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Biomagnetic Technologies acquires Finnish competitor

Biomagnetic Technologies acquires Finnish competitor

Manufacturers of magnetic source imaging (MSI) devices have long struggled to find a niche for their technology in a healthcare environment focused on cost-cutting measures. In a move it hopes will strengthen its position in a small, startup market, Biomagnetic Technologies last month acquired one of its two competitors, Neuromag of Helsinki, Finland.

The $10 million, debt-financed transaction closed Dec. 22 and formed a new company, 4-D NeuroImaging, which the two firms hope will leverage their hardware and software expertise for research and clinical applications. Before the sale, Picker International and Instrumentarium each had a stake in Neuromag, and had marketed Neuromag products (SCAN 11/23/94). However, both firms have sold their shares to BTI, so that Neuromag is now wholly owned by the San Diego firm.

The company will have its headquarters in San Diego, and BTI’s existing executive lineup will be retained. Neuromag’s general manager will also be an officer in the company and a board member. In addition to the San Diego location, 4-D NeuroImaging will have offices in Helsinki and Aachen, Germany, and plans to increase its distribution presence into Asia.

“Neuromag had a strong Japanese distribution arm, and we’ll be working together there, while we’ll take over U.S. distribution of their products,” said Scott Buchanan, president and CEO of the newly formed firm.

As part of a small market, BTI and Neuromag have been developing the same technology, but with different emphases: BTI has focused on the clinical side, while Neuromag has focused on technology research. By merging into one company, BTI and Neuromag address each others’ deficiencies, according to Buchanan. Both BTI’s Magnes and Neuromag’s Vectorview product lines will continue to be supported.

BTI’s Magnes large-array biomagnetometers run on Sun Microsystems’ UltraSPARC workstations, using the Solaris Unix operating system. Magnes 2500 Whole Head (WH) provides 148 detectors around the brain for full coverage; Magnes 3600 WH adds an additional 100 detectors for even denser coverage; the Magnes 1300 C sensor provides more than 60 detectors, which cover an area over 30 cm in diameter, and performs cardiac, gut, spine, and fetal MCG or MEG measurements (SCAN 3/1/95). Vectorview carries a vector sensor that performs three measurements on the magnetic field at each sensor location, allowing a simultaneous recording with 306 MEG channels, an integrated 64-channel EEG system, and a Unix computer platform from Hewlett-Packard.

Although the MSI market has seen clinical advances, its commercial acceptance has been slow, due in part to the price of equipment. BTI’s whole-head Magnes products range from approximately $1.5 million to $2 million, according to Buchanan. One of BTI’s strategies to address the cost issue has been to lobby for reimbursement, positioning MSI as a cost-effective technology that can take the place of more expensive tests or rule out the need for unnecessary surgery.

In particular, the company has targeted epilepsy centers. MSI is useful in localizing dysfunctional tissue, such as pinpointing the foci within the brain of epilepsy seizures. This can eliminate the need for an invasive and costly EEG, which involves placing electrodes in the brain. Total treatment, including EEG, video monitoring, and surgery, can cost between $20,000 and $120,000.

“MSI brings cost savings to the surgical treatment of epilepsy,” Buchanan said. “In a few hours, an MSI scan can locate the epileptic zone. We believe that the procedure produces as much information about the disease that one to two weeks of video monitoring would produce.”

BTI has five systems installed at luminary institutions across the U.S. that are receiving reimbursement for epilepsy treatment from private insurance carriers at approximately $3500 per scan, Buchanan said.

As advocates continue to press for MSI’s clinical acceptance, company executives hope that market consolidation may give the technology the boost it needs, as well as improve the firm’s financial performance. Indeed, BTI has posted substantial losses as it works to establish its technology: The company saw increased net losses for fiscal 1999 (end-September), posting a loss of $7.5 million, compared with a loss of $5 million in 1998. BTI attributed the increased loss to additional product development testing equipment, clinical testing, software and hardware revisions on its systems, and increased sales and marketing activities. On the bright side, BTI did experience revenue growth, reporting 1999 revenues of $3.2 million, a 14.3% gain compared with the previous year’s $2.8 million.

The company also saw some good news in first quarter 2000 when it received two orders for its Magnes products: The Veterans Affairs Medical Center in Minneapolis ordered a Magnes 3600 WH system, and the Complutense University of Madrid, Spain, ordered a Magnes 2500 WH unit, which has been shipped and installed.

4-D NeuroImaging plans to continue its efforts to build hospitals’ confidence in the technology, as well as to expand MSI’s applications to such neuropsychiatric diseases as depression, schizophrenia, attention deficiency disorder, and dyslexia, Buchanan said.

Disclosures

 
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