Elscint is examining the possibility of closing its MRI product line. If it is decided to close this product line, it is estimated that the costs of closure are likely to total some $40 million.
The MRI product line has caused medical imaging product manufacturer Elscint significant losses in the last two years, and the company is looking into various options for its future.
As far as is known, three main possibilities have been considered: selling the line, closing the line, and introducing a strategic partner through some kind of cooperation agreement.
Annual sales of the MRI line are estimated at $50 million, 17% of Elscint’s sales, which totalled $303 million in 1997.
The line closure scenario is the worst from the point of view of Elscint general manager Yonatan Aderet and the company’s shareholder, the Elron group. If the product line were sold to an outside investor, this would be the best outcome for the company, as it would probably yield a large capital gain, and the buyer would continue operating the line and supplying MRI products to Elscint customers who would transfer to it.
If the third scenario, of cooperation with another medical imaging company, is realised, it is likely to represent an interim solution for Elscint. The MRI market is competitive, and there are several major players causing a significant fall in prices. In the event of a cooperation arrangement, the fate of the MRI activity will be dependent on the strategic partner’s ability to contribute to Elscint’s penetration of the markets it finds difficult to penetrate independently.
1997 was a middling year for Elscint, which reported a decline in revenue to $303 million, and profits eroded to $710,000 ($0.04 per share), compared with a profit of $8.1 million in 1996. In the first quarter of this year, Elscint reported revenue of $81.5 million and a profit of $1.3 million.
Elscint parent company Elbit Imaging sold its ultrasound division, brought together under the Diasonics company, to US concern General Electric for $228 million, in a deal that yielded Elbit Imaging a significant capital gain. The attempt to sell or close the MRI line is a further efficiency measure at Elbit Imaging, which is keen to focus solely on areas that will be highly profitable for it.
Elscint today denied the report of the closure of the MRI line. Company president Yonatan Aderet said the MRI activity represented a key element in the company’s operations. Aderet said the company had recently brought out an innovative product that had won great success in the marketplace, and a number of orders from leading customers. Elscint also said the company had been working for some time to improve MRI’s standing in the market, and the product had recently enjoyed worldwide growth.
Published by Israel's Business Arena on July 7, 1998