Imaging Dynamics Company Ltd. (IDC) (IDL-TSX)

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May 15, 2009 Issue

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Canadian Digital Radiography Manufacturer Imaging Dynamics Company Is Successful In Capturing Industry Market Share In Emerging International Markets

Company Profile:

IDC (Imaging Dynamics Company) is a medical technology company and innovative force in the fast-growing field of digital radiography (DR) technology. IDC's X-Series line of direct capture technology replaces conventional film-based image capture and provides a cost-effective alternative to cassette based computed radiography (CR) systems.


Each IDC DR solution provides high resolution radiographic images in the digital format required for today's electronic medical record networks, all without the use of film, environmentally harmful chemicals, cassettes or expensive imaging plates. IDC received the 2007 Frost & Sullivan Technology Innovation Award and the 2008 PROFIT 100 ranking as one of Canada's fastest-growing companies. IDC was also recognized by the 2008 Deloitte Technology Fast 500, which ranks the fastest growing technology, media, telecommunications and life sciences companies in North America.


Swapan Kakumanu

Chief Financial Officer

Swapan Kakumanu, Chief Financial Officer, brings to the IDC team his business acumen, knowledge of public markets and disciplined financial approach. Mr. Kakumanu has held a range of positions in finance and public practice, including Controller, corporate secretary and CFO for public and private companies in the information technology and energy services sectors. Prior to joining IDC in 2006, he was Corporate Controller and secretary for an Energy Services Company in Calgary where he maintained overall business and finance responsibility and reported to the President & CEO. At Quorum Information Technologies Inc. (TSXV- QIS), Mr. Kakumanu was CFO, where he was instrumental in converting the company from a private enterprise to a publicly traded company, and completed its IPO on the TSX Venture Exchange. He has also held positions at the accounting and consulting firms of BDO Dunwoody LLP, Moore Stephens International and KPMG. He earned his Bachelor’s Degree from Osmania University in Hyderabad, India and holds a CGA designation from Canada and a CA and CWA designation from India. Mr. Kakumanu oversees IDC’s financial controls and the Company’s ongoing program of process enhancement.

Healthcare/Medical Devices
Digital Radiography

Imaging Dynamics Company Ltd. (IDC)
Unit 151, 2340 Pegasus Way N.E.
Calgary AB Canada T2E 8M5
Phone: 866.975.6737 / 403-251-9939

Interview conducted by: Lynn Fosse, Senior Editor,, Published - May 15,  2009

Mr. Kakumanu, what is the vision for Imaging Dynamics today?

Mr. Kakumanu: “IDC is a Canadian company that manufactures digital medical X-ray systems. We commercialized the product 5 years ago, but have had a strong focus on R&D for the past 10 to 12 years. We compete with larger organizations such as Philips Medical Systems, Siemens and GE, although our technology is different in that they offer flat panel and we provide CCD based DR technology. Our price performance is far superior and we have a strong value proposition. Based on our business model, we do not sell direct; we sell through dealers or OEMs. Through our strong distribution channels and OEM’s (Original Equipment Manufacturers) who integrate our proprietary detector head with their systems; IDC’s DR technology can be found in leading medical facilities in more than 40 countries.”

CEOCFO: What’s different about your technology?

Mr. Kakumanu: “IDC uses a charge coupled device or CCD which is optical receptive technology. It is similar to the CCD chip that you can find in standard digital cameras and primarily the same concept. It is a modular based technology and is very cost effective to produce. The cost of manufacturing is cheaper and the cost of maintenance is kept very low as all of the parts that go into manufacturing the digital radiographic systems are component based. Hospitals and clinics are compelled by the affordability, long-term savings and efficiencies of IDC’s DR solutions. There is definitely a more financially accountable approach to decision-making. The trend is forcing vendors to prove their value proposition and requiring healthcare facilities to more carefully consider their return on investment.”


CEOCFO: It sounds like a no-brainer to choose your component-based systems; is this proprietary technology?

Mr. Kakumanu: “We have multiple patents on our DR technology, its components and our software platforms. We have regulatory certifications for the complete DR systems we offer our distribution and OEM channels, which include the detector head, positioning devices, generators and patient tables.”


CEOCFO: What is the digital radiology field and the market opportunity like in general?

Mr. Kakumanu: “It is a competitive market. We believe it estimates to a $1 billion market US. It is a dynamic marketplace with a definite growing potential. If you were to examine where X-ray technology is at in most of the emerging markets you would find that many countries are still using film-based X-rays. However, because of the general transition to digitalization that is taking place globally, many people are converting from film to digital and that is where our product plays. We replace the film-based technology with digital technology, which our technology allows us to do. We believe it is an imaging market, and when I say imaging I mean CT or MRI and of that medical sector, X-rays are the first and foremost imaging, which is taken for every process. A doctor will recommend that you take an X-ray first before you have an MRI or a CT. We believe that the growth is exponential in most of these countries because they need to convert as they are still in film. We do have an intermediary between the film and the digital radiography, called computed radiography (CR), and that is basically not digital, but it is cheaper than digital, where you would use a cassette based technology and then you would still be able to view images on the computer. It looks like digital, but it is not digital technically. It does not give you the same amount of productivity that the digital system gives you. When I say the digital will replace film, it will also replace the CR. Where some of the hospitals have moved from film to CR; they are now looking at moving to DR.”


