Vendors suffer slowdown in 2004 ultrasound market

August 1, 2005

Manufacturers and industry report a decline in the ultrasound market last year in the U.S. The market was down in 2004 about 7% to $950 million in equipment shipments, according to consolidated industry estimates. This decline came on the heels of a record year in 2003, during which vendors shipped equipment valued at just over $1 billion to U.S. customers. Backlogs for new units and upgrades from 2004 outdistanced sales by about 4%, indicating strength going into 2005.

Manufacturers and industry report a decline in the ultrasound market last year in the U.S. The market was down in 2004 about 7% to $950 million in equipment shipments, according to consolidated industry estimates. This decline came on the heels of a record year in 2003, during which vendors shipped equipment valued at just over $1 billion to U.S. customers. Backlogs for new units and upgrades from 2004 outdistanced sales by about 4%, indicating strength going into 2005.

The backlogs eclipsed sales in two of the top three segments of the ultrasound market. Last year, U.S. customers ordered nearly 3800 radiology units valued at $410 million, while about 3600 units valued at $380 million were shipped.

In the cardiology segment, more than 3200 units valued at $280 million were ordered, compared with 3100 units shipped at a value of $260 million.

The ob/gyn segment accounted for 3200 unit orders valued at $130 million. Unit shipments in 2004 surpassed 3500, but with a value of only $130 million due to price erosion.

The only other decline in equipment booked versus shipped came in upgrades. Consolidated estimates put the value of upgrades on the books at the end of 2004 around $130 million compared with shipped upgrades during that year valued at $135 million.

Looking at the performance of the different segments in 2004 compared with the previous year, cardiology fared better than radiology but not by much, according to Omar Ishrak, president and CEO of clinical systems for GE Healthcare, the business division that includes diagnostic ultrasound. The ob/gyn segment showed greater strength, based on increasing interest in 3D/4D.

The area that did the best, however, was defined not by clinical applications but by technology. Industry sources agree that interest in compact ultrasound systems grew last year. Growth was particularly evident among hand-carried ultrasound systems. The trend is continuing this year.

In the overall 2004 ultrasound market, GE Healthcare was the leading global provider of units, according to Klein Biomedical Consultants. Last year, the company achieved 18% growth in sales. Its main offerings include Logiq 9, a general-purpose imaging system; Voluson 730 Expert, a 4D system; and Vivid 7, a premier digital cardiovascular ultrasound system.

Klein reported, however, that Siemens Medical Solutions was the number one ultrasound company in revenues in the U.S. Siemen's flagship Acuson Sequoia ultrasound platform was the best selling product in the U.S. market. Siemens was followed in revenues by Philips Medical Systems and GE.

Philips ranked number one in cardiovascular ultrasound system sales, according to Klein. Philips' Sonos 7500 with Live 3D Echo is the company's premier cardiology system.

The market impact of compact systems cannot be ignored. The increasing presence of systems such as hand-carried units is bringing new users, such as surgeons and emergency room physicians, to ultrasound. The technology has proven useful in nonradiological settings where point-of-care imaging is important.

"Ultrasound was once the province of radiologists, but now a lot of different physicians use it," said Gordon Parhar, director of the ultrasound business unit for Toshiba America.

Developers of hand-carried units initially targeted nonradiologists for sale, packaging their products as ultrasonic equivalents of the stethoscope. But few bought into the concept, as reimbursement for the use of the technology was problematic. First-look imaging with ultrasound had to be followed by exams on more powerful units if anomalies were spotted.

Over the past five years, however, the performance of HCUs has improved markedly. Radiologists have begun using them in place of cart-based systems to make diagnoses. Increasing acceptance among radiologists has led other specialties to widen their use of the technology.

"The hand-carried market leans more toward the specialty departments," Ishrak said. "Where cardiology is for the hospital markets, HCU is for the niche markets, both within the hospital and, to a lesser degree, outside the hospital."

His company offers the Logiq Book, an advanced compact ultrasound system that offers color flow and Doppler capabilities.

