Lunar Corporation

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Lunar Corporation

313 West Beltline Highway
Madison, Wisconsin 53713
U.S.A.
274-2663
Fax: (608) 274-5374
Web site: http://lunarcorp.com

Public Company
Incorporated: 1995
Employees: 320
Sales: $80 million (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: LUNR
NAIC: 334517 Irradiation Apparatus Manufacturing

Lunar Corporation is one of the leading designers and manufacturers of bone densitometers, a highly sophisticated, state-of-the-art machine that measures bone density in humans. Densitometers are used primarily as a diagnostic tool for identifying osteoporosis and various other types of bone diseases. The company’s most profitable product is the DPX-IQ axial densitometer, with more than 5,000 of the DPX sold and shipped by the end of fiscal 1998. Also the most popular and widely used densitometer in the world, the product’s software is compatible with the Windows95 operating system. The more affordable DPX-MD enables a physician to provide affordable axial densitometry to patients in the outpatient setting. Lunar Corporation’s EXPERT-XL is the only Imaging Densitometer available around the globe, providing the only reliable vertebral morphometry anywhere. The company’s Achilles + is an ultrasound device that measures the bone in a patient’s heel to diagnose the risk of osteoporosis bone fracture. This product is used extensively for diagnosing the risk of fracture in younger women ages 45 to 65. The ORCA mini C-arm is the company’s mobile fluoroscopic C-arm, which provides high-quality diagnostic images of an individual’s extremities for orthopedic surgical treatment. Although the company’s revenues decreased from 1997 to 1998, management is convinced that the cause was its flawed distribution network in burgeoning new markets rather than the quality of its products or effectiveness of its customer service.

Early History

The founder of Lunar Corporation is Richard B. Mazess, Ph.D., a well-known and highly respected researcher at the University of Wisconsin at Madison. Mazess had been teaching and conducting research for a number of years at the main campus of the University of Wisconsin when he became interested in bone densitometry. He was one of the leading researchers on the pioneering effort that led to the development of the first bone densitometer for commercial use in 1972. At the time and previous to it, bone densitometry was an extremely new and untested area. In fact, there were only a few prototype bone densitometers in the world at the time, and those were all employed for research purposes in teaching hospitals or medical research centers primarily within the United States. Recognizing the need for such a sophisticated diagnostic tool to assist medical personnel in their treatment of bone diseases, and specifically in the field of osteoporosis, Mazess and his colleagues at the university made a commitment to developing a commercially viable densitometer that could be used for many different applications. With the creation of the first commercially viable bone densitometer in the early 1970s, Mazess and his group of researchers thought that their job was essentially over.

Yet the academician soon realized that the creation of a bone densitometer was not nearly enough to guarantee its success in the marketplace. Mazess was disappointed that no large medical supplies or manufacturing firm elected to develop and produce his densitometer for commercial use and, for a number of years, the revolutionary machine went unnoticed and unused. Nearly eight years following its first introduction, Mazess and his fellow academicians at the university decided to form their own company to facilitate the further development, production, and sale of their product to researchers and medical personnel around the world. As a result, Lunar Corporation was incorporated in 1980 and opened its doors for business in the same year.

Growth and Expansion in the 1980s and 1990s

From its beginning, Lunar Corporation was an unqualified success. With Mazess assuming the position of president of the company, there was a concerted effort to develop and produce as many densitometers within as short a time as possible. From 1980 to 1994 Lunar Corporation shipped almost 1,000 of its radionuclide densitometers to hospitals and medical research facilities throughout the United States. As a result, sales increased and the company’s number of employees expanded rapidly.

Mazess, an academic himself, clearly recognized the necessity of a research and development department that included some of the most talented people in the field of densitometry. From the time that the research and development department was established, Mazess was adamant about providing it with the money needed for new and improved densitometers. In fact, Mazess insisted on earmarking approximately 25 percent of the company’s annual revenues for research and development, which in retrospect has turned out to be one of his best decisions, since the firm’s scientists and engineers not only set the standard for bone measurement excellence, but also garnered numerous patents during the 1980s and 1990s. One of the company’s most important innovations was the development of the dual energy x-ray absorptiometry in 1988. This machine, the first of its kind developed specially for the commercial market, enabled medical personnel and researchers to conduct highly precise bone measurements with low radiation doses and at higher speeds. The result was a machine that enhanced the company’s reputation for innovative design, while at the same time expanding its customer base and increasing revenues.

In the autumn of 1993 company management reached an agreement with Esaote Biomedica, a designer and manufacturer of magnetic resonance imagers based in Genoa, Italy, to market and distribute the ARTOSCAN magnetic resonance imager in the United States. The ARTOSCAN provided high-resolution images of a small field-of-view. The machine’s design enables medical personnel to scan large patients at a fraction of the cost of magnetic resonance imagers designed for the entire body. Thus large athletes, such as football and baseball players, could be accommodated by the machine. Soon, with the engineers and designers at Lunar Corporation adding their own improvements to the machine, football teams and baseball teams across the United States started placing orders for the machine.

