The Eastman Kodak Company today announced that it will acquire Raanana-based Algotec Systems Ltd., a developer of advanced picture archiving and communications systems (PACS). Kodak said the move 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. The company had so far raised $6 million in a single financing round in 1998. The main investors were the Star and Jafco funds. The company is currently owned by parent company Photonix, which holds 50%, Elscint, Star, and Jafco.
"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."
Banc of America Securities' "2003 Hospital CIO Survey" indicates that almost 60% of chief information officers in US 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."
"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.
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 Kodak DirectViewPACS 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.
Founded in 1992, Algotec was the first company to receive FDA clearance for a Web-based PACS viewer. Algotec, which has 70 employees worldwide, said it will continue to be based in Raanana.
"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 CEO of Algotec, who will join Kodak in a senior R&D and strategic-business advisor role following the acquisition.
Kodak recently said it will expand the availability of its successful Radiology Information System 2010 (RIS) 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. Kerpelman said today, "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."
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.
Published by Globes [online] - www.globes.co.il - on November 18, 2003