This is a printer friendly page!
Bio-Logic Systems has distinct advantages in hearing
and screening diagnostics and neurology and sleep diagnostics due to their software and
hardware technology and exclusives in some product lines
Medical Equipment & Supplies
Bio-Logic Systems Corp.
One Bio-Logic Plaza
Mundelein, IL 60060
Roderick G. Johnson and Gabriel Raviv, Chairman & CEO
Roderick G. Johnson
Chief Operating Officer
Interview Conducted By:
Roderick G. Johnson joined the Company in September 1999 as President, Chief Operating
Officer and a member of the Board of Directors. He founded the NeuroCare Group in 1994 and
served as Chairman, President and Chief Executive Officer until 1999. From 1992 through
1994, Mr. Johnson served as Chief Executive Officer in Residence at Weiss, Peck &
Greer and the Continental Illinois Venture Corporation. In addition, from 1988 through
1991, Mr. Johnson was President and Chief Executive Officer of Domino Amjet, Inc.
Bio-logic Systems Corp. is a leader in the design, development and marketing of
computerized electro-diagnostic systems used in hospitals, clinics and physicians
offices. Its core businesses are in hearing, neurology and sleep. Bio-logic has been a
leader in the hearing assessment market since the Companys inception in 1979,
offering integrated solutions for hearing screening and diagnostics incorporating the
latest technologies. The company also offers a wide range of systems and disposables for
screening and diagnosis of sleep disorders, as well as a broad range of computerized
systems used by neurologists, epileptologists, EEG technologists, neurosurgeons and other
professionals to record and analyze electrical activity in the brain (EEG) for use in the
diagnosis and management of intractable seizure disorders.
area has its own market potential:
Hearing assessment: Automated hearing screening in newborns, aimed at early detection of
hearing loss, is one of the fastest growing hearing markets. Of the 4 million births in
the U.S. each year, approximately 3 of every 1,000 infants are born hearing impaired. This
focus on early intervention has generated a growing need for improved diagnostic equipment
that can quickly and accurately identify and assess the babys hearing loss.
Sleep disorders: There are a wide range of sleep disorders including sleep apnea,
narcolepsy, insomnia, pediatric disorders and many others. These disorders affect the
quality of life, pose a threat to public safety on the road and at work, and can be fatal.
The sleep diagnostic market is estimated to be $80 million.
Electrical activity in the brain (EEG): Long-term monitoring is used to diagnose disease,
monitor the efficacy of medications and obtain information critical for surgical treatment
when indicated. The market is in transition from analog to digital video technology.
Digital video systems save both EEG and video records in digital form, replacing paper and
Product Offerings: ABaerÒ,
CUB (ABR and OAE), AuDX® (OAE), Navigator® Pro, Scout® Sport, M×A×S×T×E×RÔ,
Stacked ABRÔ, Ceegraph, Ceegraph Traveler®, Universal Reader, Sleepscan,
VISIONÔ, Airflow Pressure Transducer, Tree TipÒ, Ear MuffinÔ, HALO Ear Muffin
CEOCFOinterviews: Mr. Johnson, please give our readers a
brief background on the company.
Mr. Johnson: Bio-Logic
is celebrating its 25th year; it was founded in 1979 by the chairman and two
other founders. The total focus of Bio-Logic is in computerized electro-diagnostic
equipment. The areas of diagnostics we are in are neurology, sleep apnea monitoring, and
hearing screening and diagnostics, which has become our largest market. The company went
public in 1983 and is listed on the NASDAQ. We have about 120 employees and finished our
fiscal 2004 year with $28 million in sales, $13 million in cash and no debt.
tell us about the main product that started this company.
Mr. Johnson: The
first product was designed by Gabe Raviv, our chairman, when he was at Northwestern
working on his PhD. It was introduced when computers first started coming out and was a
product designed to monitor auditory brain stem response using a PC. As the company grew
and went public, it became focused on different areas of neurology and one of the popular
products at that time, during the 80s, was called the Brain AtlasÒ, which we no
longer sell. During the 1990s, we developed the sleep apnea monitoring system and
continued to enhance the sophistication of our neurology products. Up until the last few
years, neurology had been the largest part of our business, but has now been overtaken by
hearing screening and diagnostics.
are the benefits of M×A×S×T×E×R?
Mr. Johnson: M×A×S×T×E×R
is something totally new. We have to back up a bit in order to better understand what has
been happening in infant hearing screening.
