Imaging Firms Emageon, Merge Struggle

August 12, 2008

Sales continue to fall while losses increase for medical imaging software vendors Emageon Inc. and Merge Healthcare.

Birmingham, Ala.-based Emageon had a net loss of $25.8 million in the second quarter of 2008, including a goodwill impairment charge of $21.6 million. The company had a net loss of $300,000 during the same period last year. Quarterly revenue fell 29% to $18.1 million as system sales dropped nearly 47%. For the first half of 2008, Emageon lost $30.4 million--including the impairment charge--as revenue fell 29% to $37.4 million.

Uncertain credit market conditions and a saturated diagnostic imaging market have contributed to reduced demand for imaging systems, the company noted in its 10-Q filing with the Securities and Exchange Commission. Further, the next replacement cycle for imaging systems isn’t expected until late 2009. Sales also were affected by the company’s recent proxy battle for control of its board and the decision to investigate strategic alternatives, including a sale.

Milwaukee-based Merge Healthcare had a second-quarter loss of $18.2 million, compared with a $10.7 million loss during the same period last year. Quarterly revenue fell 5% to $13.3 million.

The company has experienced significant impairment, restructuring and legal costs, which contributed to higher net losses. However, available cash at the end of the second quarter increased by $12.2 million to $20.7 million following a private investment in June that netted $16.6 million after costs.

For the first half of 2008, Merge had a net loss of $26 million, compared with a $20.5 million loss during the same period last year. Half-year revenue totaled $27.1 million, down 9%.

More information is available at emageon.com and merge.com.

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