MEDICINE—Prescription: Change

Bob funari has led syncor international into a new world of cutting-edge medical technology During the first two decades of its existence, Syncor International Corp. was synonymous with nuclear medicine. Not only did it pioneer the use of radiopharmaceutical drugs as diagnostic tools in the early 1970s, it pretty much dominated the industry. Over the last four or five years, however, Syncor has moved on, all the while holding to the original model of using cutting-edge technology to provide physicians with the means to diagnose disease. Only, it is doing so with medical imaging, sophisticated radiation techniques and something called the Gamma knife. That move into new technologies has apparently paid off. Shares in the company which were trading at about $27 apiece in early January soared to $75 in August before a two-for-one stock split. Stocks traded at the end of last week at $33. Sales for the last 12 months neared $600 million, almost double what they were six years ago. The guiding force in what he describes as a true culture change for a once-sleepy pharmaceuticals company is Bob Funari, president and chief executive officer since 1996. Funari said the company has tried to apply the set of skills it developed with nuclear medicine to a wider variety of technologies. In an interview with the Business Journal, Funari notes that one of the great challenges in Syncor’s most recent stage of growth was convincing those inside the company that it could teach itself a few new tricks. Question: For almost 20 years, Syncor was the industry leader in nuclear medicine. In the past six years, it has moved in what appears to be a new direction. Why the change of course? Answer: In the last several years, we’ve stepped back and said, “OK, this is what we’re good at doing, but guess what? We’re pretty narrowly focused.” You’re always faced with the prospect that somebody can come in and supercede nuclear medicine, so we need to think about how we can broaden the platform of our company. The first answer we came up with was the medical imaging business. Most nuclear medical procedures are diagnostic. We had some insight into what that would look like. We said there doesn’t appear to be a (medical imaging) model out there that’s particularly effective. It’s a huge market. The market for medical imaging was $48 billion last year. It’s growing 10 to 15 percent a year. We said, why don’t we see if we can’t move into that space, build a better mousetrap and essentially build a whole new business for our company that has huge potential for growth? We’re still putting the pieces together. When we’re done, I want to see a model that allows us to achieve undisputed leadership in every market where we compete. Q: How did you cope with the much higher capital cost of medical imaging compared to radiopharmaceuticals? A: It costs less than half a million dollars to open a lavish (nuclear) pharmacy. A medical imaging center would typically cost us $3 million. You have to be very, very good at utilizing your resources. It was a big change. Just the movement into a whole new business was a big change for this company. It left people feeling a little skittish. The first year, a lot of people had their doubts. It was a little bit of a controversial decision. Q: How has the health care field changed over the course of your career? A: I came into health care in 1975. Health care at that time was viewed as something inherently good and nobody worried a whole lot about how much it cost. Technology flourished, people came up with new technologies, they all got paid for it, it all got used and everybody was quite happy. It wasn’t until the 80s that people began to feel the crush of the growing burden of health care costs. Then you began to see some of the efforts of trying to control spending. That kind of moved into the ’90s when managed care became a much more significant player on the scene and that has kind of brought us to our current condition which I think is fascinating. In this country we’re still debating whether health care is a right or whether it is a service that you purchase for money. Q: What is likely to be the next stage in what appears to be an ongoing transformation of your company? A: One of the challenges we face is the explosive acceleration of the discovery of technologies. It’s going to be incredible over the next five or 10 years. We’re beginning to understand the genetic basis of disease. That’s huge. The discoveries we are making through genomic science are as revolutionary as the invention of the telegraph. Genomic sciences are going to be the springboard for a lot of revolutionary change in the way health care is used to diagnose health problems. We need to be at the forefront of that. Q: Where do you see the competitive pressure on Syncor coming from in the future? A: We won’t be the inventors of the technology per se. Our role is being the service enabler. We can deliver that technology to the physicians. I feel pressure to be looking upstream to see what’s going on inside the major biotechnology houses. We need to play a role to help them design products in a way that makes it easier to get to physicians and patients. Q: Will public policy changes accompanying a new presidential administration have an impact on the health care device industry? A: There are several things that are almost given, irrespective of who comes into office. There are a limited amount of resources available to pay for health care. At the same time, I don’t think we are nearly as effective at making appropriate use of technology as we could be. The biggest single thing we have to wrestle with in this country is this question of is it a right or something you purchase with money? If it’s a right, what is it? Is it prescription drugs, is it primary care, is it a set of services that everybody’s going to be entitled to have? What’s best for Syncor is for government to not attempt to create economic equilibrium by setting reimbursement policy below cost. Q: How does the international portion of your business differ from the domestic portion? A: We’re further ahead of the curve in some overseas markets than we are in the U.S. Many overseas markets are what I would call developing, emerging markets: Taiwan, Thailand, South Korea. Some more mature markets are Australia and New Zealand. These markets are more open to trying something different in the way of a health care service model. For instance, we are going to be managing a cardiac catheterization lab in Trinidad and Tobago. It’s a technology we don’t have any involvement with in the U.S. but it’s clearly a very complex set of technologies that we think a very strong service model can be wrapped around. We actually manage six nuclear medicine departments for hospitals in Taiwan. We’re going to operate a Gamma knife in Brazil. A Gamma knife is a device that puts a very precise dose of radiation into a tumor. We’re saying, can we push that envelope a little bit and bring that technology outside of a tertiary hospital? Q: What does it take personally to lead a company through the kind of changes Syncor has seen in the last few years? A: People look for a lot of things from their leaders when they’re going through change. They’re looking for a sense of confidence. They want reasurrance; they want a sense from the leader that this is the right thing to do. They want a sense of commitment. They expect a lot of communication. When we’re going through change, they want more and more communication from the top. You have doubts all the time. It’s a test of courage and it’s a test of your own convictions. You take your counsel all the time, you’re always questioning yourself. We’ve been in it now for about three years. Being successful gives you a sense that you can actually move outside the defined space into other space. We will get better at this. We will become more adept at managing change.