CEOCFOinterviews: What has been happening in infant hearing
Mr. Johnson: Currently, about 35 states screen infants
before they leave the hospital, and with 4 million births annually throughout the U.S. it
is estimated that about 90% of those infants are screened for hearing before they leave
the hospital with equipment like our handheld AuDX screeners. In the past, if the infant
was referred for further testing, the problem was that the audiologist did not have a
fast, efficient way to assess the infants hearing thresholds. You cant just
put headphones on an infant and expect them to respond like you would if they were school
age. M×A×S×T×E×R, which was developed in cooperation with researchers at the Rotman
Research Institute of Baycrest Centre in Toronto and licensed exclusively to us, is a
multiple frequency technology for auditory response which within 20-30 minutes gives the
audiologist the threshold of hearing that they will use to determine whether everything is
okay or the infant should be referred to a physician for therapy. That product is very
important to the growth of the company as we look forward into the next couple of years.
has been a lot of talk on the news and there are lots of products out there for sleep
apnea. How is this area taking off for you?
Mr. Johnson: There
is a lot of press about sleep apnea monitoring; it has been linked to cardiovascular
disease and currently there is a backlog of potential patients to get this test done. Its
an overnight test with a sleep technologist and the physician reviews the scoring of the
evenings sleep and decides whether or not the patient has sleep apnea or any other
condition. Weve been in this market for over 10 years. The difference is we are not
a therapeutic company. We dont have the products that go along with sleep apnea
therapy, so while I wouldnt say its a struggle, its a very competitive
market where other companies offer products in addition to diagnostics. We feel our
product is very competitive and extremely well accepted. We have some great accounts, some
with upwards of 50 units in their different sleep labs, but we are not the market share
leader in this area.
us about the HALO Ear Muffin.
Mr. Johnson: The
HALO Ear Muffin is an invention that is the next generation of our original Ear Muffin and
is used on all of our products that require that type of coupler. It can be used with our
Navigator Pro and can also be used with a competitors product as a direct
replacement for their coupler. Its an over-the-ear plastic enclosure that captures
the sound that goes into the babys ear. This is a patent pending product that is
better and cheaper than our competitors, and we are launching it into a $20 million
market. This product has great potential for us in the next two or three years.
is the majority of the manufacturing being done now for all of your products?
Mr. Johnson: We
assemble and test all of our products in the Chicago, Illinois area.
much of your revenues are coming from the international market?
Mr. Johnson: In
fiscal 2004, $5 million was from international customers in approximately 60 countries.
all of the turmoil in the international arena lately, has this affected your company in
Mr. Johnson: If
you are talking about economic turmoil, we havent seen the reaction that you are
referring to. It may be there, but we havent been affected.
your products sold to the clients on a lease basis?
Mr. Johnson: Our
products sell for prices ranging from $3,500 to $50,000 or more, depending upon the
equipment and software purchased. Occasionally we will arrange for a leasing company to
work with a sleep diagnostic clinic, but leasing is not a significant part of our
business. As far as the follow on revenue, we see more of that in the hearing business.
Screening the babies, the consumables that go with it can range from $1.00 to $7.50 per
screen. That has become a much more important overall business segment in the last two to
you sell the equipment to your clients, how much follow up on training is done to educate
them on the use of the equipment and software?
Mr. Johnson: It
depends on the area. For example, in neurology we use our own professionals to install the
products. These are registered sleep or EEG technicians who work for us, and they do both
the installation and training. That is the basic level training and we also offer advanced
courses in sleep apnea at our headquarters, as well as at universities and other sites. In
the hearing area, there has been a major emphasis in the last two years on education in
the new technologies such as M×A×S×T×E×R. That involved holding over 20 seminars
throughout the country, as well as some overseas. Looking forward, education will continue
to be very important to us. We will be working in partnership with a select group of
universities to further the education of audiologists who have already graduated, and to
keep the universities on the cutting edge of the new products and technologies that we are
coming out with. That program is called the Audiology Centers For Excellence (A-C-E). We
are having our kick-off meeting with the first five of these universities in the next
couple of weeks. They are very excited about this program and we are too. We place a
strong emphasis on training both audiologists, and specialists in neurology and sleep, to
use our systems.
technology changing it is crucial for doctors and hospitals to continue to become
Mr. Johnson: It is
critically important, and even though the software gets easier and easier to use, you have
to know what is in there. There is so much in there that it takes a lot of training on all
of the features to use the products to their best advantage. Its overwhelming
sometimes. We are committed to education. Hopefully in electro-diagnostics, we are going
to be known as the education company.
upgrades important to your business plan?
