TABLE OF CONTENTS

Competing with the Giants?

Companion Diagnostic Dealmaking

Five Extera Projects

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Novel Cooperative Structure Puts Smaller Companies on Even Footing with Imaging Majors, by Lothar Koob and Craig Burch

In a market dominated by corporate giants, emerging medical imaging companies face significant challenges in bringing products to market. Although they want to focus on high value engineering problems, they must spread their resources thinly across design and manufacture and marketing. A new model is needed. In the auto industry, different companies share essential sub-systems, yet their customers experience each product as very distinct.

Emerging imaging companies need to begin the same process of specialization and focus on the core aspects of the business they know best. By working together, they can stop re-inventing general components which do not contribute to product differentiation and become more competitive. For example, an X-ray company should design and share the software which interfaces to the detector, captures and stores the digital X-ray images in return for getting other hardware components from a second company. This approach embeds component specific expertise in a company and enables it to focus on market relevant product differentiation by outsourceing development of the non-critical infrastructure components.

Similarly, marketing linkages for complimentary products will enhance the opportunity of both products.  Device/imaging companies or cancer therapy/imaging companies are excellent candidates for this type of collaboration.  For example, an innovative imaging device to facilitate stent placement or radiation therapy will make the procedures more competitive and drive market penetration.  An imaging major may not be interested in niche opportunities, but the revenue potential would be meaningful for an emerging imaging company.

The specialization and collaboration approach has several challenges.  Collaborators have to find each other and must be able to create a workable business model that navigates around problems like the double margin concern.  These companies also face challenges in negotiating deal terms and collaboration approaches.  However, the advantages of alliances are clear and compelling.  Emerging companies could realize economies of scale, produce higher quality products, and expand the market opportunity.  Successful collaborations could be the difference between marginal success and achieving a highly profitable business.