MRGE Mirage Energy Corporation (PK)

Recently, Merge Healthcare (MRGE) completed the acquisition of Ophthalmic Imaging Systems for approximately $30.3 million (excluding the debt). Ophthalmic Imaging provides digital imaging and informatics solutions for ophthalmology and other medical specialties. 

Merge believes that the acquisition will be accretive as the company expects to integrate Ophthalmic Imaging Systems’ ophthalmic imaging and informatics solutions, including a highly regarded single platform electronic health record (EHR) and practice management system, digital imaging management solution and a modular imaging to its portfolio. 

Moreover, huge client base of Ophthalmic Imaging Systems (more than 2,000 sites representing 60% of the top ophthalmic institutions in the US) is expected to further enhance Merge’s existing client base of 1,500 hospitals and 4,000 clinics and practices to a large extent.

Ophthalmic Imaging Systems’ current portfolio primarily focuses on radiology, cardiology and orthopedics; products for clinical trials; software for financial and pre-surgical management. Merge believes ophthalmic imaging solutions possesses huge potential given an aging population, better treatment results owing to early detection of disease, increased incidence of visual impairment and the growing need for portable diagnostic equipment.

However, we do not expect any significant benefit from the deal in the near term as the company reported dismal results in the first quarter of 2011.. Ophthalmic Imaging reported revenue of $3.5 million (lower than $4.1 million in the year-ago period) with a net loss of $1.5 million.

Merge has grown through several acquisitions, the most significant being AMICAS, an image and information management solutions provider, in April 2010. The company exited the second quarter with $45.2 million in cash (including restricted cash) compared with $41.0 million at the end of December 2010. Cash from core business operations was $6.6 million versus $9.4 million in the year-ago quarter.

There is immense potential in the diagnostic imaging market, especially with the government’s emphasis on HIT and an ageing population. However, Merge’s growth prospect is highly dependent on capital investments by hospitals for advanced imaging solutions, which are in turn tied to general economic conditions.

Merge’s growth prospect is highly dependent on capital investments by hospitals for advanced imaging solutions, which are in turn tied to the general economic conditions. Major players like General Electric Co (GE) and McKesson Corporation (MCK) have made the diagnostic imaging market highly competitive. However, there is immense potential in the diagnostic imaging market, especially with government’s emphasis on HIT and an ageing population.

 
GENL ELECTRIC (GE): Free Stock Analysis Report
 
MCKESSON CORP (MCK): Free Stock Analysis Report
 
MERGE HEALTHCAR (MRGE): Free Stock Analysis Report
 
Zacks Investment Research