Focused for Growth 4153

COVER STORY

As a division of a division of one of the largest integrated manufacturers of electric and electronic equipment in the world, it would be easy to get lost in the shuffle—particularly when a company's competitors are also multinational giants that compete successfully in multiple industries. Yet Toshiba America Medical Systems Inc. (Tustin, CA) hasn't had any trouble making a name for itself in the field of imaging.

One of only four international manufacturers to produce a full range of imaging products, Toshiba America Medical Systems has boasted 25% year-over-year growth for the past three years—an impressive figure in a sector estimated to be growing at an overall annual rate somewhere in the high single digits. And while its competitors have turned their attention to high-profile acquisitions in molecular imaging and healthcare information technologies as a means of spurring greater growth, Toshiba America Medical Systems remains focused on investing in its core competencies in the diagnostic imaging market and building stronger relationships with its customers and strategic partners.

In recent months, Toshiba America Medical Systems has made significant strides in furthering its commitment to both its customers and its technology. In November 2006, the company announced the grand opening of the Toshiba Education Center, a $6 million, 4840-sq-ft expansion of the Toshiba Training Academy. Later that month, at the annual meeting of the Radiological Society of North America (RSNA), the company offered a sneak peek at images acquired from its 256-slice computed tomography (CT) scanner, a works-in-progress technology with the potential to significantly alter the field of imaging.

In this excerpted interview with MX editor-in-chief Steve Halasey, Lawrence Dentice, senior vice president and general manager of Toshiba America Medical Systems, elaborates on these and other developments that are paving the way for Toshiba America Medical Systems' continued growth. He discusses the company's strategy for differentiating itself through customer-centric initiatives, world-class partnerships, and focused technology development.

MX: Imaging technologies are powerful, but they are also arguably not as well understood as products from other medical technology sectors. How informed is the general public about the advanced imaging technologies being used by physicians?

Lawrence Dentice: There has been a good deal of public discussion regarding imaging technologies, but as with many technologies, such discussion in the general marketplace is being driven by direct-to-consumer advertising. So although the general public knows a great deal about imaging advances, there is also a great deal of confusion in the marketplace.

Toshiba prefers to partner with physicians, healthcare administrators, and technologists. Instead of launching a direct-to-consumer advertising campaign, our company spends its time educating these parties so they can in turn educate their patients and the public at large.

Imaging technologies are contributing to better healthcare in many ways. What clinical applications do you find most impressive?

A couple of technologies are getting a lot of buzz. Overall, there is more awareness of cardiovascular disease than ever before, thanks to magazine articles and television shows such as Oprah. And multislice CT systems are enabling quicker, more-accurate diagnoses. In addition, in women's health, breast magnetic resonance imaging (MRI) offers an accurate and much less invasive means of diagnosis because there is no radiation.

What clinical opportunities are still on the horizon—under discussion, perhaps, but not yet in everyday clinical use?

When discussing which technology offers the most tremendous potential to improve the quality of healthcare, I must mention the 256-slice CT scanner, which is a works-in-progress technology at Toshiba. And it's going to do something very different in the marketplace.

From a cardiac perspective, the key thing the 256-slice technology will do is cover the entire heart in one rotation. That means the technology will be able to scan the entire heart in less than a second—it will scan it in one heartbeat. Therefore, the patient is scanned at a much lower x-ray dose—probably 10–20% of what a patient would be exposed to on the current 64-slice technology.

The 256-slice technology will also provide new applications. One of the key applications is functional imaging of the heart, meaning perfusion studies to take a look at the myocardium as well as infarct imaging. The technology will also go beyond the heart. It will likely scan most organs in one rotation—in less than 1 second. It will also have significant implications for oncology patients by enabling physicians to look at perfusion of antiangiogenesis therapy for follow-up of oncology patients. These will be game-changing clinical applications.

You mentioned that 256-slice CT is a works-in-progress technology. How many years of research have already gone into the product and what is the projected date for commercialization?

From a research and development (R&D) perspective, most of these products take up to 10 years to get them to a works-in-progress stage. That's about where this product is now. Toshiba's 256-slice system is probably about two years away from a commercial launch.

So comparatively speaking, this product is close to commercialization.

Yes. At the RSNA meeting last year, Toshiba held a conference on the future of CT, during which we discussed what 256-slice technology will do.

