Sopha Medical claims market share increase despite troubled 1993

Strong sales of Sophycamera DST lead the charge

By any measure, 1993 was a turbulent year for gamma camera manufacturerSopha Medical. The Buc, France, vendor paid competitor Elscint$7.75 million to settle a patent interference suit, was forcedto abandon its effort to sell MRI systems, and experienced a bruisingfight for shareholder control that sparked rumors that the firmwas filing for bankruptcy (SCAN 7/28/93, 2/2/94 and 4/7/93).

There was a silver lining to the dark cloud that hovered overSopha for much of last year, however. Shipments of the vendor'sSophycamera DST variable-angle dual-head gamma camera picked updramatically in the second half of the year. Sales of the unitsare helping the company seize market share from its competitors,according to president Colin McNaught.

According to McNaught, Sopha's share of the nuclear medicinemarket by sales increased to 15% in the fourth quarter, doublingthe company's market share compared to the third quarter of 1993.Sopha's growth is even more dramatic when viewed in light of a26% decline in revenues in the nuclear medicine market in thefourth quarter of 1993, according to Sopha. The market's annualsales declined 4% overall in 1993, the company said.

While the cause for the market's steep drop in sales in thefourth quarter is unclear, Sopha's improved performance is dueto Sophycamera DST sales, which jumped in the second half of theyear, according to McNaught. The camera's installed base worldwidenow stands at 75, of which 50 are in the U.S.

Sopha began shipping Sophycamera DST at the end of 1992. Asthe first variable-angle dual-head camera on the market, Sophafaced a hurdle in introducing nuclear medicine physicians to thenew technology.

Perhaps as a result of the technology's novelty, sales wereslow in the first half of 1993, McNaught told SCAN. HandicappingSopha were rumors then swirling about the company's viability.

Those rumors were fueled by a shareholder battle between Sophafounder Francois Blamont and CEA-Industrie, a for-profit divisionof the French government's Atomic Energy Commission that owned32% of Sopha at the time. When the sides took their dispute tothe Paris Commercial Court, a French newspaper incorrectly reportedthat Sopha was filing for bankruptcy.

The dispute eventually was resolved, with CEA-I buying a 78%stake in Sopha. But the rumors affected Sopha's image in the market.

"The competition jumped on this, and it's one of the reasonswhy we had a hard time in the first part of 1993," McNaughtsaid. "It had an impact on sales and we had to work veryhard to put our story out."

Sopha's position within CEA-I is now secure, according to McNaught.Sopha has been forming R&D relationships with other divisionswithin CEA-I that should show a payoff in nuclear medicine technologydown the road.

"These relationships are long and deep and there is noquestion of CEA-I divesting itself of Sopha," McNaught said.

Nuclear prospects are sound. Sopha sees strong growth aheadfor nuclear medicine and does not perceive the move toward managedcare as a threat to equipment sales. Because some 50% of the installedbase of nuclear medicine cameras are over five years old, therewill continue to be a strong replacement market for gamma cameras,McNaught said.

A recent Comdisco survey of hospital medical imaging equipmentfound that the installed base of gamma cameras has an averageage of 6.2 years, older than any other modality except for R/Fand angiography systems (SCAN 2/2/94).

Nuclear medicine is also aided by the fact that insurance reimbursementlevels have remained stable, as opposed to the double-digit percentagedeclines experienced in modalities such as MRI and ultrasound,according to Lonnie M. Mixon, director of sales support.

"This is partly because nuclear medicine is viewed asa cost-effective clinical application," Mixon said. "Ithas been less vulnerable to the cost-cutting attention that thegovernment has been giving to each and every procedure in thehospital."

Comeback projected to continue. Now that the deck is clearedof the troubles that plagued the company last year, Sopha shouldbe able to further improve its market share, according to McNaught.This year the firm will have to deal with increased competitionfrom ADAC Laboratories, however, which in the spring of 1993 beganshipping Genesys Vertex, its own variable-angle dual-head camera.

"We dealt with a lot of problems in early 1993 and despitethat we've come back and shown that we have a strong market share,"McNaught said. "We can at least sustain our market share.The only thing standing in our way is whether the downturn (inthe nuclear medicine market) in the fourth quarter is one thatwill be sustained."