Top executive steps down at R2 Technology

June 14, 2004

R2 Technology is about to enter a new phase in its corporate evolution, one that requires new leadership. Engineers at the company that pioneered computer-aided detection in mammography have come up with "more ideas than the company can get to," said

R2 Technology is about to enter a new phase in its corporate evolution, one that requires new leadership. Engineers at the company that pioneered computer-aided detection in mammography have come up with "more ideas than the company can get to," said William J. Mercer, R2's interim president and CEO.

Some of those ideas will take R2 into new markets, including CT lung imaging and virtual colonography. But Mercer probably won't be at the helm in Sunnyvale, CA, when they do. In concert with a boutique executive search firm, he is looking for the person who will. He estimated the search will take from three to six months.

"We'd like someone steeped in the medical imaging area with sound general management skills," Mercer said. "We're looking for dynamic leadership and a proven track record of success-the ability to lead the company to the next level."

In the interim, Mercer will replace Michael Klein, who resigned earlier this month. Klein will likely continue as a consultant with the company, although the details have not yet been worked out. Since joining the company as president and CEO in May 2000, Klein grew annual revenues from $5 million to almost $60 million, largely on the rising popularity of R2's CAD product, ImageChecker.

Since ImageChecker was approved in 1998 (SCAN 7/22/98), the company has shipped more than 1300 digital and film-based units. R2 has been developing CAD for application in other areas, such as the lung and colon, for several years.

In early April, R2 received an approvable letter from the FDA for its ImageChecker CT Lung Nodule CAD system. Efforts to conclude the FDA's review of the device are progressing, said Mercer, who has served on R2 Technology's board of directors for the past three years.

"Mike and the board agreed that the next generation of leadership would be needed to take R2 Technology toward its next phase as a full-fledged medical software company," he said. "You see this in companies moving from an early stage of growth, where they hit a plateau and need another style of leadership."

Mercer said he is not seeking the job as Klein's long-term replacement, although he would appear to have the credentials. The interim leader of R2 has been in the medical device industry for more than 17 years. He served five years as the president of Alaris Medical Systems, where he built revenues for the IV medications company to more than $400 million. He left to start a private equity investment firm, Avocet Ventures, in 2000. Previously, Mercer held executive positions with Becton Dickinson, Abbott Laboratories, and Mallinckrodt.

"My mission right now is to step in and recruit the best long-term leader for the company, and that is what I am doing," he said.

Whoever gets the job will likely preside over a major change in the character of the company. Ownership today is concentrated in the hands of a few investors, including Morgan Stanley Ventures, GE, and Kodak. If and when the business climate turns favorable, R2 might go public, Mercer said. The idea of creating an initial public offering for the company has been kicking around for several years, but the IPO boom era of the late 1990s went bust four years ago and is only now showing signs of recovery.

"The climate is still not quite there," he said. "The track record on IPOs has been questionable, and we want a good sustainable track record before we take the company out to investors."