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IBM Watson Health Inks Deal with MedyMatch for Healthcare AI

Zacks Equity Research

International Business Machines Corporation IBM owned Watson Health has recently inked a five-year agreement with MedyMatch, an artificial intelligence (AI) startup based in Israel. The objective of the deal is to integrate MedyMatch’s AI technology with Watson Health for enhanced detection of bleeding in the brain as a result of stroke or head trauma.

Initially, IBM Watson Health will launch the MedyMatch brain bleeding detection application globally. Later, the two companies will proceed toward integrating and achieving interoperability between IBM Watson Health’s imaging offerings and MedyMatch’s AI application.

Reportedly, IBM will incur several millions of dollars as recurring annual licensing fees to MedyMatch over the span of the agreement.

Notably, shares of IBM have underperformed the Zacks Computer - Integrated Systems industry over the last one year. While the industry gained a modest 24.3%, the stock appreciated only 20.5%.

The underperformance of the stock could be due to the time consuming transition to the cloud, weakness in traditional businesses and lower IT spending worldwide. However, we expect the stock to rebound given such strategic deals.  

What Does This Mean for IBM?

As per a report by the World Health Organization, nearly 7.6 million people are likely to be affected by stroke by 2030. As per another report by Zion Market Research, worldwide spending on global stroke diagnostics and therapeutics is estimated to reach $31 billion by 2021 at a CAGR of 7%. 

There is thus a huge scope for application of IBM’s cognitive technology as it helps in detecting bleeding in the brain as a result of stroke or trauma.

We note that Watson Health has been fast gaining traction in the recent times. Earlier this month, the company launched IBM Watson Imaging Clinical Review, a cognitive imaging offering, at the Health IT Conference for 2017 to address various cardiovascular diseases. (Read More: IBM Watson Introduces Cognitive Imaging to Boost Healthcare).

Also, earlier this year, IBM Watson Health partnered with the FDA to advance cancer research. (Read More : IBM Watson Health, FDA Partner to Further Cancer Research).

Although competition is intensifying in the cognitive healthcare solutions space with the presence of major players such as Alphabet’s GOOGL Deepmind Health and Microsoft’s MSFT Healthcare NExT, strategic partnerships such as these are expected to further strengthen IBM’s  position in the long run. Also, Watson Health’s recent partnership with FDA over cancer research augurs well for the company in the long run.


International Business Machines Corporation Price and Consensus

International Business Machines Corporation Price and Consensus | International Business Machines Corporation Quote

Zacks Rank

At present, IBM carries a Zacks Rank #3 (Hold).

A better-ranked stock in the broader technology space is Fortinet, Inc. FTNT, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Notably, the Zacks Consensus Estimate for Fortinet’s current year has improved to $13.80 from $13.73 over the last 60 days.

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