RSNA holds the world's largest international medical meeting—and the one that imaging companies prepare for most intensely. At the 2006 meeting, what Toshiba announcements received the strongest response?

In the MRI segment, there's no question that our Vantage Atlas 1.5T MRI system got a lot of attention. With 128 channels, it's focused on enabling a patient to have multiple scans without being repositioned. We designed the system with the patient in mind—particularly the claustrophobic patient. Unless the head is being scanned, the system allows the patient to go in feet first, and the patient's head is not in the magnet. The system also features a technology called Pianissimo, which reduces ambient noise by about 90%.

In addition, Toshiba's multiaccess hybrid lab—which is installed at Columbus Children's Hospital in Ohio—received a lot of press. It allows unfettered access to patients. It saves time and increases a patient's level of comfort.

In the ultrasound segment at the RSNA meeting, we featured our 4-D ultrasound product, which enables real-time acquisitions in 3-D. It also provides for volume data analysis, thereby removing much of the variability due to scanning by different sonographers, allowing them to provide more-consistent scans and thereby help the physician provide a quick, accurate diagnosis.

And, as I mentioned, probably Toshiba's biggest RSNA event was the one during which we discussed the promise of 256-slice CT. We had more than 700 attendees, and the event's key presenters included physicians from Johns Hopkins University (Baltimore), Brigham and Women's Hospital (Boston), and Charite in Germany.

The Toshiba Pipeline

Can you provide an overview of where Toshiba America Medical Systems fits into the overall structure of Toshiba Corp.?

Toshiba America Medical Systems is part of Toshiba Medical Systems Corp. (TMSC) in Japan. TMSC is one of Toshiba's corporations, part of the worldwide business accounting for about $4 billion in sales for medical. Toshiba America Medical Systems is the corporation's U.S. operation. There is also a European operation, a Japanese operation, and an Asia-Pacific operation, as well as sales and service activities throughout the world.

How would you describe the advantages and challenges of directing a subsidiary of a much larger multinational corporation with diversified interests?

Toshiba Medical Systems Corp. is an important part of the corporation in that it uses many of the innovations developed by its sister companies. It's also a very stable business within Toshiba's broad portfolio of businesses, some of which are quite volatile. Although it accounts for a smaller percentage of the company's overall sales, TMSC accounts for a larger percentage of the overall return. And a big part of that return is due to the U.S. market.

So your unit is not neglected by its parent company.

Actually, it's the opposite. Because the U.S. market is so strong in innovation and research relative to the world market, we're a very important part of the overall corporation.

The parent corporation wants our unit to have strong clinical research partners and to understand what's happening in our marketplaces. We receive the support to do that, and we have a strong marketing group that keeps us on the leading edge of what's happening in healthcare and the U.S. medical fields.

Toshiba is one of four international manufacturers to produce a full range of imaging products. How tough is it for the company to compete in all those areas at once?

The imaging sector is dominated by world-class companies. Toshiba differentiates itself in two ways: we offer the best technology possible, and we are committed to customer satisfaction and after-sales support.

How is clinical testing of imaging modalities and applications carried out? Does this differ from clinical research in other medical fields?

Toshiba recognizes the value and importance of multicenter trials. That is why the company has made tremendous investments in its coronary evaluation on 64-slice CT (CorE 64) clinical trial, which compares cardiac CT to cardiac cath diagnostics for cardiovascular disease. Eight centers around the world are comparing CT exams with cardiac cath, and they're seeing a difference.

How does clinical research such as the CorE 64 trial contribute to the success of the company?

Good clinical research is critical. Soon Toshiba will be installing its 256-slice system at Johns Hopkins University, where we will get clinical data from both radiology and cardiology.

In order to be responsible about bringing this technology to the marketplace, Toshiba has to ensure that it enables physicians to do something they haven't been able to do with existing technologies. It must offer greater efficiencies, improved productivity, lower cost, or other clinical advances.

The clinical research that Toshiba is doing must provide the foundation for peer-reviewed publications.

Absolutely. That's a major part of the conferences that Toshiba sponsors. In addition to RSNA and the American College of Cardiology convention, our company sponsors 20 or 30 other conferences at which people compare clinical data and discuss how technology advances are going to improve healthcare.

Imaging and Information

Toshiba's competitors GE Healthcare and Siemens Medical Solutions are building businesses in molecular imaging—combining in vitro diagnostics with imaging modalities—and in healthcare information technologies. Does Toshiba have any interests in these fields?

