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IMPAC Medical Systems, Inc. (IMPC) |
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CEOCFO Current
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This is a printer friendly page! Delivering a single integrated system
that address the wide range of therapies used in cancer has been a significant competitive
advantage for IMPAC Medical Systems Bio of CEO, Joe Jachinowski is President
and Chief Executive Officer of IMPAC Medical Systems, Inc. in Mountain View, California, a
leading provider of information technology solutions for cancer care. Mr. Jachinowski is
also co-founder of IMPAC, and a member of the Board of Directors, in which capacity he has
provided business and technical leadership for the company. His major responsibilities
include overall business strategy and as well as representing the company to the investor
community. Prior to co-founding IMPAC, Mr. Jachinowski held the position of Manager of Systems and Software Engineering for Varian Medical Systems of Palo Alto, California. In this role, he managed engineering departments responsible for systems engineering, accelerator control system design, and database management system development. Before joining Varian, Mr. Jachinowski co-founded SEL of Pullman, Washington. SEL is the world's leading supplier of digital transmission line power analyzers. Mr. Jachinowski holds an MS degree in Electrical
Engineering from Washington State University, and a BS degree in Electrical Engineering
from Ohio University. CEOCFOinterviews: Mr.
Jachinowski, please give us a brief history of IMPAC Medical Systems. Mr. Jachinowski:
“IMPAC was founded in 1990, with the intent of providing information technology
solutions for the entire continuum of cancer care, from detection through diagnosis
treatment and long-term follow-up. We were looking at managing the entire process from
when the patient first walks in the door for their first visit, all the way through the
long-term statistical out-comes research that is necessary to gage the effectiveness of
cancer care. We started working with an integrated system of practice management, coupled
together with an electronic medical record, which in 1990, was fairly novel. Since that
time we have added imaging capability, decision support capability, and a variety of
device and system connectivity to our system. Further, we have added laboratory
information systems management as well. Now we have a very broad based product line. CEOCFOinterviews: Is it typical in the healthcare technology industry to have specific programs for different disease management? Mr. Jachinowski: “It certainly is not atypical, by that I mean you can go into hospital settings where there may be a generalized EMR (Electronic Medical Record) that is used for the majority of in-patient settings, and then some specific system that are used for some of the specialties. I think that is where we fall. Cancer by its nature is not a single disease but a collection of over a hundred related diseases and uses very complex chemotherapy regimens, radiation therapy, surgery and hormonal therapy. In over 60% of those cases, there is some mixed mode of treatment so that a patient may receive surgery and chemotherapy for example. Managing that complexity is typically far beyond the capabilities of a standard EMR and consequently some specialized systems such as ours are necessary for the efficiency and quality gains to be garnered by the providers.” CEOCFOinterviews: What is it that you are actually selling to your customers? Mr. Jachinowski:
“We are selling a range of products. We market about forty-five different products
that are grouped into roughly five different product categories. They are centered around
an electronic medical record that addresses the complexities and nuances of cancer care,
specifically dealing with surgery, chemotherapy and radiation therapy. Built around that
EMR, and tightly integrated with it, are products from our image management family, our
practice management family and our data aggregation and analysis family, otherwise known
as ‘decision support family’. These products are highly integrated to get
seamless operation between the administrative products and the EMR. They also have a vast
amount of advanced device integration. CEOCFOinterviews: What is your revenue model? Mr. Jachinowski: “Generally speaking, about 96% of our revenue is based on perpetual licenses that we sell. In general, we are selling perpetual licenses for the software, with maintenance and support. We have some ASP (Application Service Provider) and/or term licensing models, where the customer may buy a one-year license, and we will renew that on an on-going basis. In some cases, we provide the infrastructure as well, which is a small part of our business right now, although we do expect that will grow to be about 10 to 15% of our business over the next several years.” CEOCFOinterviews: Do the people with perpetual licenses pay for your upgrades, and how often do you make changes and have new additions? Mr. Jachinowski: “If the customer purchases a product via a perpetual license, then on an annual basis after the first year of warranty, they will buy additional maintenance and support for that product, and that entitles them to all the upgrades for the products, which they originally purchased as well as the on-going support for those products. We will typically come out with one or two releases a year, for our product family, so the products are very current. Over the last year, we have made some major overhauls to our product line. I would say, in our thirteen-year history, our product line is in the most current state that it has ever been in since day one when we first shipped the initial product.” CEOCFOinterviews: Why the decision to become a publicly-traded company and how has that been working for you? Mr. Jachinowski: “So far, so good! We had some venture investors that had been with the company for almost six years and both from a venture perspective as well as from the founders perspective, we were looking for some liquidity, not necessarily to sell the whole business, but to really look for some vehicle to obtain a modest amount of liquidity. We also felt that given the low volume of deals that were being done in the market, that it would be advantage to IMPAC, as we are not that big of a company, less chatter on the street, would give us a better opportunity to get in front of investors. We also felt, given the current economic climate, that if in fact we could go public, which we succeeded in doing; we would be in a good situation for buying some technology that exists in the market place. As a public company, we have some additional capital that we raised as well as having a public company stock currency, which gives us a lot of flexibility. We think there will be a lot of good buying opportunities in the next