CEOCFO: You seem to have a steady stream of new customers!

Mr. Kakumanu: “Absolutely and we welcome the opportunities they provide.”


CEOCFO: Where is most of the growth coming from these days?

Mr. Kakumanu: “Predominately if you go back 4 or 5 years ago and look at IDC, our market share was North America, and that being the United States. Over the last 3 years, we have been trending more towards the emerging markets, especially China. We are very strong in China, Latin America, India, the Middle East and Europe. At this point, we sell close to 50% to North America and 50% to the emerging countries of China, Latin America and India.”


CEOCFO: Are there any geographic areas you are not in now where you would like to get more of a foothold?

Mr. Kakumanu: “We are starting to focus on the BRIC countries. One country that we are not in, but we are very close to getting some kind of an association with is Russia.”


CEOCFO: Would you tell us about the recent 300 unit contract in China?

Mr. Kakumanu: “The recent award was for 300 units in China in the latter part of January. It is again a demonstration of how our product fairs in comparison to other products offered by Siemens, Philips and GE. These companies are well established in China, not essentially for the digital radiographic product, but because they sell a lot of other products in the health sectors. It obviously gives them more of an edge in being able to win these contracts. However, this project being awarded to IDC says a lot about not only the product, but the price performance that IDC can offer compared to the other products which these companies are offering.”


CEOCFO: Do you see your price performance as being more of a factor with the current economic conditions?

Mr. Kakumanu: “IDC right now is at a very good position, but you are absolutely right. In economies where market is shrinking, or especially in capital expenditures, people are deferring capital expenditures. IDC does have a very good fit, because we can give them the same product performance and the same throughput, with a much lower cost. Therefore, IDC has a product portfolio that will be very attractive, even during the down economy. That is out of the developed markets, but out of the emerging markets, it is always different because emerging markets have always been price sensitive and one of the reasons why the larger companies will have difficulty to succeed in the emerging market is purely because of the price. It is not because the markets do not want the technology; it is just because the price is definitely not affordable at this point in time. We have noted that most of the larger companies, because the market is also shrinking in Europe and North America, they are focusing mostly on emerging markets like India, China, and Latin America. They are also trying to acquire companies to associate themselves with and will channel their product though those subsidiary companies. But having said that, their product price point is still high. Unless they come up with some kind of different technology at this point in time, I don’t really know how they would be able to compete at that price level, and that’s where we see IDC still has a very good edge with its global brand name and in 40 different countries with close to 2000 units working. Therefore, we still have a very good opportunity in emerging markets because we have the right price point, we have the right global brand name, and we have the performance which is equal or better to some of the systems that are out there.”


CEOCFO: What is the financial picture like for Imaging Dynamics today?

Mr. Kakumanu: “Since I came on board, just over two years ago, my focus has always been on improving the balance sheet and reducing costs. We have substantially done that quarter-over-quarter. Even in the last quarter of 2008, we ended up with over $1 million of cash in our bank and we have reduced our operating costs on a quarter-over-quarter basis. At this point, we believe we have the right cost structure in terms of head count. We have close to around 50 employees, whereas at one point a year ago, we had close to 100. We have restructured the company to make sure we can meet the current economy downturn and also be able to eventually work towards a breakeven, profitable situation.”


CEOCFO: Final thoughts; what is ahead for the company and why should potential investors put IDC on their radar screen?

Mr. Kakumanu: “A couple of things. I’ll start with the market. First, investors need to ask is what is digital radiography, what is the market and is the company in the right industry. The answer to that is an absolute yes. According to market research and economic developments we have seen over the past few years, DR in the medical imaging sector is the fastest growing segment. We export our technology to many countries and have found there are some countries now revising their import policy so that film or CR based products are no longer importable commodities for medical imaging; with DR products being the only recognized technology. Therefore, we are in the right industry. The next thing you need to ask is; how is IDC recognized globally. Our brand recognition and value proposition have allowed us to be well identified and respected globally. Especially in most of the large countries such as India, Chile, Turkey and China. The next thing you need to ask about is price performance. However, not price as it is today, but what it would cost to maintain the product in the next 5 to 6 years. We have the best price performance in both upfront capital expenditure, and cost to maintain and support. IDC provides its customers with a standard 3 year warranty on our detector head, whereas most of the flat panel companies are not able to compete and will only provide a 1 year warranty, with the option to buy additional warranty. This is because in the instance that any damage occurs to the flat panel, you have to replace the entire flat panel imaging receptor. With IDC’s CCD based technology, we are confident in providing the 3-year warranty in knowing that the modular design of our technology allows for components to be easily upgraded or replaced in the field. With those three things in mind, and also looking at a cost structure, which we have rationalized over the last couple of quarters, I personally think that we are in one of the best positions that IDC could have ever been over the last couple of years.”


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“Predominately if you go back 4 or 5 years ago and look at IDC, our market share was North America, and that being the United States. Over the last 3 years, we have been trending more towards the emerging markets, especially China. We are very strong in China, Latin America, India, the Middle East and Europe. At this point, we sell close to 50% to North America and 50% to the emerging countries of China, Latin America, and India.” - Swapan Kakumanu does not purchase or make
recommendation on stocks based on the interviews published.