We evaluate new and emerging technologies on an ongoing basis. However, Toshiba is focused on the diagnostic imaging market. Our strategy has allowed us to differentiate ourselves from the competition and to be successful in the marketplace, as evidenced by our 25% year-over-year growth for the past three years and the highest customer satisfaction ratings in the country.

Does Toshiba Corp. have an overall strategy for developing its medical businesses?

Toshiba's annual corporate investment is more than $3 billion from an R&D perspective. That number includes all of the Toshiba businesses. We spend our time evaluating which areas will benefit most from the medical research portion. For example, we just made a multimillion-dollar investment in a Toshiba Medical Research Institute in Chicago. Such an investment demonstrates our commitment to the U.S. medical imaging market.

Our competitors have made some acquisitions in areas that Toshiba hasn't identified as being central to its growth. Right now, rather than acquisitions such as those being undertaken by other companies, we are focused on our customers and on creating best-in-class partnerships.

Do other Toshiba business units contribute to Toshiba America Medical Systems in some way?

We do get some cross-functional advantages from our sister companies, such as those that develop laptops, copiers, and phone systems. We also gain an advantage through our key partners, including Vital Images Inc. (Minnetonka, MN) and McKesson (San Francisco). McKesson is one of the leaders in healthcare information technologies (IT), picture archiving and communications systems (PACS), and information systems. Toshiba recently partnered with McKesson on a mini-PACS.

Growth Engines

How important is acquisition to the growth strategy of Toshiba America Medical Systems?

Our company can acquire other companies, but it's not a strategy central to our core values. We try to partner with companies that have synergies we can leverage. Most of our growth and technology advances come from our internal sister companies. For example, the detector for our CT and the probes for our ultrasound systems are developed from proprietary technology that we get from our sister ceramics division.

How do you coordinate the future of the Toshiba America Medical Systems business with its sister divisions? Do the divisions meet on a regular basis?

Such coordination is done on an almost weekly basis. Our marketing group is vertically integrated throughout business units, and it hosts teleconference calls on an almost weekly basis. In addition, we have engineers and research personnel going back and forth between the United States and Japan on an almost weekly basis. It's an ongoing effort.

Many medtech companies measure their R&D investment as a percentage of sales revenues, but that's tough to evaluate when you are part of a much larger entity. How does Toshiba measure its R&D investment in medical technologies?

From an overall corporate standpoint, Toshiba invests about $3 billion annually. During budgeting meetings, representatives from individual businesses discuss specific projects that they feel are important in their marketplace. During that time, they lobby for as much of the R&D dollars as they can get. Toshiba has a strong commitment to the healthcare system in the United States, so our business commands a good percentage of what's necessary to fund the projects that we see as important in the marketplace.

Reimbursement has become an area of major concern among imaging companies. What do you see as the key issues in this area? What can companies do to safeguard reasonable rates of reimbursement?

It comes down to education. Manufacturers must educate the general public and Congress on the value of imaging. Our company works through the National Electrical Manufacturers Association (NEMA; Rosslyn, VA) and the Access to Medical Imaging Coalition to help communicate the value of these technologies.

How would you rank the funding available to researchers in the field relative to the opportunities?

It's easy to argue that there is never enough funding. The key is being able to select the opportunities that deliver the greatest return. The greatest opportunities provide the ability to make diagnoses previously not possible. There are also great opportunities in advances that increase productivity and reduce the overall costs to the healthcare system.

In what areas do you think the field's next breakthroughs are likely to develop? How long will it take to make them happen?

It looks like genetics will likely offer significant breakthroughs in personalized medicine, enabling targeted prevention and treatment. These advances are probably 10–15 years away, but they will have a significant impact on the practice of medicine.

How do you think that that is going to relate to the field of imaging?

The best way of summing up what's happening with imaging is to quote Elias A. Zerhouni, MD, head of the National Institutes of Health. He said that imaging will continue to increase in value as it becomes more predictive, preemptive, and preventative. Technologies that succeed will enable physicians in a cost-contained environment to provide faster, more-accurate diagnosis, and improve patient treatment. I believe that Toshiba falls right in line with that. Toshiba's practices promote the value of imaging, and we are continually trying to make our equipment more preventive and preemptive.

Copyright ©2007 MX