Imaging and interoperability solutions provider,
Merge Healthcare
(
MRGE
) announced another addition to its ever-increasing client list
with the latest deal with Datapharm Australia Pty Ltd., an
Australian Contract Research Organization (CRO) that provides
full-service drug development services. Per the deal, Datapharm
Australia will deploy Merge's eClinical OS that provides an
end-to-end study support for in house electronic data capture (EDC)
with control on electronic case report form (eCRF) creation and
mid-study changes. However, financial settlements of the contract
were not disclosed.
Datapharm Australia started an EDC vendor evaluation in 2010
involving 14 vendors who could offer in-licensing of software for
technology transfer. The evaluation criteria included full set of
EDC tools, time and costs associated with technology transfer. The
company gradually understood the need of EDC in a growing number of
client studies. Thus, it started outsourcing EDC projects to a
third party vendor to handle the eCRF setup. However, on facing
several drawbacks related to outsourcing, the company shifted to
eClinical OS which has several EDC features.
Healthcare-IT Industry - Current Scenario
Currently, imaging in laboratories accounts for over 90% of data
storage in healthcare. As per the estimates of the global market
research and information analysis company RNCO, the U.S. healthcare
IT market is anticipated to grow at a compound annual growth rate
(CAGR) of over 24% during 2012-2014.
This market will gradually adopt electronic health records
(EHRs) to meet HITECH funding requirements. Merge is expected to
target this market given its imaging interoperability platform.
According to Frost and Sullivan and Merge's 2011 internal
research report, the global market for imaging software and
services, healthcare IT interoperability solutions and electronic
health records (EHR) solutions for radiology, cardiology,
ophthalmology and orthopedics is worth $7.5 billion annually.
With greater adoption of EHRs in doctor's offices, hospitals and
imaging centers, the need for data exchange is on the rise. Against
this backdrop, a reliable imaging interoperability platform becomes
significant as a vendor-neutral archive (VNA).
During the second quarter of fiscal 2012, Merge was acknowledged
by InMedica, a division of IMS Research as the global market leader
in VNA Solutions. Data from InMedica's study revealed that in 2011,
Merge's iConnect VNA customers accounted for 37% of all studies
archived in VNAs worldwide. InMedica predicts that the market for
VNA solutions will grow from 75 million studies in 2011 to 570
million studies by 2016, a CAGR of 49.9%.
The overall U.S. health IT (HIT) market witnessed a dramatic
change in February 2009 with the passing of the Health Information
Technology for Economic and Clinical Health (HITECH) Act, which was
included as part of the American Recovery and Reinvestment Act
(ARRA), an economic stimulus bill.
In August 2012, the final regulations for the second stage of
the 'Meaningful Use' incentive program for EHRs were released,
along with the final rule on the certification of EHR technology.
As per this final mandate, the 2009 ARRA, which authorized the $27
billion program, requires providers to use certified EHRs in order
to earn bonus payments from Medicare, Medicaid or both, for
'Meaningful Use'. Implementation of the final stage 2 ruling will
begin in 2014.
The stimulus aims to increase the use of EHR by medical
practitioners, in both ambulatory and hospital-based settings. As a
result, selected companies in this space, including Merge, are
witnessing improved and positive investors' interest. Favorable
demographic trends, reinforced by a supportive regulatory
environment, are expected to sustain strong growth in demand for
EHR-related software in the foreseeable future.
This will benefit Merge in the long run. It is believed that the
company is well placed to capture a meaningful share of the
multi-billion dollar ARRA-related healthcare information technology
investment opportunity.
However, we remain concerned about the declining Medicare
reimbursement for advanced medical imaging that could negatively
affect hospital and imaging clinic revenues, thereby reducing the
demand for the imaging-related software and services offered by
Merge. Furthermore, the presence of many big players like
McKesson Corporation
(
MCK
) has made the healthcare solutions and services market highly
competitive.
Presently, Merge retains a short-term Zacks #3 Rank (Hold). Over
the long term, we have a Neutral recommendation on the stock.
MCKESSON CORP (MCK): Free Stock Analysis Report
MERGE HEALTHCAR (MRGE): Free Stock Analysis
Report
To read this article on Zacks.com click here.
Zacks Investment
Research