MFC Expands MEG Holdings with Acquisition of 4-D Neuroimaging

Mass Financial Corp. (MFC) has announced the purchase of MEG manufacturer 4-D Neuroimaging (4-D). For MFC, a merchant banking business encompassing a broad spectrum of activities related to banking, commodities, financing of commercial trade, and proprietary investing, the acquisition of 4-D expands the company’s involvement in the MEG industry: MFC had previously acquired struggling VSM Medtech Ltd. and refashioned it into MEG International Services Ltd. (MISL).

“Independent of MFC, 4-D filed Chapter 7 Bankruptcy,” stated Scott Buchanan, Former President of 4-D. “MISL made an offer for all the assets of 4-D as part of the bankruptcy proceedings and the trustee decided to sell all assets as a single unit. Bidding for this unit occurred on April 14, 2009 with both Elekta and MISL bidding. Bidding started at approximately $270,000 with MISL winning with a bid of $500,000.

“MISL has retained two service personnel to provide service to existing 4-D customers using the spare parts and drawings obtained from the above sale.”

Move Follows MFC’s Acquisition of VSM Medtech

“MFC created MISL in April 2007 to build a foundation of customer service for existing CTF/VSM equipment owners,” explained Tim Baird, GM at MISL. “From this foundation, MISL has been able to bring the CTF MEG product back to the MEG market.

“VSM’s business model, as well as its competitors, was unsustainable, and MFC has applied the needed management disciplines to the business. The first and foremost discipline, which was ironically a radical principle in the MEG marketplace, was that the business must be profitable.

“MISL’s announcement that it would begin the manufacture of the CTF MEG product line took place just a few weeks prior to the unfortunate announcement of the bankruptcy of 4-D Neuroimaging (see Superconductor Week, Vol 23, No 2). Needless to say, both announcements sent shockwaves through the MEG community, but from our vantage point at MISL, both were reasonably predictable.

“Knowing what we were able to achieve with VSM and the CTF customer base, we saw an immediate opportunity to expand our market presence and bring a solid service solution to 4-D customers who were left in a very difficult position. In addition, our plans for the careful rollout of a new generation of CTF products would be bolstered.”

Buchanan: MFC Aiming for Monopoly on MEG Servicing

Buchanan elaborated on the history of MFC’s involvement in the MEG business: “VSM was running out of cash when MFC provided a multi-million dollar (IIRC) loan which, when VSM could not raise additional capital, provided MFC with the path to acquiring VSM in its entirety.

“They then re-engineered the company to use the $60 million net operating loss to offset royalty streams from other businesses. MFC transferred the intellectual property from VSM MEG systems to MISL with the stated intention of re-starting production of the systems in China.

“To my knowledge production in China has never yet happened. MISL has made a (barely) profitable service business from former VSM customers and will add 4-D customers to this list. Their business model is simple: they are a monopoly and control all spare parts required to keep systems running. Customers must pay an entry fee in the form of a yearly service contract to gain access to these parts and some service expertise. I have been told they do not provide software support or service.”

MFC Motivated by ‘Sound Business Principles’

Baird added that MFC was motivated to move into the MEG business by sound business principles: “The MEG market, and VSM in particular, was a textbook example of a technology that is driven by a pioneering scientific motive and an excited investment community that wanted to be in on the ground floor of the next big thing.

“However, the company was not endowed with the right managerial skill set to carefully husband its resources and build a reliable revenue stream. The only real hope for the CTF technology was to start with a clean sheet – and MISL was that clean sheet. Analysis of the customer base and the market revealed that a genuine business opportunity existed – if it was carefully managed.

“MFC was confident that it could apply its principle asset – experienced management and recruiting – to work and build a credible business out of the assets of VSM. Similarly, MFC’s motivations in acquiring 4-D were twofold: to provide comprehensive service to 4-D equipment operators at an affordable price and to expand MISL revenues to accelerate and grow our MEG manufacturing business.”

Baird: Days of Giving Away MEG Equipment Over

Baird went on the say that MEG has entered a new phase: “We are at a turning point in the development of MEG and its underlying technology and marketability. The trailblazing that was undertaken principally by a dedicated scientific community has matured into a more rational commercial opportunity.

“There are essentially two major players in the MEG market – MISL and the Neuromag division of Elekta. MFC believes MISL possesses a superior technology and supports the more disciplined and rational approach to the commercial reality of the MEG market. The days of MEG manufacturers essentially giving their equipment away to expand their market share have come to an end – at least from MISL’s position.

“We are in a strong position to work with research organizations to structure their funding mechanisms in such a way that it will motivate MEG manufacturers to build and service MEG equipment now and into the foreseeable future.”

Doubts Persist On Potential Profitability of MEG Manufacture

Buchanan, however, cast doubt on the timeframe within which MEG manufacturers could expect to turn a steady profit: “MEG is currently a failing technology with no real horizon to profitability for either the manufacturers or our users. The two remaining companies were losing in excess of $10 million per year between them with no visibility that this would change.

“So far this year, to my knowledge, there has only been one new MEG system sold, by Elekta Neuromag. There were a couple of sales that were actually made last year, to the MIND institute in New Mexico and the University of Washington, which were completed this year, but these are not new users.”

