Vital Images, McKesson cut deal to sell Vitrea and PACS jointly

July 23, 2003

Sales forces begin cross-training each otherVital Images and McKesson Information Systems have signed a three-year agreement calling for the two companies to jointly distribute their flagship products, specifically Vital Images'

Sales forces begin cross-training each other

Vital Images and McKesson Information Systems have signed a three-year agreement calling for the two companies to jointly distribute their flagship products, specifically Vital Images' Vitrea 3D imaging software and McKesson's Horizon Medical Imaging PACS. Under the agreement, announced July 8, McKesson's sales force has begun selling Vitrea to its Horizon customers, and VI's sales force has begun offering the Horizon archive capability to its own customers. The two companies have the option to extend the agreement after three years. The deal capped months of negotiation between the Plymouth, MN-based Vital Images and San Francisco-based McKesson.

One year earlier McKesson acquired key PACS player ALI Technologies, which at the time had a "loose marketing relationship" with Vital Images, said Philip I. Smith, vice president of corporate development for VI. As with ALI, Vital Images and McKesson have similar philosophical approaches to the imaging business.

"The organizations had good relationships on the sales and marketing side, so when the decision was made to grow our revenues on the PACS side of the business, McKesson was a logical partner for us," Smith said. "It was a conscious strategic decision to more aggressively sell Vitrea, our flagship technology, onto the PACS side of the world."

Access to McKesson's PACS sales channel will expand Vital Images' reach. McKesson's initial target will be film-based small hospitals and imaging centers that need archival capability for their data-heavy multidetector CT scanners.

As the agreement was announced, sales forces from both companies were poised to begin training each other, both in-house and in the field, to smooth implementation of the collaboration. Additionally, engineering teams from both companies have begun working to develop a more tightly integrated solution involving the two products. Vitrea will initially be offered with DICOM protocols. Vital Images hopes eventually to integrate it into the McKesson platform.

"The benefit to us is that we'll increase our sales of Vitrea into the PACS environment, where we don't play today," Smith said. "And as multidetector CT continues to proliferate, McKesson gets a better solution for its customer."

VI currently has more than 1000 installations at hospitals and clinics, including research and tertiary-care facilities, around the country and internationally. Many are in association with CT, as Vitrea's ability to help radiologists visualize the large volumes of data coming off multidetector scanners has been a major selling point. Adding to the installed base have been bundled sales of Vitrea and Toshiba's multidetector scanners.

McKesson has some 500 PACS installations in facilities ranging from stand-alone imaging centers and clinics to community and teaching hospitals. Smith would not say how much growth he expects may result from leveraging this installed base, although he believes the collaboration might enable Vital Images to exceed the 30% to 40% annual growth rate it has seen in recent years. McKesson will benefit from the arrangement as well.

"McKesson may sell more PACS (as a result of the deal), and I think it'll allow them to be more competitive," Smith said. "They'll have a more comprehensive solution for customers."

A McKesson spokesperson declined to say whether or how much the company's sales might increase as a result of the collaboration.