements, dialysis access, thoracentesis, and paracentesis.

The fourth, S-Cath, supports interventional procedures. These include fluid removal, line placement, biopsy, dialysis access, and stent placement, as well as abdominal and cardiovascular imaging applications.

These systems were preceded by the early October launch of M-Turbo, a general-purpose ultrasound scanner for radiologists and technologists. This unit, the successor to SonoSite's MicroMaxx, provides improved image quality and enhanced diagnostic capabilities.

Demo units are in the field, and routine shipments are expected to begin in the current quarter. This process could slow the company's momentum, as sales channels switch gears to handle the new products.

"When you launch five new products and they are all really good, you have a process of having the market and the channel to digest them," said SonoSite President and CEO Kevin Goodwin in a conference call with analysts Oct. 30, following the release of third quarter results.

The launch's impact will not be so great as to keep SonoSite from achieving year-end revenues toward the top of its existing guidance range, near 18% year over year, he said.

During the teleconference, Goodwin called the introduction of these systems an "inflection point for the company and the new market space that we lead."

Their introduction marks a three-tiered product strategy for the company with M-Turbo as the new top dog, the S-Series in the middle, and the former flagship MicroMaxx bringing up the rear. This product hierarchy will remain in place for the next 24 months, according to Goodwin, although there may be some new additions.

"Our heavy R&D is slated to continue the delivery of more of these innovations," he said.

SonoSite did not provide pricing for the new products, but Goodwin laid out a structure under which M-Turbo is incrementally more expensive than the existing MicroMaxx, which will not change in price. The S-product line will sell at price points ranging from higher to lower than the MicroMaxx, "depending on the situation," he said.

To launch these systems, the company targeted three professional meetings for exhibiting: the American College of Emergency Physicians (S-FAST), American Society of Anesthesiologists (S-Nerve), and American College of Chest Physicians (S-ICU).

SonoSite will not, however, exhibit at the RSNA meeting. Most of the company's revenues come from the sale of its general-purpose system, although not all customers are radiologists. In the third quarter completed Sept. 30, MicroMaxx accounted for 71% of worldwide revenues.

The company definitely is not turning its back on radiologists, as demonstrated by the development of M-Turbo, Dugan said. Company strategists expect this product to build revenue further and provide an improved flagship and positioning of its predecessor, the MicroMaxx, as a lower cost alternative for general use.