MEG Likely to Find Several Clinical Niches

Baird said that MEG was continuing to find clinical niches: “Research into broader clinical application is continuing in MEG. Likely there will never be one but rather a broad collection of clinically valuable niches that MEG can dominate. There are some active clinical applications such as pre- surgical functional mapping and epilepsy evaluations that are adjunctive to conventional EEG techniques.

“These clinical applications have formed a good foundation for a broader range of efficacious clinical uses for MEG, but they alone do not yet represent a strong reimbursement motive for clinics. MEG continues to be a preeminently leading edge neuroscience research tool with an adjunctive clinical role.”

4-D’s MEG Units Utilized CIV Technology

4-D manufactured the Magnes series of MEG units and associated delivery systems. The most recent member of the Magnes line was the 3600 WH, with 248 MEG detector channels and full cortical coverage. 4-D claimed that the 3600 WH provided the highest detector density available along with high sampling rates. The 3600 WH employed the proprietary Coils-In-Vacuum (CIV) technology, enabling it to be easily and rapidly transitioned between the seated and supine positions.

“The 4D technology was similar in many respects to the CTF/MISL technology,” explained Baird. “The principle difference in MEG instrumentation is the stability of the different designs in non-laboratory conditions.

“The main opponent in MEG data acquisition is environmental noise. Detecting brain signals requires an instrument to extract an extraordinarily small signal from often very large environmental noise. The magnitude of this task is roughly analogous to pouring a cup of water into the Columbia River and measuring the flow increase in the river several miles downstream.

“4-D’s constructional technique to optimizes signal to noise performance by focusing on the placement of detecting coils in the vacuum space of the dewar as close as possible to the outer helmet region – and thus the brain –without compromising the cryogenic efficiency of the vessel. This is the CIV approach.”

MISL to Integrate 4-D’s Stimulus and Analysis Software Tools

Baird mentioned other valuable 4-D innovations that MISL now has at its disposal: “In addition, they employed broadband environmental noise cancellation methods utilizing reference detectors that were sensitive to environmental noise conditions and could subtract these noise signals from the sensors positioned near the brain.

“The 4-D design, like all other MEG systems except the CTF design, relies on a high-quality shielded room to contain the sensing instrumentation and of course the patient. 4-D also developed some novel stimulus and analysis software tools and more clinically oriented applications which MISL plans to integrate into its existing CTF MEG application.”

Buchanan: MEG Sales’ Rebound Dependent on Finding Killer Application

The current markets for the MEG business are North America, Europe and China. Medical applications of this technology include the localization of epileptic spikes prior to epilepsy surgery and brain mapping prior to tumor surgery.

“The market has been running 8-10 [$15-$20 million] systems per year for the last 4-5 years,” elaborated Buchanan. “This year is down (not surprising), and there is no indication of an increase unless someone can find the killer application. I don't see where this will come from given the current user base and 4-D's exit. 4-D was the principal driver of MEG adoption.”

“MEG will not be the next MRI in terms of having an MEG instrument in local street corner clinics,” added Baird. “MEG can be expected to be a $20 - $30 million world market for a number of years. There are currently about 100 sites around the world operating some kind of an MEG instrument – principally in a research context.”

Baird: MISL Only Genuinely Profitable MEG Company

Baird also said that MISL was proof that profitability was possible for MEG manufacturers: “MISL is already – and in our estimation – the only genuinely profitable MEG company in the world. We are entirely self-funded (including the recent acquisition of 4-D), and MISL does not bury R&D costs in the budget of its mother company. [Klaus FYI and NOT FOR QUOTE: MISL has done no real R&D therefore they have none to fund/bury making this quote disingenuous. This is if you want to research further]

“In the past, MEG companies were so desperate to move equipment, that they set aside any desire for profitability. This was and still is in the case of our competitors. The dominant view is that profitability (i.e. a real business) can wait until the discovery of the killer MEG application. But as we have seen, and as we at MISL and others in the MEG community foresee, the underwriters of unprofitable MEG companies eventually re-assess and insist on a rational business model or they choose to pull the plug.

“It is clear that the skepticism that greeted MISL’s entry into the MEG market with the rational business model that it is founded on is dissipating. The MEG customers with a long-term vision are rapidly gaining confidence that the bad old days of MEG manufacturers racing each other to the bottom are over. MISL has the means to be there with them when the potential that MEG holds for understanding the human brain becomes a reality.”

MFC Involved in Legal Action Against Elekta

MFC has also been involved in a lawsuit with the last remaining major MEG manufacturer, Elekta, for breach of contract and contract interference concerning the proprietary MEG technologies of VSM Medtech. MFC is seeking injunctive relief and substantial damages. MFC President Michael Smith at the time of the lawsuit’s initiation expressed surprise in the press that Elekta would complain of Chinese companies copying their designs while being allegedly involved in the same behavior.

Baird commented on the ongoing legal action: “With the litigation still underway, there is little that can or should be said other than that MFC, acting on behalf of its subsidiary MISL, has a substantive dispute with Elekta concerning Elekta’s business practices.

“The MEG market is best served by genuine competition and fair play between competitors. Further, MFC is determined to protect its technological advantages and intellectual property from unauthorized use. This litigation was initiated as part of MFC’s determination to protect these principles and give the MEG market the best opportunity it has ever had to utilize this important technology.”


Access My Subscription
Newsletter Issues
Order Any Article
Premium Subscriber Content
Industry Directory
Industry News Releases
What Is Superconductivity?
Superconductor Week Forums


Purchase individual issues