IMGG Investors Still Waiting for Judgment Day

by Melissa Davis - 12/2/2009 6:37:01 AM

The story at Imaging3 (OTC.BB:IMGG) is following the same familiar plotline made famous by the popular movie “Groundhog Day.”

Every morning, IMGG investors wake up with high hopes that the U.S. Food and Drug Administration will finally clear the company’s Dominion 3-D scanning device for sale. Every night, they return to bed with a sense of disappointment lightened only by the chance that tomorrow will somehow be different and bring the good news they so crave.

Since Imaging3 first submitted the Dominion for FDA review in mid-2007 – and optimistically predicted approval for the device within six months – investors have been reliving this torturous cycle for two full years. The stakes have rocketed in recent months, however, with the company’s generous $500 million market value already suggesting a favorable ruling by the FDA.

Lately, IMGG CEO Dean Janes has given investors fresh reason for hope. During an Oct. 29 conference call – which attracted a reported audience of 700 – Janes predicted that IMGG was just one minor step away from FDA approval of its imaging device. Specifically, he said, IMGG simply needed to clarify the “intended use statement” for the label on its 3-D scanner.

“They had requested that I narrow the focus of the label” for the Dominion, Janes explained. “Now they want to clarify why it’s still equivalent to predicate devices … It’s a relatively minor question.”

To some, however, the development signaled possible trouble. From the start, IMGG has sought FDA clearance for its Dominion scanner using a 510(k) review process designed for devices that resemble similar products already on the market. That process normally takes far less time than the vigorous reviews required for novel devices that represent true breakthroughs. Yet IMGG itself has repeatedly portrayed the Dominion as a one-of-a-kind device.

“There is nothing out there,” Dean emphasized last month, “that can compete with our product at all.”

For loyal IMGG investors, that statement sparked more hope then fear. For IMGG critics, however, the remark – and others like it – further strengthened existing doubts about the company.

At this point, both groups want some answers. After all, more than a full month has passed since IMGG last predicted that the FDA could render a final decision on the Dominion scanner within weeks or even days. Meanwhile, the company has refused to share the FDA’s actual request with its investors.

“My lawyer says that we really can’t,” Dean explained during last month’s conference call. “The only thing I think we’ll ever make public is the approval letter.”

With IMGG still waiting for that letter – which it promised to share immediately after its receipt – the company is once again relying on its annual appearance at a big trade show (hosted by the Radiological Society of North America) to boost investor morale. Although IMGG’s stock initially bounced as this year’s conference got underway, it began to lose steam as investors spotted signs of a possible rerun they had seen far too many times.

One investor, posting messages in a busy Internet chat room on Tuesday, pointed to an old press release – issued by IMGG ahead of a past RSNA conference – to emphasize just how repetitive the company’s storyline had become.

“We are looking forward to demonstrating our technological and manufacturing achievements to RSNA’s over 70,000 attendees,” Dean stated at the time. “This marks a pivotal milestone for the company’s business model and marketing plan. With FDA approval of the Dominion Vi Scanner pending, Imaging3 is poised to transition to production and sales of this revolutionary, one-of-a-kind, breakthrough device and technology.”

That press release, eerily similar to more recent announcements from the company, is now more than two years old.

* To contact Melissa Davis, the author of this story, please send an email to [email protected]