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Putting RFID chips into people’s arms is, it turns out, not a booming business.
VeriChip, which has created a system for putting RFID chips into humans for medical-record tracking, held an initial public offering on Friday, and the company’s stock has been struggling ever since. The stock is currently trading at around $6.15. The company released 3.1 million shares in the IPO for $6.50 a share.
Part of the problem is likely the lackluster sales for the company’s most famous product.
Only 222 medical patients in total have opted to get RFID chips from VeriChip implanted as of the end of 2006, according to documents filed by the company with the Securities and Exchange Commission as part of its initial public offering. It’s a modest number, the company says, and revenue for these systems is far below projections.
“To date, we have only generated approximately $0.1 million in revenue ($100,000) from sales of the microchip inserter kits, significantly less than we had projected at the beginning of 2006. We may never achieve market acceptance or more than nominal or modest sales of this system,” the company stated.
The slow sales will likely hearten the many critics of the company. When the company first began touting the technology nearly three years ago, it was criticized by civil libertarians, who saw the chips as a gateway to privacy erosion, and by religious consumers some of whom said that implantable chips were the mark of the beast.
In its SEC filing, the company stated that many patients are probably unwilling to get chipped, the company said, and doctors have likely been reluctant to discuss the procedure with clients. Privacy issues and bad publicity have also been factors.
Virtually all the company’s revenues come from two Canadian companies it acquired in 2005. These companies, EXI Wireless and Instantel, specialize in infant tracking and “wander” detection systems in rest homes. In these systems, RFID tags alert nurses and medical professionals if an infant or other patient is passing through the exits or into unauthorized areas. In these systems, however, the RFID chip is contained in a wristband.
VeriChip, in fact, may have to begin to stockpile equipment from its suppliers to stay in business. Digital Angel, which invented a similar system for the pet market, granted VeriChip an exclusive license to market the technology to humans. (Digital Angel in turn gets its chips from Raytheon Microelectronics Espana.) The agreement, however, stipulates that VeriChip must buy $875,000 worth of RFID readers and implantable chips from Digital Angel in 2007 and $1.75 million in 2008. If it doesn’t, Digital Angel can sign new agreements. VeriChip said it will take actions to prevent the license from lapsing.
The company had earlier scaled back the terms of its IPO. It initially planned to sell 4.3 million shares for between $6.50 and $8.50 per share.
Despite the slow sales, VeriChip says it will continue to market its implantable RFID technology. The FDA approved the used of implantable RFID chips in humans in October 2004. Approximately 1,200 doctors and 66 hospitals have agreed to try out the VeriChip system, assuming patients request it and databases support it.
The company estimates that 45 million patients in the U.S. alone could benefit from implanted RFID chips. The idea is to put medical information into the chip so that paramedics and others could obtain information about medical allergies and other issues in a person if they are unconscious and they lost their medic alert bracelets.