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Kodak to Purchase Algotec, Medical Imaging Technology Innovator
Acquisition will Improve Company's Position in Growing PACS Market
ROCHESTER, NY, Nov. 18 — Eastman Kodak Company announced that it will acquire Algotec Systems Ltd., a leading developer of advanced picture-archiving-and-communications systems (PACS), in a move that improves Kodak's competitive position in the growing market for PACS, which enable radiology departments worldwide to digitally manage and store medical images and information.
Kodak plans to acquire privately held Algotec for $42.5 million in cash and expects the transaction to close by year-end. Algotec, whose technology is among the best in the PACS world, will become the "center of excellence" for developing Kodak medical PACS products and attendant 3D imaging technologies.
"This move will bolster our current PACS development efforts and will give Kodak greater leverage in a market growing at 15-20% annually," said Dan Kerpelman, President of Kodak's Health Imaging Group, and a Senior Vice President of the company. "We will own Algotec's intellectual property, including its unique source code - ideal for developing products in the rapidly growing category of web-enabled PACS. By fully utilizing this intellectual property, we will create a stream of compelling product innovations and, in doing so, will accelerate the growth of our business."
The PACS market is fertile for growth. Banc of America Securities' "2003 Hospital CIO Survey" indicates that almost 60% of chief information officers in U.S. hospitals plan to purchase PACS within the next three years. The price of a PACS system ranges from $500,000 to $3 million or more, depending on exact requirements.
"Algotec's technology will put us in a better-than-ever position to capitalize on this opportunity," Kerpelman said, "as will changes we are making in our field operations."
Sales and technical specialists that serve multiple product groups in Health Imaging soon will begin supporting its PACS operation exclusively. "We also plan to double the size of this team by year-end, putting a total of some 40 specialists into the market to serve customers," Kerpelman said.
"This new field model and our planned acquisition of Algotec represent a one-two punch that will give Kodak a sharp, new competitive edge in PACS," he added.
Kodak-Algotec Relationship Began in 2002
Algotec and Kodak have had a close relationship since May of last year. At that time, the two companies signed an agreement under which Algotec began providing supplemental software for the development of Kodak's PACS products.
The innovative KODAK DIRECTVIEW PACS System 5, currently rolling out in the market, is the result of the companies' collaboration.
"Having emerged as Kodak's principal supplier of PACS technology, Algotec will become part of the Kodak family as a wholly owned subsidiary within our Health Imaging Group," Kerpelman said.
The Algotec team, composed largely of people involved in research and development, will become part of Health Imaging's R&D operation, which reports to Michael Jackman, Chief Technology Officer and Vice President of Health Imaging.
Industry Pioneer
Since its formation in 1993, Algotec has been a recognized technology leader in medical imaging information management, processing, teleradiology and PACS. In fact, Algotec was the first company to receive FDA clearance for a Web-based PACS viewer.
"Kodak has the brand name, resources and commitment to drive much greater adoption of PACS by healthcare institutions worldwide," said Dr. Menashe Benjamin, founder and Chief Executive Officer of Algotec, who will join Kodak in a senior R&D and strategic-business advisor role following the acquisition. "Everyone at Algotec is excited about joining a company that is on record as wanting to be a top-tier PACS provider."
Algotec, with 70 employees worldwide, is based in Raanana, Israel, which will remain its principal location. Its technology will continue to support product development for Health Imaging's Healthcare Information Systems (HCIS) business. "The Algotec team will align tightly with HCIS," Jackman said, "helping Kodak augment its leadership in PACS."
One of six product groups in Health Imaging, HCIS develops and markets image-and-information management systems and software for use in radiology departments of healthcare institutions. These products include PACS and radiology information systems (RIS). RIS (information-management systems) when combined with PACS (image-management systems), enable the simultaneous management and archiving of medical images (such as digital x-ray images, MRI images and CT images) and information (such as radiology reports on patients), thus helping medical facilities improve productivity and, ultimately, patient care.
In a related announcement, Kodak recently said it will expand the availability of its successful Radiology Information System 2010 to customers in the United States during 2004. This product - already available in Europe and Australia - will debut in countries beyond the U.S. at a later time.
"PACS-RIS systems continue to be one of the most important segments in healthcare information technology," Kerpelman said. "Such systems can serve as the central repository for all medical images and radiology information in a hospital. They also enable radiologists to organize patients' radiology records and to share these via the Internet with referring physicians and other colleagues. In effect, PACS-RIS are at the very core of the radiology operations of hospitals and imaging centers, and our pending acquisition of Algotec will enable us to compete more aggressively in this arena."
About Kodak's Health Imaging Group
Kodak's Health Imaging Group is a world leader in developing, manufacturing and marketing intelligent imaging products from analog to digital. Its portfolio includes computed radiography (CR) and digital radiography (DR) systems, laser imagers, picture archiving and communications systems (PACS), radiology information systems (RIS), traditional mammography and x-ray film systems, dental imaging products and various services offerings. The group, with 2002 revenues of $2.27 billion, has served the global healthcare community for more than 100 years.
The Health Imaging Group and Kodak's other major businesses - Commercial Printing; Commercial Imaging; Display & Components; and Digital & Film Imaging Systems - together are leading participants in infoimaging, a $385 billion industry created by the convergence of image-and-information technology. Infoimaging unites three closely related imaging markets that enable end users to more easily capture, process and share images and information: devices (such as Health Imaging's CR and DR systems), infrastructure (online networks and delivery systems for images, including PACS) and services & media (software, film and paper).
For more information about Kodak's Health Imaging Group, contact your Kodak representative or visit Kodak's web site at www.kodak.com/go/health.
About Algotec Systems Ltd.
Since its inception in 1993, Algotec Systems Ltd. has been an internationally recognized leader in the field of PACS and 3D Processing of CT and MRI data. Algotec's families of products, sold under the name ImagiNet™, are installed in over 1200 healthcare institutions worldwide and provide state-of-the-art Web-based clinical image management, archiving, processing and communication solutions. Algotec was and continues to be one of the pioneer companies in the area of 3D image processing, and was among the first to introduce advanced imaging techniques into its diagnostic reading products. In 1997, Algotec was the first company to receive FDA clearance for a Web-based image distribution and display system - MediSurf™.
Algotec's products have been sold over the years directly and by key industry leaders, including Kodak. Algotec's ImagiNet™ family includes a diagnostic reading, processing and reporting station, Web-based image display and data access engine, multi-tier archive, and various workflow management and integration applications. ImagiNet also features various integrated image and report distribution products, such as automatic emailing, CD writing, or the Web.
Algotec is headquartered in Israel, with subsidiaries in the US, France and Germany. For more information about Algotec, visit www.algotec.com.
KODAK and DIRECTVIEW are trademarks of Eastman Kodak Company.
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