Recently, Merge Healthcare ( MRGE - Analyst Report ) entered into a new deal with a global medical image collection and delivery service provider AG Mednet. Per the deal, the integrated solution would offer an entire collection of tools to life sciences companies working on imaging clinical trials across the world. However, financial terms of the deal were not disclosed.

The partnership will enable Merge to integrate its Clinical Imaging Management System (Merge CIMS) with AG Mednet’s image collection platform. Merge CIMS is a pioneering product in the field of automated data and imaging workflow solutions and enables efficient imaging of clinical trials for radiologists, sponsors and CROs. This integrated solution will provide superior imaging and data flow directly into Merge's CIMS and electronic data capture (EDC) solutions.

Merge is confident about the premier infrastructure and comprehensive feature set. It will prove to be an indispensable solution for commercial and academic core labs and extend necessary logistical support for clinical trials. Also, the alliance with AG Mednet will help the company to access its broad customer base (currently AG Mednet has over 10,000 registered users in 58 countries across the world).

Physicians, payors and patients are currently focusing on healthcare information systems and clinical data to achieve the ultimate goal of improving the quality of the healthcare system and reduce costs. In this scenario, we believe Merge’s partnership with AG Mednet holds strong potential. Merge is confident about this new combined service and expects greater acceptance of the solution going ahead.

However, Merge’s growth prospect is highly dependent on capital investments by hospitals for advanced imaging solutions, which are tied to general economic conditions. Also the presence of big players like General Electric Co ( GE - Analyst Report ) and McKesson Corporation ( MCK - Analyst Report ) has made the diagnostic imaging market highly competitive.

However, there is immense potential in the diagnostic imaging market, especially with the government’s emphasis on HIT (health IT) and an ageing population. The acquisition of AMICAS has transformed Merge into a stronger company with an expanded product portfolio. We are encouraged by the company’s renewed focus on international markets.

Presently, Merge retains a short-term Zacks #2 Rank (Buy). Over the long term, we have a ‘Neutral’ recommendation on the stock.