PET firm CTI files for IPO

Apr 11, 2002

PET developer CTI is planning to go public. The Knoxville, TN, company last week filed papers with the U.S. Securities and Exchange Commission in preparation for an initial public offering of common stock.

CTI is planning to raise up to $230 million, according to the company’s S-1 registration statement. The funds will be used to expand its manufacturing facilities, repay debt, grow its P.E.T.Net Pharmaceuticals FDG radiopharmacy network, and general corporate purposes.

CTI’s financial statements show that the company is benefiting from the rising PET market. CTI posted revenues of $188.9 million in fiscal 2001 (end-September 30) and $124 million the year before, an increase of 52%. Its 1999 revenues stood at $88.2 million. CTI is profitable, with net income of $3.9 million in fiscal 2001, compared with $2.7 million the year before.

The company’s future also looks rosy: The U.S. installed base of dedicated PET scanners will grow at a compound annual growth rate of 38.7% from 2000 to 2007, according to numbers cited in the registration statement from market research firm Frost & Sullivan of San Jose, CA.

In addition to PET camera manufacturing and development, the company builds cyclotrons and detector materials, and it also owns P.E.T.Net, which currently operates 31 radiopharmacies. Its PET manufacturing business, CTI PET Systems (CPS), is operated through a joint venture with Siemens Medical Solutions, with Siemens owning 49.9% of the venture and CTI the rest.

Among the risk factors cited in the S-1 is the chance that insurance reimbursement for PET could be reduced to the point where healthcare providers would be reluctant to purchase and/or use the company’s products. As an example of the tenuous nature of reimbursement, the statement cites the recent drop in Medicare PET payments, from $2,331 to $1,764.

In addition, Siemens has an option to purchase a majority interest (80%) in CTI PET Systems if certain sales levels are met. Such a move would deprive CTI of a large portion of its revenues, operations, and assets, as well as employees and intellectual property assets.

The company believes that this sales target likely won’t be met before 2005, but if the level is met and Siemens exercises its option, the company could effectively take over 100% of CPS, the statement says. CTI would have rights to distribute PET scanners made by CTI PET Systems until 2010 if Siemens took control.

Until last year, Siemens sold all of CTI’s scanners on an OEM basis, and sales through Siemens still make up 63.9% of CTI’s revenues. CTI began to assume a direct sales role last year, and is also pursuing distribution relationships with other companies. Hitachi Medical Systems America is one of CTI's most recent relationships, gaining rights to sell CTI scanners through an agreement inked in November 2001.

By AuntMinnie.com staff writers
April 12, 2002

Focus on PET pays off for CTI as modality booms, August 6, 2001