Hologic Lays Plans To Acquire Mini C-arm Maker Fluoroscan

Breaking News Newsletter, a Service of Tech Assessment Imaging July 26, 1996

Hologic Lays Plans To Acquire Mini C-arm Maker Fluoroscan

The run-up in prices being paid for Hologic stock has given the company a massive financial lever for corporate acquisitions - and the Waltham, MA, company has begun using it. Hologic announced July 19 its intent to merge with Fluoroscan imaging Systems, Inc., of Northbrook, IL, the manufacturer of low-dose, low-cost Mini C-arms that are taking the surgical market by storm.

The deal will be consummated with the issuance by Hologic of 1.5 million shares of its common stock in exchange for all outstanding shares of Fluoroscan’s common stock, stock warrants and stock options. Finalization is contingent on tying up the usual strings - due diligence efforts, approval by stockholders and acceptance of appropriate documents by the SEC, actions that Hologic expects to be complete by September.

But before the ink dries on this deal, Hologic will have already begun looking for other acquisitions. Company Chairman and CEO S. David Ellenbogen says Hologic is especially interested in the women’s health industry - not mammography, but potentially a developer of technology for interpreting mammograms, or possibly one that builds automated pap readers.

“The Fluoroscan acquisition is a small bite that we can digest reasonably easily,” says Ellen Bogen. “And it is not a big bite financially or as a percentage of our sales, so we would like to take a few other bites as well.”

The deal with Fluoroscan will dispel the idea that Hologic “is a one trick pony,” says VP of Business Development Joel Weinstein. Hologic has ridden a wave of interest in its bone densitometers over the last 18 months, a wave that took shape with the approval by FDA of a novel drug therapy for osteoporosis developed by Merck. Fluoroscan has been on a similar ride, benefiting from the move toward outpatient surgery, particularly in orthopedics. According to the Northbrook, IL, company, Fluoroscan products account for about 70% of domestic sales of mini C-arms, which have been driven by orthopedic surgery.

“We really believe that the mini C-arm market is poised for accelerated growth in the upcoming years,” Weinstein said. Driving this market will be the continuing emphasis of cost containment. The Fluoroscan products are ideally suited for budget conscious buyers, costing about the same as a new mobile X-ray system. Prices for the Fluoroscan II runs about $35,000 to $40,000. In April 1994, FDA cleared a predecessor of the Fluoroscan II version, a slightly more powerful unit, the cost runs from $45,000 to $65,000.

Sales may also benefit from the introduction of a novel type of bone treatment in which a paste is applied to aid in the healing of bone fractures. The use of this unique skeletal repair system, which was developed by a company called Norian Corp., requires a mini C-arm for localizing the fracture and visualizing the injection of paste into the fracture site. Fluoroscan has an exclusive agreement with Norian to introduce the product to orthopedic surgeons around the world. The global distribution network put in place by Hologic to sell bone densitometers outside the U.S. when domestic demand was lean should help in the introduction of that product, as well in selling mini C-arms.

“We have spent ten years building a market presence in more than 60 countries outside the U.S.,” Weinstein notes. “Those established international distribution channels should provide a considerable opportunity to expand Fluoroscan’s presence overseas.”

While Ellenbogen and Weinstein want to fold the international sales of Fluoroscan products into Hologic’s distribution machine, they want Fluoroscan to keep selling through its established channels in the United States, where the vast majority of the company’s products have been placed. “They have built a very nice dealer organization and our plan is to leave that alone,” Ellenbogen says.

Fluoroscan has been slow to develop its international sales because of fears in the State Department that the Mini C-arm technology might be subverted for military purposes. The technology that allows the company to make image intensifiers that can produce high-resolution images at just 10% of the X-ray dose found in other C-arms is also used in military applications, such as night vision glasses, tank sites, missile guidance systems and sniper scopes.

“We didn’t want to put this technology in the hands of the enemy,” says Larry Grossman, chairman and CEO of Fluoroscan. “But with the break-up of the Soviet Union, the Russians dumped night vision technology into Iran and Iraq, so the State Department finally allowed us to export our machine internationally.”

The technology is extraordinarily safe, because of the low dose, allowing the mini C-arms to be used in doctor’s offices and surgery centers without being operated by radiology techs and without the bulky lead aprons that accompany most such fluoroscopic work.

“In several places radiology still gets involved in it, but most of the people are giving up control (of the equipment) to orthopedic doctors and surgeons,” Grossman says. For the time being, executives at Fluoroscan - and its prospective parent, Hologic - are satisfied with the domestic and global market potential of the Mini C-arm. Grossman says the company does, however, have plans to extend its technology to larger versions, specifically mobile C-arms used during surgery in operating rooms and for other specialty applications.

“That’s next,” Grossman says. “One thing at a time.”