Mr. Johnson: Upgrades
are an important part of our business. Its not only upgrades on the computer
technology end where advances occur so rapidly, we also have service agreements where at
the end of three years we will replace all of your computers and include the latest
software. Whats great about the hardware we produce, the example Im going to
give is in neurology and sleep, is that the headbox that interfaces between the person and
the computer does not have to be changed, so there is a major cost savings for the
hospital. It also helps them keep up-to-date with all of the changes, unless during that
three-year period they get a software upgrade that includes our new features. On the
hearing side, many accounts like to update their Navigator Pro systems with additional
software that they were unable to budget for in the initial purchase. They already have
the hardware, they just need the software to update their Navigator Pro. It is very
important for us to keep in contact with our customer base to ensure that they have the
latest technologies available.
much do you spend in R&D annually?
Mr. Johnson: As a
percentage of sales, it is in some years almost 20%. Its a very major
commitment the company makes to stay competitive and maintain our position as an industry
Mr. Johnson: It
has been coming down and in fact probably came down a bit too much last year, so I expect
us to increase inventories somewhat this year. Weve been on a downward trend during
the last four years, but expect inventory to basically remain close to current levels.
CEOCFOinterviews: As far
as the numbers for the last quarter, are you comfortable with them?
Mr. Johnson: Comfortable?
No one is ever comfortable unless they blew the top off. Not really. Hearing had a strong
quarter, particularly in the U.S., but neurology had a slow start. Im hopeful that
by the six-month mark the neurology area will pick things up a bit. International had its
first quarter in some time where they were a little slower than usual, but I think that
had more to do with timing due to a strong finish in the fiscal 2004 fourth quarter.
other product we didnt mention was the Stacked ABR.
Mr. Johnson: Stacked
ABR is a technology that is also licensed exclusively to Bio-Logic to identify very small
abnormalities in the auditory nerve. This helps the ENT and audiologist to screen certain
patients before sending them to therapy. We licensed this technology from Healthcare
Institute in California and adapted it to our Navigator Pro system. It takes a lot more
training and education for the center, the ENT office or hospital with the audiologist.
There is still a lot of interest in this product. The benefit is that the physician can
use it with the audiologist to screen patients for these very small abnormalities that can
be on or around the auditory nerve. By using Stacked ABR they can eliminate the need, in
some cases, for sending patients for a costly MRI. Thats of course very beneficial
and there has been at least one article written on it. So that product, although it is not
growing as fast as M×A×S×T×E×R, is still an important part of our technologies.
do you feel has been the biggest hurdle for the company?
Mr. Johnson: Its
always been to achieve consistent growth. Technologies have different rates of acceptance
and R&D yields more significant results at different times. Even though we spend a
significant portion of our revenue dollar on R&D, its always a challenge to get
the products out as fast as we can. We think we are one of the fastest at doing this, but
sometimes the acceptance doesnt match up with the quarterly reporting we do as a
public company. One of our biggest challenges is to put together a string of consistent
CEOCFOinterviews: In all
of the areas that you cover, is the competition fierce in one area over the other?
Mr. Johnson: I dont
know anyone who doesnt have fierce competition, but the degree we face depends on
the product line. With hearing and diagnostics, and our exclusive products, there is
competition, but we believe that we are the market leader. In infant hearing screening, it
has gotten more competitive in the last 2-3 years. In the consumables area, it is
competitive with a couple of other companies. Neurology is very competitive, there are
about 10 companies we are dealing with in that field. Its the same with sleep
diagnostics, where it went from least to most competitive.
think a lot of this is due to public awareness.
Mr. Johnson: I
think public awareness has helped a lot in sleep apnea monitoring. You see a lot in the
local newspapers on concerns about sleep and the obesity of Americans. These problems arent
going away overnight, so people should have these tests done to improve their health.
CEOCFOinterviews: In closing, what do you feel a potential
investor, just getting acquainted with your company, should be looking at?
Mr. Johnson: First
of all, the history of the company; in business for 25 years, no debt, $13 million dollars
in the bank and consistent profitable growth, though not necessarily quarter by quarter.
Bio-Logic Systems is in an area where we typically have distinct advantages due to the
software and hardware technology that we offer, and we have exclusives in some of our
product lines which is very important. We have considerable experience in
electro-diagnostics across the board in both hearing and screening diagnostics and
neurology and sleep diagnostics. At least two out of three of those areas are growing at a
pretty decent rate, and we definitely have more growth potential and a high quality
balance sheet that investors are buying into.
Any reproduction or further distribution of this
article without the express written consent of CEOCFOinterviews.com is prohibited.