SmartLight, an Israeli company that manufactures a unique digital film viewer system, has filed for the Israeli equivalent of Chapter 7 liquidation due to inadequate funding. The firm is seeking a third party to acquire its technology and large patent portfolio.
The company has downsized sharply, from 50 employees to seven, retaining only core staff members with the expertise and ability to manufacture and sell SmartLight products. The SmartLight office in Hackensack, NJ, is still operating as usual. Due to downsizing, reduced marketing expenses, and a cut in research and development, the company is now profitable for the first time.
SmartLight’s current strategy is to improve the cost-performance of its products and find an ally or an industrial entity that will purchase the product line, said Dan Inbar, a SmartLight founder.
SmartLight’s workstations optimize film-viewing conditions by adjusting light intensity according to film density. Clinical studies have indicated that the technology could lead to measurable improvement in the performance of radiologists using it. However, the trend toward digital image management has hampered the company’s prospects.
In a world moving to PACS, the company's connection to analog film hurt its prospects, said Eyal Kaplan, general partner with Walden Israel, a venture capital firm that formerly backed SmartLight. "It was difficult to raise money for a ‘film-related’ company," Kaplan said. "Secondly, some customers were reluctant to present to their management a purchasing plan for film-related devices, even if they admitted there was no way they would (adopt PACS) in the near future and accepted the clinical value of SmartLight products."
Inbar agreed. "Film is not sexy in the same way paper wasn’t sexy when computers arrived. But every year the gross film consumption in the world grows by 3.5-3.7%," he said. "Although everybody talks about the digital department of the future, the truth of the matter is that on the demand-and-supply side, 6.5 billion to 6.6 billion square feet of film are sold to the healthcare industry [annually]. Even if you take the most optimistic forecast for the conversion to filmless, by the year 2010 we’ll have 8 billion square feet of film in consumption; only then will it start to go down. By 2020, we’ll have more or less the same film consumption as today. Film and filmless will live side by side."
Dan Ben-Zeev, another SmartLight founder, blamed the company’s downfall on the high cost of its technology. "The basic technology was quite expensive and had a list price that was quite high," he said. "The company, being a small, Israeli-based company, couldn’t invest much money in developing the second generation of less-expensive products and in establishing a sales and marketing effort."
Ben-Zeev said that although the company tried to work with strategic partners to sell the product, the executives of the big companies, such as Siemens, Fuji, Kodak, and Agfa, could not integrate the SmartLight technology into their product lines, especially with the filmless-technology buzz. Inbar argued that the sales forces of the major vendors felt that SmartLight's film-viewer technology would take attention away from high-profitability, high-value products such as digital mammography machines.
Ultimately, according to Ben-Zeev, SmartLight’s initial funding depleted before the company closed strong strategic investments. SmartLight's timing may have hurt its investment prospects as well, Kaplan noted. "SmartLight was looking for funding at a time when anything that didn't have to do with the Internet or telecom was very difficult to finance," he said. "In addition, within the healthcare investment space, diagnostic imaging in general has not seemed attractive. So the company could not identify a credible financial investor to lead a round of funding."
Two months ago, SmartLight introduced a second-generation viewer, called 20/20, which offers higher performance at a lower cost. The new product resembles the company’s original workstation, but has a much higher light output, an improved user interface, better image quality, and plug-and-play capability. The first shipments have been sold to Fuji and GE Medical Systems. Although Fuji represents the company, GE purchased the new viewers in response to customer demand. The 20/20 system costs one-third of the original viewer’s price.
Unfortunately, SmartLight did not have the opportunity to explore 20/20’s market before funding dissipated. "It is a shame that a technology that does so much for so little doesn’t take off because it doesn’t appeal to those who prefer to make much higher profits on large-ticket items," Inbar said.
Ben-Zeev concurs. "Many professionals and radiologists were excited about the technology. It’s most unfortunate that it didn’t break fast enough," he said. "I think there is still a big hope in it; it has the potential to save lives."
Kaplan believes the company would make a smart purchase. "There is a tremendous clinical value in the company’s products, which can fit into the portfolio of many companies in the imaging world, including digital imaging," he said. "Also, there’s a vast portfolio of intellectual property that is very valuable for any imaging or display technology manufacturer. Hundreds of units have been installed in very important clinics, and still today the interest exists."
By Leslie Farnsworth
AuntMinnie.com contributing editor
April 2, 2001
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