Merge Healthcare has announced a corporate reorganization, the latest and most drastic in a string of maneuvers designed to keep the troubled provider of medical imaging and information management software and services out of bankruptcy.
Included in the reorganization is the re-naming of the company's two remaining units, the resignations of four company officers and the naming of replacements, plans to reduce the workforce by another 60 employees, and an explanation of about $9 million in costs that the company expects to incur in the process.
Thursday's announcement follows on the heels of a successful $20 million financing deal with Delaware-based Merrick RIS LLC through a private placement, which closed on June 3 and netted the company approximately $16.6 million. At least $3 million of that money will be used to settle a consolidated securities class action suit filed against the company, in which the company and some key officers were charged with misrepresenting the company's financial health.
According to the reorganization plan, Merge Healthcare North America, based in West Allis, Wisc., will be renamed Merge Fusion, while its Cedara operating division, based in Toronto, Canada, will be renamed Merge OEM.
The company also announced the resignations of four officers - CEO Kenneth Rardin, CFO Steven Norton, Merge North America President Gary Bowers and Cedrara President Loris Sartor. Taking their places will be:
- Justin C. Dearborn, who has served since September 2006 as managing director and general counsel of Merrick Ventures, and will be Merge's new CEO;
- Steven M. Oreskovich, who had been the company' vice president of internal audit and will be the company's new CFO;
- Nancy J. Koenig, who had been CEO of Merrick Healthcare Solutions, a portfolio company of Merrick Ventures, and will become president of the Merge Fusion division;
- and Antonia Wells, who had been Merge OEM's vice president of customer operations and will take over Merge's newly renamed Merge OEM division.
As part of the financing deal with Merrick Ventures, Merrick was allowed to place five of its own choices on Merge Healthcare's 11-member board of directors. As a result, board members Rardin, Michael D. Dunham, Robert A. Barish, Ramamritham Ramkumar and R. Ian Lenox resigned and were replaced by Dearborn, Koenig, Michael W. Ferro Jr., Neele Stearns Jr. and Gregg G. Hartemayer.
In its reorganization announcement, Merge officials said they plan to reduce the company's worldwide headcount by 60 people, to approximately 300 employees. The company expects to take a charge of at least $6 million in its second quarter financial statements to cover the reductions.
In addition, company officials estimate they'll incur additional non-cash charges during the second quarter of approximately $1 million in trade name impairment costs and $2 million in stock-based compensation costs - not to mention "additional costs incurred with the early termination of certain vendor contracts, which it cannot currently estimate."
Merge Healthcare had been struggling financially for years, and in May - following nine straight quarters of posted operating losses - announced the sale of its subsidiaries in France and China and the planned divestiture of its EMEA business unit in the Netherlands. At the time, company officials said they planned to consolidate operations in North America and focus on the RIS-PACS and teleradiology markets and the Cedara OEM business.
Will this reorganization save Merge Healthcare? Why do you think the company is struggling? Send your comments to Managing Editor Eric Wicklund at eric.wicklund@medtechpublishing.com.