American Health Says Research Unit Caused $4.7-Million Loss in ’88

American Health Services Corp., a medical diagnostics-imaging firm in Newport Beach, reported a net loss of $4.7 million for 1988, even while revenues climbed 158% to $14.6 million.

A year earlier, the company, which operates imaging centers in hospitals and health centers, had a net loss of $4.6 million on revenues of $5.7 million.

The 1988 losses came from a subsidiary’s research division, according to the company. The imaging centers, while amassing hefty losses in their start-up phases, were profitable for 1988, contributing to earnings of $736,000 from continuing operations.

Discontinued Operations

TCET--the research division of American’s subsidiary, Neuromedical Technologies--was responsible for a $5.4-million loss from discontinued operations.

Neuromedical Technologies, which also operates the profitable Stop Smoking Clinics chain, is considered a discontinued operation because American Health expects to spin off ownership of the subsidiary next week.

On Tuesday, American Health plans to turn over to its stockholders one share in the new Neuromedical Technologies company for every 10 shares of American Health stock they own. In addition, shareholders will have a right to buy an equal number of shares in the new company at $2 per share. The offering is expected to raise $1.8 million.

The TCET division--which is developing an advanced medical treatment that uses an electrical stimulation brain therapy to treat nicotine, alcohol and drug addiction--has been a drain on American Health because the division has not received federal approval to market its product.

Help Continue Research

Spokesman Donald Reynolds said the money raised from the spinoff will help the company continue research until it begins selling its treatment.

American Health expects TCET to receive Food and Drug Administration approval by the end of this year to market its “electro-stimulation” therapy.

Larry Selwitz, director of research for Cruttenden & Co., an investment banking firm in Newport Beach, said prospects for approval are promising.

But he said that FDA approval might not come as soon as expected and that other financing sources may be needed. “The FDA is swamped with applications right now,” he said.

Selwitz described Neuromedical’s prospects of sales success after approval as similar to “a dice roll. The odds aren’t great, but if they have what the tests say they do have, it’s incredibly exciting.”