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The University of Tennessee College of Engineering 114 Perkins Hall Knoxville, TN 37996-2012 |
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| Newsletter
of the UT College of Engineering |
| The CTI founding group includes (l to r) Terry Douglass, Kelly Milam and Ron Nutt, pictured with the CTIMIE PET Scanner. |
Alumni Profile |
The Story of CTI: Terry Douglass, Ronald Nutt, Kelly Milam and Michael Crabtree
"Hey, what are you going to do for the rest of your life?"That question and a vision for the future sparked the birth of a multimillion dollar technology company founded by four UT College of Engineering graduates. Three of them--Ronald Nutt (BS/EE, '61; MS/EE '62; PhD/EE '69), Terry Douglass (BS/EE '65; MS/EE '66; PhD/EE '68) and James "Kelly" Milam (BS/EE '61; MS/EE '64)--first met during their years at COE. They became further acquainted in the 1970s while working at EG&G Ortec, a technology corporation in Oak Ridge.
As an engineering graduate student, Michael Crabtree (BS/EE '73; MS/EE '75) based his thesis on research he conducted at Ortec. Crabtree says, "When I was defending my thesis, I was surprised to see Terry (Douglass) in the audience." Soon afterward, Douglass offered Crabtree a job at Ortec, which he accepted.
In addition to sharing a background in engineering, all four were interested in developing new technologies. The idea for positron emission tomography (PET)--an imaging technology that provides physicians with functional and molecular information about patients, often before the onset of disease--was introduced first to Douglass via a phone call from Dr. Mike Phelps, a faculty member at Washington University in St. Louis, Missouri.
Douglass subsequently invited Phelps and his colleagues to visit Ortec. Upon doing so in 1973, Phelps forged a lasting connection between Douglass, Nutt, Crabtree and Milam. Phelps, who invented PET technology through his medical research, later became the fifth partner in CTI and since then has provided the critically important academic base for the company.
In 1976, Ortec produced the first commercial PET scanner. Douglass and Crabtree were leaders in the group at Ortec that developed and introduced the new ECAT scanner product.
In 1982 Douglass, as president of Ortec, was responsible for analyzing and selling off businesses owned by its parent company, EG&G, whose products were incongruent with EG&G's and Ortec's core competencies. In assessing the operations at Ortec, he determined that the medical scanner division that EG & G was scheduled to sell might offer potential for a successful new business.
"I discussed the situation with a senior vice-president of EG&G and asked if I could acquire the scanner division and spin it off into a new company," Douglass explains. "He gave approval for the buyout but asked that I wait until after he retired the next year, in 1983. So I did."
On July 5, 1983, Ron Nutt called Douglass and during their conversation asked him, "Hey, what are you going to do for the rest of your life?" Douglass' passion for developing new things, coupled with Nutt's technological expertise, united the two in a common purpose--to make clinical PET a reality, and to form the company to make it happen.
On September 1, 1983, Douglass resigned from Ortec and with Nutt entered into three months of negotiations with EG&G to purchase the scanner division and its technology. What began as afternoon get-togethers evolved into Saturday morning strategy sessions. Soon, Nutt and Douglass were joined by Milam and Crabtree in considering the hundreds of details involved in setting up a new company.
"When I look back and think about it," says Douglass, "We didn't have any business going into business!"
Negotiations with EG&G were final in December 1983, and on January 20, 1984, Douglass, Crabtree and Nutt were joined by 22 former Ortec employees at the official headquarters of Computer Technology & Imaging Inc. (CTI). Kelly Milam officially joined the staff the next month.
"We had a pretty low budget," Nutt admits. "Our first location was basically an office building that we converted to manufacturing space. We didn't have a lot of money to spend on furniture--Terry and Kelly would go to surplus auctions and pick up desks and chairs. Once they came back with 15 purple office chairs and one lone yellow chair. The yellow chair became the 'employee of the month' chair and was passed around from office to office."
The founders borrowed $3 million to finance the start-up and put up their homes as collateral for the loan. The first year, CTI carried over six orders from Ortec for the PET equipment--sales that essentially helped the new company get on its feet. Although CTI had purchased the scanner technology, the company still needed technology for the cyclotron process that is necessary for PET scanning. The founders were interested in partnering with the Cyclotron Corporation, but their plans changed rapidly when they learned, six weeks after CTI's first day of business, that the California company had filed for bankruptcy. Douglass and Nutt flew out west, eventually purchased the company, and managed it for five years in California before bringing its technology and processes back to Knoxville.
As it turned out, the cyclotron technology they had purchased needed a lot of new developments to meet the needs of the clinical PET market.