Miniaturization of ultrasound technology has translated into opportunities for substantial growth. Industry pundits estimate that HCU revenues have expanded from $5 million in 1999 to more than $96 million in 2003. Growth continues in double digits, said Lars Shaw, vice president of marketing for Zonare. The company's flagship z.one is a unique "convertible" ultrasound system that transforms from a cart-based system to a compact unit.

In 2005, the HCU area is expected to outpace growth in other market segments. Meanwhile, growth in cardiology is expected to gain momentum, due primarily to innovations in 3D/4D technology and in contrast ultrasound, as well as an expected increase in procedure volumes. Industry observers anticipate that these developments should combine to create a healthy cycle of systems upgrades and replacement in the segment. A confluence of these factors could help turn things around for the ultrasound market in 2005.

"We appear to be on the way back to the normal growth pattern," said Arnd Kaldowski, vice president of sales and marketing for the ultrasound division at Siemens Medical Solutions.

One of the factors cited as influencing the downturn in 2004 was the record sales achieved in 2003. This strong showing satisfied much demand. Another factor was a failure to keep up with improvements achieved in other modalities.

"There wasn't a really significant innovation that increased clinical utility and throughput," Kaldowski said.

One exception was ob/gyn technology. Real-time capabilities in 3D/4D offer the potential for throughput improvements as well as novel clinical capabilities.

"They need to see the fetus moving or the moving heart of the fetus," Kaldowski said.

Real-time is not that important in radiology, he said. This is a key point, and he expects it to be an area of significant focus for ultrasound manufacturers in the next few years.

"Obviously, you still need to find additional applications or ways to increase the efficacy of certain applications," he said. "But the throughput side has been somehow neglected."

Perennial concerns for manufacturers include image quality, quantification, ergonomics, and upgradeability. But workflow and productivity improvements are particularly important business drivers.

"All vendors will be trying to optimize workflow. Improved workflow and productivity will drive future technologies," Parhar said.

In this area, Toshiba offers the iAssist, an ultrasound navigation device. Based on Bluetooth wireless technology, iAssist improves workflow and reduces sonographers' physical strain. QuickScan, an image optimization tool, reduces scan times and improves workflow.

Workflow improvement will be important to the broader application of 3D/4D technology, Kaldowski said.

"Workflow is one of the issues vendors need to solve to make it standard practice, because of the amount of data generated," he said.

So far, it hasn't happened. He cited two reasons: not enough integration between the system and workstation, and the lack of effective CAD tools.

"CAD will be crucial to broader 3D/4D utilization," he said.

Ishrak sees three major trends continuing from last year to this: the move to volume ultrasound, miniaturization, and contrast ultrasound.

"These are the three primary areas for investment and will provide market pull, market growth, and market creation," Ishrak said.

He expects that, within the next three years, more than 50% of GE's U.S. sales, at least at the high end, will be volume ultrasound products.

"Volume ultrasound drove improvements in productivity and is driving doctors toward the modality. That only started last year, and it is gaining more momentum this year," Ishrak said.

Contrast ultrasound is increasingly being used in cardiology for looking at the left ventricle and the wall of the myocardium. Other applications are anticipated.

"In the future, we expect it to be used more for vascular imaging," he said.

Parhar is cautiously optimistic about the current year.

"We are hoping that 2005 will at least be the same as 2004, or that we will see growth by a few percentage points," he said.

Kaldowski, too, keeps his optimism in check. He is looking to see overall growth from 3% to 4%.

"It will be better than 2004," he said.

He expects the cardiology segment to grow faster than the radiology and ob/gyn segments. Sales of hand-carried units could grow by as much as 15% over 2004, he said.

Growth in the ob/gyn segment will be boosted by 3D/4D technology, as it has in the past, according to industry observers, as clinicians realize its utility in imaging various parts of fetal anatomy and the moving fetal heart.

"We feel that, in the next few years, live 4D imaging for gynecology will become the standard mode of imaging," Ishrak said.