Vital Images to gain independence in midst of major product launch

December 18, 1996

Vitrea aims at practical virtual endoscopyCiting progress on multiple fronts, Bio-Vascular of St. Paul,MN, has announced plans to spin off its subsidiary Vital Imagesas an independent public company. The news comes as Vital Imagesis preparing

Vitrea aims at practical virtual endoscopy

Citing progress on multiple fronts, Bio-Vascular of St. Paul,MN, has announced plans to spin off its subsidiary Vital Imagesas an independent public company. The news comes as Vital Imagesis preparing for the commercial launch of Vitrea, a 3-D workstationdesigned for everyday clinical use.

Vital Images' accomplishments in 1996 encouraged Bio-Vascularto approve the spin-off, according to Victor Argiro, Vital Images'founder and chief technology officer. The Fairfield, IA, companysecured Food and Drug Administration 510(k) clearance for VoxelView,its 3-D research workstation, and cemented research collaborationswith several prominent luminary sites.

Vital Images also signed a multiyear contract for joint productdevelopment and marketing with ultrasound equipment vendor AdvancedTechnology Laboratories of Bothell, WA, whose RSNA booth featuredthe Digital 3DI workstation developed with Vital Images. In addition,the Vitrea workstation received 510(k) clearance during the RSNAmeeting.

The spin-off will be completed by distributing one share ofVital Images common stock for every two shares of Bio-Vascularcommon stock, according to Argiro. Bio-Vascular will also turnover $13.3 million in cash to its former subsidiary. The paymentwill erase its debt, leaving about $10 million to expand its salesand product development efforts, Argiro said. Vital Images shouldhave about 5 million shares outstanding.

Company officials hope to receive Securities and Exchange Commissionand stockholder authorization to split the companies in earlyApril. If the deal goes through, Vital Images president AndrewWeiss will become president and CEO, while Argiro will retainhis current position.

Customer interest in Vital Images at the RSNA conference focusedon Vitrea, a more user-friendly version of VoxelView that wasdesigned for routine clinical use. Vitrea runs on the new O2 workstationdeveloped by Silicon Graphics (SCAN 10/23/96).

To develop Vitrea, Vital Images called on its university-basedcollaborators to translate VoxelView's time-consuming setup proceduresinto a series of icon-driven protocols for rapid-fire clinicalwork, Argiro said. Vital Images displayed over a dozen of theprotocols in its RSNA booth.

The protocols automatically reconstruct data sets into six3-D views on the screen. Clinicians may choose among these optionsfor a starting point to real-time interactive navigations insidethe study. Using a virtual endoscopic mode, they can fly in andaround 3-D depictions of anatomic structures to make correlationswith 2-D images, insert markers, or take snapshots for printing.

Standard protocols using CT angiographic data cover applicationsin the carotid arteries, circle of Willis, the abdominal aortaand aortic arch, and neuroradiological workups. Another protocolwas developed for virtual bronchoscopy.

Vitrea also has built-in teleradiology capabilities, Argirosaid. Diagnostic-quality images can be posted on a secure, centralizeddata server inside a hospital for access by physicians elsewherein the facility or on a personal computer at home.

Bio-Vascular's decision to spin off Vital Images might be seenas awkwardly timed for the subsidiary. As VoxelView is primarilytargeted at research facilities, it has not generated the kindof revenues required to support an independent company. Vitrea,while it has far greater potential, still needs to prove itselfin the medical imaging market.

Vital Images, however, sees the spin-off as an opportunityto move out from under the shadow of Bio-Vascular, a developerof surgical implant materials whose investor base sometimes didnot fully understand the vagaries of medical software development.

"The biggest benefit is that we can now get investorsthat understand the medical visualization market, and understandwhat it's like to be a software developer and a systems supplier,"Weiss said. "Their expectations for growth and profitabilityare much more in line with our kind of business."