U.S. medical firms retain their allure

April 24, 1991

International investors are showing increased interest in U.S.medical firms, despite the appeal of a unified European market,according to Jack W. Cumming, president of WDI International. WDI offers strategic business consulting and investment

International investors are showing increased interest in U.S.medical firms, despite the appeal of a unified European market,according to Jack W. Cumming, president of WDI International.

WDI offers strategic business consulting and investment bankingservices to medical firms (SCAN 6/20/90). The Atlanta-based companyis boosting its presence in Europe to meet increased demand forinvestment services.

"Our business is picking up. We have met with large companiesand investment groups in Europe and found their appetite to buy(positions in U.S. medical businesses) is voracious," hesaid.

The U.S. is still the largest medical market in the world andthe source of much new medical technology. International investors,seeing the value of the dollar that is low but rising, are anxiousto increase their American stake, he said.

WDI executives met recently with representatives of a groupof leading Swiss and German banks. "They want to make 20%to 40% equity investments in U.S. medical companies. They willdo management buyouts. The U.S. is their number one target,"Cumming said.

Small U.S. medical imaging companies view foreign investors'interest warily. These investors, however, offer smaller companiesa way to support strong R&D expenditures without losing control,he said.

"What Americans don't realize is that Europeans are notlooking to replace them. They want to make investments in companiesthat have the management capacity to make the company grow,"he said.

The investment criteria of one Swiss bank, for example, arethe following:

  • strong management;
  • solid products; and
  • a solid bottom line.

WDI has negotiated an equity stake in a U.K. company, whichhas provided it with an office in Oxford. The firm has also hireda former Squibb executive in Sweden to work in the Nordic countries.This representation is in addition to existing offices in Switzerlandand France. WDI also hopes to add an office in DÕusseldorf,Germany, Cumming said.

Interest in the U.S. medical market is not limited to Europeaninvestors. A major Japanese medical imaging vendor, not currentlyactive in the U.S., has hired WDI to study the markets in boththe U.S. and Eastern Europe. This firm is developing a long-rangeplan in Eastern Europe and is exploring the potential market ina specific diagnostic imaging niche 10 years in the future, hesaid.

BRIEFLY NOTED:

  • Philips Medical Systems North America has formed a nationalcustomer finance program in cooperation with Citicorp, the largestU.S. bank. The two companies will staff regional finance officeswith dedicated account representatives offering scanner leasingoptions to Philips customers.

Citicorp has the financial resources and health-care expertiseto offer customers one-stop financial shopping, said Wynn Blieberg,director of financial services for Philips. The joint effort willalso offer promotional and educational services as well as Medicarereimbursement advice.

  • Gendex raised $5 million last month through a privateplacement of common stock to institutional investors. The DesPlaines, IL, firm is the largest U.S. dental x-ray manufacturer.Proceeds will be used to repay part of the debt incurred by theacquisition of Kestrel Dental last year (SCAN 9/12/90).

  • Imatron sold three C-100 electron-beam computed tomographyscanners in the first quarter of 1991 (end-March) versus two inthe same period last year. The additional sale--plus $4 millionin licensing fees from Siemens--helped boost Imatron's revenue268%, from $2.3 million in the first quarter of 1990 to $8.5 millionthis year.

The most recent period was also Imatron's first profitablequarter in the company's history. Imatron had a net income of$3.7 million for the first quarter, versus a loss of $1.55 millionin the same period of 1990 (see graph). Imatron signed a productdevelopment and marketing agreement for future products with Siemens(SCAN 3/27/91).

  • C.R. Bard's withdrawal of its Probe angioplasty catheterfrom the market last year due to problems at the Food and DrugAdministration (SCAN 3/28/90) was a boon to catheter competitorScimed Life Systems of Minneapolis. Scimed had a 66% increasein sales for fiscal 1991 (end-February), from $67.3 million in1990 to $111.8 million. Net earnings rose 71% from $16.9 millionin 1990 to $28.8 million in 1991 (see graph).