CEO SUMMARY: It was only 21 months ago that IMPATH acquired Tamtron. Both companies had high expectations for the relationship. But with IMPATH now in Chapter 11 bankruptcy and facing an unclear future, Tamtron is now an attractive asset for potential buyers who want to enter the anatomic pathology marketplace with an established product like Tamtron’s PowerPath software system.
IT’S THE PROVERBIAL STORY of bad news and good news at Tamtron, the business unit of IMPATH, Inc. which sells one of the anatomic pathology profession’s leading information management systems.
This bad news/good news story has ramifications throughout the pathology profession. As many as 400 laboratory sites currently use Tamtron’s system, called PowerPath® , so anything that might disrupt service is a concern.
Financial Woes At IMPATH
The bad news was IMPATH’s financial woes, which caused it to file a Chapter 11 bankruptcy action in New York on September 29. 2003. As a business division of IMPATH, the bankruptcy action and IMPATH’s lack of cash significantly constrains Tamtron’s ability to conduct expansive business activities and invest funds into product development.
The good news involves the potential for Tamtron to be purchased by a strategic buyer. A careful reading of documents filed in the bankruptcy action reveals that both IMPATH and the creditors have cleared the way for Tamtron to be sold as an asset that creditors and the court categorize as unrelated to IMPATH’s core business.
Tamtron customers should welcome this development. IMPATH’s bankruptcy filing six weeks ago created concern among many of the anatomic pathology groups using PowerPath. They viewed IMPATH’s bankruptcy filing as something that could negatively affect Tamtron’s business operations and ability to service its PowerPath customers.
“At Tamtron, we’d like all our customers to know that our business organization is intact and continues to serve all our customers, including new clients,” stated Steve Tablak, President of Tamtron. “There have been no service issues caused by IMPATH’s difficulties that have impeded our business activities.”
Tablak also noted that Tamtron’s employee team remains intact. “Since IMPATH’s first announcement of financial problems on July 30th, we have not lost any employees,” he observed. “This fact reflects well on both the quality of our organization and the commitment our people have to this product and our customers.”
In selling to IMPATH last year, Tamtron’s board and stockholders had hoped that IMPATH would provide it with capital needed to fund further product development and to expand sales and marketing activities. That has obviously not gone as planned.
Within IMPATH, the IIS division and its two business units have operated in a
relatively autonomous manner from IMPATH’s physician services and IPO divisions.
But IMPATH’s bankruptcy may prove to be a lucky break for Tamtron because the bankruptcy court is positioning the business unit for a potentially speedy sale. A rapid sale to the right buyer would be good for both Tamtron and its pathology practice clients, for at least two reasons.
First, if a buyer is quickly identified and allowed to purchase Tamtron on a fast timeline, this minimizes the time that Tamtron’s customers find themselves inconvenienced by the circumstances of IMPATH’s bankruptcy. Second, likely buyers should have the capital necessary to invest in Tamtron post-acquisition to beef up product development.
IMPATH’s Current Situation
Customers of Tamtron should understand several aspects of its current situation. Since its acquisition by Tamtron early last year (See TDR, January 28, 2002), the anatomic pathology informatics company has operated as part of IMPATH’s Information Services Division (IIS). The other business unit in this division is IMPATH Cancer Registry™ (ICR).
Within IMPATH, the IIS division and its two business units have operated in a relatively autonomous manner from IMPATH’s Physician Services and IMPATH Predictive Oncology (IPO) divisions. This autonomy has encouraged the bankruptcy court and creditors to see the IIS division as an asset that can be sold quickly.
To that end, investment bankers are working with IMPATH to identify companies interested in buying Tamtron and ICR. Indications are that several strategic buyers are expressing interest in buying both business units and operating them together. ICR’s national dataset consists of more than 2.3million cancer cases nationwide. IMPATH has sold this information to pharmaceutical companies and biotech research firms in recent years.
The laboratory industry may be surprised at which companies bid for Tamtron and ICR. Just four months ago, General Electric Medical Systems acquired Triple G Systems Group, the Canadian-based LIS firm. The importance of laboratory test data in diagnosis, prognosis, therapy, and patient-monitoring is recognized by a growing number of companies.
Further, there is widespread recognition that oncology will be a major disease of aging baby boomers. This makes a pathology informatics company like Tamtron more interesting to those companies looking to establish a greater presence in the oncology marketplace. It means Tamtron’s eventual buyer may be a new player in the laboratory testing services market.