Zacks_Analysts' Blog : Merge Connecting with iConnect - Analyst Blog

Recently, Merge Healthcare’s (MRGE) iConnect has been selected by Radiology Associates of Sacramento (RAS), North California. iConnect is an interoperable platform that enables providers to view current and historical images and content, irrespective of the various ways of image storage.

Physicians, payors and patients should be able to access healthcare information and share clinical data to achieve the ultimate goal of improving the quality of the US healthcare system and reduce costs. In this scenario, we believe Merge’s iConnect platform holds strong potential. It provides integrated delivery networks (IDNs), hospitals and imaging centers the ability to exchange information. The solution will be available in various packages – iConnect Share (for the sharing of images), iConnect Kiosk (for front office automation) and iConnect Exchange (for full interoperability solution). These packages have been priced ranging from $499 a month to multi-million dollar deals, depending on the needs of the customers and the targeted market segment.Merge is confident about its iConnect platform and expects greater acceptance of the solution going ahead.

According to Merge, imaging in laboratories represents over 90% of data storage in healthcare. With greater adoption of EHRs in doctor’s offices, hospitals and imaging centers, the need to exchange data becomes more necessary. In this scenario, iConnect platform becomes significant since it is a vendor-neutral archive. Additionally, it is also compliant with web accessibility and Enterprise Master Patient Index (EMPI) technology.

During the third quarter call, the company shared its marketing strategy, which among others intended to boost the sales team considerably. In addition, for iConnect, Merge was planning to tap the installed base of 2,200 imaging centers, 800 orthopedic clinics, and 1,500 hospitals already using Merge technology.

Recommendation

Merge’s growth prospect is highly dependent on capital investments by hospitals for advanced imaging solutions which are tied to general economic conditions. However, there is immense potential in the diagnostic imaging market, especially with government’s emphasis on HIT (health IT) and an ageing population. The acquisition of AMICAS has transformed Merge into a stronger company with expanded product portfolio. Moreover, the company has taken several initiatives based on which it aims to achieve the targeted $15 million cost synergies. Merge has brought in some changes in its top management with an aim to increase its sales efforts. We are also encouraged by the company’s renewed focus on international market.

We have an ‘Outperform’ rating on the stock, which is also supported by the Zacks #1 Rank (strong buy).