Successful IPO adds thrust to niche-MRI effort

Play the flip side of the health-care, cost-containment bluesand you will hear some well-placed companies singing market rhapsodies.Wall Street whistled to the tune of $6 million in support of niche-MRIdeveloper Magna-Lab last month, despite the financial community'srecent turn against medical stocks in general.

The Hicksville, NY, start-up firm had planned to sell 832,000shares of common stock in its initial public offering but endedup offering one million units at the anticipated price of $6 pershare. Magna-Lab netted $4.8 million from the offering, whichshould help the firm accelerate its product development program,said vice president and chief financial officer John D. Haytaian.The firm is listed on the NASDAQ exchange.

While it is hard to pin down why the IPO was oversubscribed,investor enthusiasm seems to signal agreement with Magna-Lab'sbusiness thrust of developing low-cost, limited-application MRIsystems (SCAN 12/2/92 and 1/27/93). This tack may work well ina health-care system characterized by declining reimbursementbut growing clinical preference for the diagnostic power of MRI.

"We are telling the marketplace you can buy a machinethat isn't going to do all of the scans you presently do, butwill perform a good number at a lower cost, still allowing fora profit," Haytaian told SCAN.

Magna-Lab showed a prototype of its first MRI system, a headand extremity unit labeled Magna-SL, at the 1992 RadiologicalSociety of North America meeting in December. The 0.3-tesla permanentmagnet system weighs 4500 to 5000 pounds and should fit into a150 square-foot site. Two other scanners, for dedicated mammographyand spine imaging, are also in the pipeline. Systems are expectedto sell for under $500,000.

The company is currently manufacturing a production prototypeof the Magna-SL to use in applying for 510(k) certification fromthe Food and Drug Administration. Once initial approval is obtained,a beta site will be set up to expand the technology and preparefor supplemental FDA applications, Haytaian said.

Reaction from radiologists has been surprisingly warm, he said.Magna-Lab had worried that radiologists would view the technologyas a turf threat, since the systems might be owned and used byspecialists. The firm introduced its system at the RSNA meetingpartially as a means to counter that impression. During and afterthe show, radiologists have expressed interest in using the nichesystems as second units, supplemental to their whole-body scanners,he said.

Following its successful IPO, Magna-Lab is open to discussionswith potential partners interested in helping with the technologylaunch.