Syncor launches major commitment to develop regional PET cyclotron network

January 31, 1996

Firm sees rosy future for oft-maligned modalityRadiopharmacy firm Syncor International this month made a multimillion-dollargamble on the long-term viability of positron emission tomography.The Chatsworth, CA, company said it has launched a $14

Firm sees rosy future for oft-maligned modality

Radiopharmacy firm Syncor International this month made a multimillion-dollargamble on the long-term viability of positron emission tomography.The Chatsworth, CA, company said it has launched a $14 millioneffort to build a nationwide network of regional cyclotrons toproduce PET radioisotopes.

As part of the initiative, Syncor revamped its executive lineup,promoting president Gene McGrevin and putting him in charge ofthe new program. In two other new efforts, the company starteda program designed to improve communication links with its customersand suppliers and also launched an aggressive push for overseasexpansion.

In the PET initiative, Syncor said it will invest $14 millionin the development of a national network to produce PET radioisotopes,such as fluorodeoxyglucose (FDG). The availability of FDG hasbeen one of the stumbling blocks hindering PET's growth, and advocatesof the modality believe that regional cyclotrons could alleviatethe problem.

Recent developments indicate that demand for the radioisotopesused in PET imaging will increase in the near future, accordingto McGrevin. Clinical evidence is showing that PET's ability todetect pathology outstrips that of any other modality, to thepoint where a single PET exam can eliminate the need for a batteryof other diagnostic tests. This ability will endear PET to managed-careproviders anxious to cut unnecessary testing.

"(PET's) impact on patient treatment, from an accuracy,early diagnosis and cost standpoint, is absolutely on target forthe emerging healthcare system that we are facing in this country,"McGrevin said. "We believe that managed care will only payfor something that's effective. The test that has the greatestaccuracy at the most effective cost is going to be the diagnostictest of choice. And we believe that PET is uniquely positionedin that area."

Also in PET's favor is the growth of high-energy imaging techniques,such as ADAC's Molecular Coincidence Detection, which enable gammacameras to image FDG (SCAN 12/13/95). This will further increasedemand for the radioisotope, as there is a much larger installedbase of gamma cameras than PET systems.

Syncor currently runs four PET radioisotope distribution centersin the U.S. Under the new initiative, that number will increaseto over 20 by the end of 1998. Syncor hopes to reach that levelby assuming management of existing cyclotrons, although in a fewcases it may purchase or lease the equipment in regions whereno cyclotron exists, McGrevin said.

One stumbling block that might delay the effort could comefrom the Food and Drug Administration, which has ruled that radioisotopesproduced in cyclotrons should be regulated by the agency's goodmanufacturing practices (GMP) guidelines rather than state practiceof pharmacy rules.

This would require all cyclotron operators to file a new drugapplication (NDA) before their products could be used clinically.Syncor filed a lawsuit against the agency in August seeking tohave the policy overturned (SCAN 9/13/95), but it will complywith the FDA's rules if it loses the litigation.

"We are prepared to go forward and do it under practiceof pharmacy, or if the FDA has its way, we are prepared to meetGMPs," McGrevin said.

The lawsuit is still in early stages, McGrevin said. If theFDA's ruling does stand, Syncor believes it would require a separateGMP for each market it serves with FDG.

Other initiatives. To improve its position in its core U.S.nuclear medicine business, Syncor committed $8 million over thenext three years to a program designed to upgrade its links tocustomers and suppliers. That effort will involve building informationsystems and networks to help increase efficiency, McGrevin said.In overseas markets, Syncor said it intends to increase the numberof markets served by its radiopharmacies to over 25 from eightat present.

As part of the changes, several Syncor executives were promoted.McGrevin has been named vice chairman and CEO and will becomechairman later this year. Current chairman and Syncor founderMonty Fu will become chairman emeritus at that time. McGrevinwill oversee Syncor's expansion in the PET market, the companysaid.

Robert Funari has been named president and COO, and will beresponsible for the company's U.S. expansion. Funari joined Syncortwo years ago.

The new initiatives will negatively affect Syncor's earningsover the next two to three years, McGrevin said. The company saidit expects to meet analysts' estimates of 1995 earnings of 45¢a share. That compares with 1994 earnings of 11¢ a share,indicating the rebound of the radiopharmaceutical market followinga steep drop in 1994.

In other news, Syncor late last year increased the number ofradiopharmacies in its network by acquiring several sites belongingto Pyramid Diagnostic Services, a radiopharmacy chain startedby former Syncor employees. The two firms had been involved inlitigation relating to some of Pyramid's business practices, whichSyncor claimed were illegal.

Acrimony between the two parties was resolved in November whena Tennessee bankruptcy court accepted Syncor's offer of $3.2 millionfor the assets and certain contracts of its former competitor,which operated nine radiopharmacies in the Midwest and Southeast.

The purchase culminated eight months of legal proceedings thatbegan with allegations that six Pyramid radiopharmacies used illegaltactics against competing Syncor sites, according to Haig Bagerdjian,Syncor vice president and general counsel. Among other charges,Syncor alleged that Pyramid was buying radiopharmaceuticals andreselling them in violation of pharmaceutical laws.

Syncor obtained an injunction in October barring the practices,one day before Pyramid filed for Chapter 11 bankruptcy protection.Pyramid closed one of the sites in November, and Syncor closedfive others after the buyout.

Three former Pyramid radiopharmacies, in Springfield, MO, Jackson,TN, and Memphis, TN, survived the takeover and were purchasedby Syncor at a liquidation auction. The sites provide radiopharmacyservices to at least 50 customers and will contribute over $7million in sales to Syncor in 1996.