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Screen Test

OSI Systems Inc., a leading maker of airport body scanners, has seen its business surge since the 2009 Christmas Day bombing attempt of a Northwest Airlines flight.

That’s despite assertions the X-ray scanners violate privacy by peering through clothing to produce graphic body images.

But now the Hawthorne company finds itself in the midst of another growing controversy: concerns that the scanners may emit harmful amounts of radiation, despite safety assurances by the company and government.

So far, stockholders don’t seem worried, with shares trading about double of what they were a year ago. But the controversy doesn’t show any signs of going away.

What started out as a buzz among activists and bloggers was elevated last month when a group of researchers at the University of California, San Francisco, had sent a letter to the White House arguing that OSI’s Rapiscan Secure 1000 scanning system was potentially unsafe.

The scanners use “back scatter” technology that bounces ultralow dose X-rays off human flesh instead of penetrating it in the traditional manner, creating an outline image of a person and revealing anything hidden under clothing.

But the letter to President Obama’s chief science and technology adviser, Dr. John P. Holdren, said that since the majority of energy “is delivered to the skin and underlying tissue” rather than “distributed throughout the volume of the entire body” the dose to the skin may be “dangerously high.”

As a result, the actual exposure to the area involved could be as much as a hundred times more damaging than thought. The researchers said the scanner’s “very intense” X-ray beams could be harmful to travelers older than 65, women who are pregnant or prone to breast cancer, patients with cancer or HIV, and young children.

“We’re not trying to be alarmist, but the feeling was that, given the massive scale in which these scanners are going to be used, it’s important to be more conservative,” said David Agard, a professor of biophysics and biochemistry at the university, who signed the letter. “Our primary concern is that, because these are low-level X-rays, they are potentially more dangerous than the numbers indicate.”

OSI, which has sold more than 500 of the Rapiscan systems to airports and military installations worldwide, has vigorously denied the researchers’ claims.

“The system has been thoroughly tested for safety and efficacy by multiple regulating entities both internationally and in the U.S.,” said Peter Kant, executive vice president of OSI’s Rapiscan division in Torrance. “In every test, it has been shown to be completely safe.”

The government, which is installing the scanners at airports nationwide, is backing up the company.

Daniel Kassiday, a radiation safety expert for the U.S. Food and Drug Administration, said that after evaluating the concerns raised by the San Francisco researchers, the FDA has drafted a response disputing the claims that it will soon release.

“If you look at the tone of their letter, it sounds like they think that no one has examined these issues,” Kassiday said. “The product has been tested numerous times with numerous people and found to be in compliance with radiation safety standards. The risk is tiny. Pick the smallest word you can use to describe a risk and that’s what it is.”

Large deployment

For both the company and government, the stakes are high.

There are currently 93 full-body scanners at 29 airports nationwide. By the end of this year, 450 more will be deployed. An additional 1,000 are expected to go on line next year, according to the Transportation Safety Administration.

Some of the scanners, produced by a competing New York company called L-3 Communications Holdings Inc., do not use X-ray but microwave technology. However, the TSA has not disclosed the breakdown and did not return calls for comment.

Airports operating full-body scanners include Los Angeles International, Boston Logan International, Denver International, Miami International, San Francisco International, and Ronald Reagan Washington National in the nation’s capital. Expected to receive the technology soon are airports in Boise, Idaho; Buffalo, N.Y.; Corpus Christi, Texas; Oakland; Houston; Pittsburgh; and San Diego.

What’s more, public concern over air safety has grown since a Nigerian national attempted to detonate plastic explosives sewn into his underwear on a flight from Amsterdam, the Netherlands, to Detroit. U.S. government officials have said the OSI scanner likely would have detected the explosives.

OSI announced in May that it was awarded additional contracts with a combined value of approximately $6 million for its Rapiscan Secure 1000 scanners, which retail for about $165,000. That raises the total value of orders to about $50 million for the fiscal year ending June 30. Among the foreign governments that have placed orders are the United Kingdom, Nigeria, Australia and Canada.

The success of the system has helped drive up OSI shares from below $11 in 2008 to a 52-week high of $32.58 in January. The diversified company, which also makes medical and electronic equipment, said its fastest-growing division is Rapiscan, which has experienced a 20 percent sales increase in the past year. Profits nearly doubled to $6.1 million in the third quarter ended March 31 on revenue of $145 million.

Wall Street analysts also remain high on the firm, with four out of six who track it giving the equivalent of “buy” ratings, according to Bloomberg News.

Michael Kim, a vice president and analyst at Imperial Capital LLC, a Century City investment bank, said that so far he hasn’t seen any fallout from the radiation controversy.

“There haven’t been any indications of the de-obligations of funds or existing orders,” he said.

Richard V. Hoss, an analyst at Roth Capital Partners LLC in Newport Beach, also had a positive assessment.

“I would call it a healthy and profitable company,” he said. “I haven’t seen any blips.”

Lingering controversy?

Still, it’s far from certain the health controversy will just fade away – if only because it might be hard to definitely refute any potential danger. So far, experts seem to disagree.

Signers of the White House letter include John Sedat who, like Agard, is a biophysicist and biochemist, as well as Robert Stroud, an X-ray crystallographer and imaging expert, and Dr. Marc Shuman, a medical doctor who specializes in cancer.

They are all associated with UC San Francisco, which operates one of the most well-regarded medical schools and hospitals in the nation. What’s more, Dr. David Brenner, who heads the Center for Radiological Research at Columbia University in New York and has briefed members of Congress on the scanners, was critical of the scanners in a segment on National Public Radio.

He claimed that one in 10 persons might be particularly sensitive to the scanners and could have gene mutations that make them less able to repair cellular damaged caused by radiation. That would mean they are at higher risk for skin cancers.

However, David Schauer, executive director of the National Council on Radiation Protection and Measurement, a Washington, D.C., non-profit organization chartered by Congress to make radiation recommendations, said the X-ray beams emitted by the scanners fall well within the acceptable range.

“When you look at the numbers, you can see that it would take a lot of flights to even approach those safety limits,” he said.

Schauer estimated a traveler would have to be scanned 2,500 times a year to reach a level of radiation exposure beyond what the government deems safe.

“It’s a very unlikely scenario that a member of the public would ever approach that dose limit,” Schauer said.

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