Diagnostics & Imaging Week

Agfa-Gevaert NV (Mortsel, Belgium) needed some good news, having been punished all year on the Euronext stock exchange (Brussels) and continuing to deny rumors, as recently as early September, that Royal Philips Electronics (Amsterdam, the Netherlands) is circling the company's Agfa HealthCare division, intent on acquiring it.

Agfa got its break on Sept. 16 when the French business newspaper Les Echos reported an Agfa-led consortium of IT companies won a prized $142 million contract to create a patient record system for 38 French hospitals in the group l'Assistance Publique Hôpitaux de Paris (APHP), the largest French health information systems project to date.

The boost to Agfa's stock was short-lived. After a modest upward tick to €5.50, the stock that in January was trading at €10.50 continued its relentless slide reaching a new low of €4.61.

Agfa traded at €22 when it was introduced on Euronext in 1999 and traded at a high of €25.25 in April 2005 before poor result first sent the stock on what has become a continual slide.

"There is a general fall in the entire market, of course, with the financial crisis this week," Agfa's director of corporate communication, Viviane Dictus, told Diagnostics & Imaging Week, adding that the APHP contract award remains positive news for the company.

In other words, just more bad luck.

An optimistic Agfa was, in fact, the source of the leak about the APHP contract, she confirmed, saying "we received a positive phone call regarding the contract."

The signature of the contract is expected at the end of the month, she said, which was confirmed by APHP that told D&IW a press conference announcing the winning consortium is slated for Sept. 30.

The Agfa consortium, which includes Capgemini (Paris), Hewlett-Packard (Palo Alto, California) and Oracle Healthcare EMEA (London/Paris), would have beat out a group led by regional operations of Cerner and IBM, both located in Courbevoie, France, and a consortium led by Atos Origin (Paris).

Meanwhile, it is going to take more than a prized e-health contract to pull Agfa-Gevaert out of its nosedive to what many consider to be a bargain price that has attracted investor groups like Nordea (Stockholm, Sweden) or Franklin Resources (San Mateo, California), which holds more than 11% of Agfa.

A possible break-up of Agfa-Gevaert was put in play at the end of 2007 by CEO Jo Cornu, who floated the idea of splitting the company's three main business units — Agfa Graphics, Agfa Specialty Products and Agfa HealthCare — into three separately traded companies.

The idea of selling the entire company also was considered by the Agfa board, which charged Cornu with "actively investigating all demonstrations of interest received."

The persistent rumor of a takeover of Agfa Healthcare provided the only relief to the sliding stock price this year.

In July Agfa rebounded 39% against its loss of 52% on the year when the Belgian financial press fanned a report from Thomson Financial (New York) that Philips was preparing to offer €9.00 a share for the company. GE Healthcare (Waukesha, Wisconsin) and Siemens Medical Solutions (Malvern, Pennsylvania) also were reported to be interested.

Two weeks later, the stock fell again as Agfa reported it was continuing to suffer from a strong exchange rate for the euro, high costs of raw materials and declines in several of its key markets.

For the second quarter Agfa reported sales declined 8.1% to €777 million ($1.1 billion), and that profit fell by 93% to just €3 million ($4.26 million) against €42 million ($59.7 million) for the same period in 2007.

Combined with first-quarter results, Agfa was down 6.2% in sales, with a 84% loss in profit

The Healthcare division reported sales down 13.3% at €607 million ($863 million) for the first half of 2008, hurt primarily by unfavorable exchange rates that wiped out costs savings of over 20%.

At the beginning of September, the possibility of a spin-off of the medical imaging division surfaced again when the Belgian financial publication La Libre said Agfa was conducting a road show in the U.S.

Rumors circulated for a week on Belgian websites, pumping the Agfa stock price up 32% before Cornu issued a statement on Sept 9 formally denying any intent to sell all or part of the company. Agfa's stock slid again by 18%.

Looking forward, Agfa warns against any quick fix to its problem, though it hopes for encouraging developments from healthcare IT.

"The competitive position of Agfa HealthCare will continue to suffer from the strong euro," the company said in a statement. "Stronger IT revenues are expected in the second half of the year, but on a full-year basis, the sales growth of HealthCare's digital technology will not offset the decline in the traditional film and print business."