several years.” CEOCFOinterviews: You mentioned you were in 52 countries. About how much of your business is outside the U.S., and is that area growing for you? Mr. Jachinowski: “Yes it is growing for us! To date, we have handled international distribution through distributors, not directly, and so consequently, we recognize only transfer pricing to those distributors and not the top-line that they recognize from their customers. With respect to international revenue, only about 6% of our revenue today is internationally based, although as I said, that number is a little misleading because we only recognize the transfer pricing. About a year ago, we started to establish some direct distribution, and we have done that in the areas where our distributors historically have not had high market penetration. We have set up a complimentary channel internationally, and we expect that channel to start to become productive in our fiscal year 2004, which will begin in October of this year.” CEOCFOinterviews: Is there much competition in the specialized area that you are in, and what sets you apart? Mr. Jachinowski:
“There isn’t much competition. One of the things, which is key for us in terms
of differentiating with respect to our competitors, is the breadth of product offering
that we have. We are the only company in the segment that offers an integrated product
that addresses the different modalities of treatment; some of our competitors have
products that are information solutions for radiation therapy but they don’t address
chemotherapy. Another group of our competitors addresses the chemotherapy problem, but
don’t address the administrative problem. The vast majority of the patients are
treated with multiple treatment modalities, so the ability to deliver a single integrated
system that address the wide range of therapies used in cancer and address the business
problems face by providers, has been a significant entry barrier and competitive advantage
for IMPAC. CEOCFOinterviews: How do you identify the most likely prospects to use your system? Mr. Jachinowski: “We address a very broad range of the market and that is a competitive advantage of ours. We can go in to small physician practices, freestanding private offices, all the way up to the largest cancer centers in the world. We have been in the business long enough and have established our channels from a market distribution standpoint. In-terms of actually getting to those folks, we have a large sales force, we attend a large number of professional meetings and we get a lot of reference business because of our installed base. From our standpoint, it is easy to get in front of the customer and because of our platform; it is very easy to address a broad range of customers.” CEOCFOinterviews: Is cost an issue? Mr. Jachinowski: “Clearly at some point, cost always becomes an issue. Much of what we provide is very much enabling technology, because without having our system, it could be very difficult to deliver today in any real manner, some of the more advanced treatments that are used to attack cancer. Or stated another way, our systems have moved from the domain of nicety to one of necessity. Another thing we see is that safety is becoming an ever-increasing driver in our field. There is the famous Institute of Medicine study, which came out several years ago that said ”In the U.S. we kill or seriously injure over 100,000 patients a year.” That study was generated because of a fatal mistreatment of a cancer patient, and there has certainly been awareness in our field of patient safety. When you think about it, the chemotherapy and radiation therapy that is used, in fact, can be lethal; that is a big driver. The third driver is the economic side, with efficiencies that can be gained using information technology. That one has been emerging over the last several years and is becoming a bigger and bigger driver.” CEOCFOinterviews: What do you see as the biggest challenge facing IMPAC, and how are you ready? Mr. Jachinowski:
“What is always a challenge is when you are growing at a 30% clip, which is
effectively what we have been doing over the last five years; those numbers get bigger
each year and it gets to be a challenge. With respect to that, we are always looking for
new opportunities and we have established a five-prong growth strategy to be able to
continue to move the company forward in a profitable manner as we have over almost the
entire history of the company. The first component is to up-sell to our existing
customers. We have an awful lot of products today. The vast majority of our customers do
not have all of our products. We think there is a very good opportunity to sell back into
our customer base. We also continue to expand our solutions. For example, last year we
introduced more new products than we ever had in the history of the company. In pursuit of
the additional customers that don’t have IT (Information Technology) solutions today
in the U.S. and throughout the world, we continue to expand our sales force; we have grown
it from twelve at the end of 1998, to what will be twenty-eight by the end of this fiscal
year. Additionally, we have now started to internationally add to our distribution, so we
have established an international sales force to tap those opportunities outside of North
America, as well as adding some additional distributors in some key geographic locations
around the world. CEOCFOinterviews: In closing, what should shareholders and potential investors know about IMPAC? Mr. Jachinowski: “One of the things that is confusing when one looks at the financial aspects of the company is the accounting treatment of our venture investment, which occurred six years ago. The company had been accreting a non-cash charge on its P&L, to reflect the increasing value of the company in a redemption option that our venture partners had. At the IPO, that redemption opportunity went away and their preferred shares converted into common shares. The result of all of that accounting was that our prospectus was carrying a non-cash charge that made the company look un-profitable. We have in fact been very profitable. It is just one of the unfortunate side-effects of the new accounting treatment coming into practice. In our particular case, it reflected negatively on the company, which is performing very well. It is one of those technical issues that the private investor might not realize. Another thing is, we are in a very good niche of the healthcare market; when you look at the profit centers in a hospital, cardiology and oncology are really the two key profit generators. We have a very significant share of the market, and in the U.S., we estimate that our market share is somewhere between 65 and 70% of all new deals that go down. We think that we have a very good position, which we can maintain going forward.” disclaimers |
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