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August 7, 2015

IBM’s Watson to “See” Clinical Imaging Data with $1B Acquisition of Merge Healthcare

IBM (NYSE: IBM) announced yesterday that Watson will gain the ability to “see” by uniting Watson’s advanced image analytics and cloud-based cognitive capabilities with data and images obtained from Merge Healthcare (NASDAQ: MRGE). The announced merger is valued at $1 billion in cash and debt for Merge, who largely helps doctors, hospitals and clinics store and analyze CAT scans, X-rays, ultrasounds, MRIs and other medical image data. The goal is to turn Watson’s cognitive computing ability towards this imaging data, along with written medical records, in an effort to unlock the value of medical images to help medical professionals make better patient care decisions.

Merge’s technology platforms are already used at more than 7,500 U.S. healthcare sites, as well as many of the world’s leading clinical research institutes and pharmaceutical firms to manage an ever growing body of medical images. IBM researchers have estimated that medical images represent 90% of all the medical data available today, and the hope is that Watson’s Health Cloud could help elucidate new insights from patient current and historic images, electronic health records, data from wearables and other relevant medical data, all in a HIPAA-compliant environment.

Since the launch of the Watson Health unit in April 2015, Watson has already been actively courting healthcare leaders such as Cleveland Clinic and Memorial Sloan-Kettering, IBM purchased Cleveland-based Explorys (cloud-based spin-off from the Cleveland Clinic whose data on 50 million patients is used to spot patterns in diseases, treatments and outcomes) and Dallas-based Phytel (software to manage patient care and reduce readmission rates to hospitals), and IBM announced partnerships with Medtronic, Johnson & JohnsonApple and CVS Health.

As reported in Forbes,“Watson has the ability in medical imaging to understand whether it is looking at an Xray, or a CAT scan versus an MRI. It has the ability to know it’s looking at a brain scan versus a heart scan,” says John Kelly, IBM’s senior vice president, research and solutions portfolio. “We are now absolutely convinced that Watson is capable of doing these things. What we lacked was the access to clients, and the images. What Merge brings us is that access and that capacity.”

This acquisition is a watershed in the evolution of healthcare and the growing promise of digital health. It highlights the view that patient data could yield valuable insights, as well as business opportunities, and that the best way to get this data locked in proprietary silos is to buy it. By many analyses this acquisition will not yield much to IBM’s bottom line in the near term, as its estimated that Merge’s annual revenue may not exceed $300 million over 2015 and 2016. This signals IBM’s commitment to point Watson towards stacks of disparate and combined patient data in the effort to help provide individualized health care that may improve outcomes while cutting costs.

Without a doubt, other tech companies have the financial resources to make purchases of Merge’s competitors to gain access to similar data, as well as the technical and computing firepower to take on Watson. In light of IBM signaling the start of this new era, its likely just a matter of when, not if, this comes to pass.