"The technology was actually down to zero," Nutt recalls. "We had to recreate it the way we wanted it, and that continues to be the case. We are consistently reinventing every day."
The commitment to producing PET scanners remained strong in CTI's early days of business, and still does. "Our value systems were essentially the same throughout the building up of the company," says Milam. "If you felt it was the right thing to do, then the other partners always backed you up." Adds Douglass, "We wanted to do everything we could to make clinical PET a reality."
CTI's PET scanners use the body's metabolism to reveal abnormalities, most often cancer, but also conditions such as heart disease and Alzheimer's disease. Capitalizing on the heightened metabolic activity of, for example, a tumor, PET uses a radioactive form of glucose injected into a patient's body to detect areas where an abnormality may exist.
As the business developed, each of CTI's four engineering partners found his niche: Douglass' area was overall company management; Nutt was responsible for research and technology; Milam handled the manufacturing; and Crabtree initially handled scanner engineering and software development.
"I was managing the PET scanner product engineering and development," says Crabtree, "Later, at Terry's request, I took on all the sales and marketing responsibilities for PET. Although I had no experience in sales or marketing, he felt that I knew the customer base well and could relate to their needs. Eventually, I started spending 50 to 60 percent of my time on the road, representing the company in the U.S., Europe, and Japan."
CTI survived its initial year of business and successfully produced the six PET scanners as contracted. The first five were based on Ortec technology; the sixth was based entirely on CTI expertise.
In 1985 the company experienced another milestone. The East Tennessee Technology Corridor was being promoted, and a venture-capital firm was interested in touring CTI. That initial visit led to a partnership with one of the firm's clients--Siemens Medical Corporation.
Siemens evaluated CTI's technology, made a $2.5 million capital investment, and agreed to represent and market the cyclotron and scanner technology worldwide. Siemens later approached CTI with interest in purchasing the entire company but settled for 49.9 percent of the joint venture, at a cost of $30 million, which it still maintains. CTI then bought back the cyclotron distribution contract from Siemens. Currently, the distribution rights for CTI's PET systems are equally divided among Siemens, Hitachi and CTI.
"Our relationship with Siemens is similar to being in bed with an elephant," Nutt remarks. "We have to roll when it rolls."
This past summer, after 19 years of success, CTI went public with a new ownership structure and a new name: CTI Molecular Imaging Inc. In its initial public offering (IPO) on June 21, 2002, CTI, trading under the symbol "CTMI," listed 10.5 million shares on the NASDAQ exchange at a cost of between $16 and $18 per share. The company raised $192.96 million, and at week's end the stock closed at $19.90 per share (its current price exceeds $25 per share). In order to include more outside representation once CTI went public, Crabtree and Milam resigned from its board.
Douglass estimates the current market in the United States could support 4 million PET scans per year, but just 350,000 scans will have been done in the US in 2002. With the US market only initially tapped, the growth potential for CTI and its PET scanners is significant. The market in Europe, where 30 percent of CTI's sales occur, is also ripe for expansion.
"We've been around for over 19 years because we've always found something new to do," observes Douglass, who remains president and CEO of CTIMI. Nutt is now senior vice president and technical director of the newly renamed company, and is also president of CPS Innovations.
Since leaving CTI, Milam and Crabtree have pursued other interests.
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| Michael Crabtree and his IdleAire Technologies HVAC unit. |
All four of the company's founders say that their education at UT helped them develop their capacities for success.
"My roots in electrical engineering run deep," says Nutt. "I have benefited significantly from the education I received, as well as from the recruiting relationship we [CTI] have maintained over the years with the College of Engineering. I appreciate what my education did for me, and consequently, I want to give back."
Adds Douglass, "Upon leaving UT, I realized the importance of my engineering education. I had gained the ability to solve problems; that gave me the confidence and the drive to do well. All of us also realized that with the education and experience we received, there wasn't much we couldn't accomplish."
Crabtree notes that his appreciation for UT increases as he grows older. "I've come to understand that I received a valuable education from a very under-capitalized institution," he says. "It is one of the main reasons that I established an engineering fellowship," which was named in honor of Dr. Robert Bodenheimer.
All four of the founders recognize the critical role that professors played in their education, especially Professors Robert Bodenheimer, J. Frank Pierce and Vaughn Blalock.
Milam recalls, "Dr. Pierce had practical experience that helped in solving problems and designing circuits that worked. Dr. Bodenheimer was an excellent instructor who motivated us all."
Ron Nutt concurs. "The professors set a good example and taught us that when you have the ability to learn, you can do anything," he says. "And that doesn't just apply to academics, but to your life."
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Story by Cathy Dodge and Kim Cowart
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Visit CTIMI's web site at http://www.cti-pet.com
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