In 1994 the company introduced the dual-energy x-ray absorptiometer, otherwise known as the EXPERT-XL Imaging Densitometer. The only imaging densitometer in the world, it can perform highly reliable vertebral morphometry, which enables the operators to clearly identify spinal problems. As the engineers and scientists at Lunar Corporation improved the machine over the years, it has developed into the world’s fastest axial densitometer and has received approval and clearance from the United States Food and Drug Administration for lateral spine, orthopedic, and total body applications. In addition, it has one of the clearest, near radiographic image systems of any machine of its kind. In 1997 Lunar Corporation brought out the PIXI, a peripheral densitometer that quickly became known as the fastest in the world, providing extremely precise bone measurements in approximately five seconds. The only peripheral densitometer that provides precise measurements for the heel and forearm, within a short time the machine was one of the company’s best sellers.

Another of the company’s most successful product introductions includes the Achilles +, an ultrasonometer that enables medical personnel to achieve precise measurements of spine and hip fractures. The device employs ultrasound to measure bone of the heel and also allows for measuring a patient’s risk of osteoporotic fracture. In addition, it can measure and monitor bone changes due to either therapy or the progression of a disease. By the end of fiscal 1998, the company had sold more than 2,800 of the machines to customers around the world. In 1997 Lunar Corporation started to sell the ORCA mini C-arm, a very compact, readily mobile fluoroscopic C-arm that provides extremely high-quality images of the extremities for orthopedic surgical applications. Easy to use, the ORCA mini C-arm had gained a small portion of its market by the end of 1998, but company management regards the device as one its most promising products.

The world’s most sophisticated and innovative densitometer was introduced by Lunar Corporation also in 1998. Named the PRODIGY, this new densitometer used low dosage, pencil beam precision, and fan beam speed. Another product, the E-SCAN, was introduced at the same time. The E-SCAN is a brand new magnetic resonance imaging device that not only incorporates all of the new technological developments in the field, but also is a cost-effective system to which health care professionals are attracted. In 1999 the company launched the ORCA-DX, the only fluoroscopic mini C-arm in the world that is able to provide health care professionals and researchers with precise bone density measurements.

Company Perspectives:

Lunar Corporation is the world leader in developing and marketing innovative medical technology for the assessment and management of osteoporosis, metabolic bone diseases, and orthopedic surgery. Lunar delivers the widest range of bone densitometry and orthopedic imaging equipment in the world and is dedicated to superior quality, innovation, and service.

Strategic Partnerships and Innovative Marketing During the 1990s

As Lunar Corporation grew, and as its research and development department developed one of the best reputations in the electromedical equipment industry, Mazess and his management team implemented a strategic partnership plan for the decade of the 1990s and beyond. Financial figures during the middle and late 1990s were not as good as the early years of the decade. Some of this was due to the Asian currency crisis, which dramatically affected the company’s new marketing efforts around the Pacific Rim. In fact, during fiscal 1998, Lunar Corporation sales in the region fell a precipitous 42 percent, and there seems no likelihood for a quick market recovery. In addition, company management had evaluated its distribution network, especially in new efforts directed toward overseas markets, and came to the conclusion that a more sophisticated and professional approach was required to make progress.

For the foregoing reasons, Lunar Corporation reached an agreement with Henry Schein Medical (Caligor) of Pelham Manor, New York and McKesson General Medical (MGM) located in Richmond, Virginia. The contract with these two firms provided Lunar Corporation with more than 700 sales representatives and gave them non-exclusive rights to sell a number of the company’s products. In fact, this one agreement alone enabled Lunar Corporation to market its product line to more than 140,000 primary care physicians working in the United States. In 1998 the company reached an agreement with Philips Medical Systems, one of the largest and most respected medical equipment manufacturers throughout the world. This Dutch-based firm agreed to market Lunar Corporation’s ORCA mini surgical C-arm.

At the same time, the company entered into an agreement with Office of the Future Research and Development Consortium, a group of major medical device manufacturers that assists doctors in redesigning their offices to more efficiently use high-technology medical equipment. Management at Lunar also made it a priority to continue cultivating potentially lucrative relationships with hospitals and hospital purchasing groups such as Premier, Voluntary Hospital of America, Inc., and Health Services Corporation of America. Finally, the company made a major effort in developing and expanding its international presence by reaching distribution agreements with firms throughout South America, Eastern Europe, and around the shores of the Mediterranean. To develop its presence within the Western European market, Lunar Corporation opened a new office in France.

As Lunar Corporation continues to design and develop innovative bone densitorneters, there is little doubt that profits will increase as the firm garners a worldwide reputation. Company management is astute enough to recognize that, even though it has a good product line, the only way to sell its products is to establish a comprehensive sales and distribution network.