Vital Images leverages technology from merger with HInnovation

June 14, 2004

Four months after acquiring HInnovation, Vital Images has released an updated version of that company's Web-enabled advanced 3D visualization software. The product, called ViTALConnect, allows access to 2D, 3D, and 4D visualizations from a Web-enabled

Four months after acquiring HInnovation, Vital Images has released an updated version of that company's Web-enabled advanced 3D visualization software. The product, called ViTALConnect, allows access to 2D, 3D, and 4D visualizations from a Web-enabled thin-client server via any PC or notebook computer. It was introduced May 20 during the annual Society for Computer Applications in Radiology meeting in Vancouver, BC.

"More than a year ago, we identified an advanced visualization capability that extends beyond the radiology department, where access is more important than performance," said Jay D. Miller, president and CEO of Vital Images. "We said if we're going to play in this game, we can either make it or buy it."

In January, the company bought it, purchasing HInnovation of Milwaukee. The company brought to the table a product that Vital Images quickly upgraded and has begun marketing. ViTALConnect enables users to complete online a variety of tasks, including processing, analysis, review, and distribution of multidimensional medical images.

Vital Images "vitalized" the product, according to Miller, adapting the user interface to fit its own profile, running it through the Vital Images product development process, and improving functionality.

"It's imminently deployable-you can go to any Web site and download the capability and start using it," Miller said. "It's totally Web-based, and there's no proprietary hardware required. We think it's the only true Web-based, imminently deployable, non-hardware-specific advanced visualization tool on the market."

The product enables surgeons, referring physicians, and interventionalists to download 3D images with ease, allowing them to plan and guide procedures and communicate with radiologists, he said.

"The pull from surgeons, interventionalists, and referring physicians gets stronger every day," he said. "They want this capability."

ViTALConnect is being marketed to radiologists-specifically the PACS/IS sector-through Vital Images' regular marketing and sales channels. It sells for about $100,000. The company expects the product to account for 5% to 10% of its revenues during the next year.

Vital Images purchased HInnovation largely because of the product, which may serve as a foundation for future offerings, Miller said. He did not rule out the possibility that other acquisitions might be forthcoming.

The company is well fortified for future acquisitions. It has $28 million in the bank, generates cash with regularity, and has a history of raising money through private investment and public equity efforts. Some $20 million was raised in 2003 specifically to finance the HInnovation acquisition.

"If we see opportunities for capabilities that fit strategically and make sense financially, we'll do them," Miller said.

Vital Images evaluates potential purchases during its ongoing strategic planning process and may consider other acquisitions as early as this year, he said. The company's long-term strategy is straightforward: to remain a leader in advanced visualization. To do that it must continue to grow, which Miller expects will happen in the coming years.

"We told the financial markets we're going to grow between 25% and 35% this year," he said. "We will generate cash from operations, we'll take a bit of a hit on the bottom line due to the HInnovation acquisition, but we'll be positioned well for 2005 and beyond."

Next year, the company expects 30% growth and record revenues and earnings. Miller attributed that expected growth to the proliferation of 32- , 40- , and 64-slice CT scanners and the advent of high-resolution MR images captured using 3T technology, both of which pump the need for advanced visualization technology. Additional growth should come from PET/CT, he said.