Medical imaging company Pro Medicus [ASX:PME] announced its wholly-owned US subsidiary, Visage Imaging, has signed a $140M, 10-year contract with Baylor Scott & White Health (BSWH) — the largest not-for-profit healthcare system in Texas and one of the largest in the United States.
Under the terms of the deal, Visage Imaging will implement its cloud-based Visage 7 platform and provide enterprise-wide distribution of images integrated with the company’s electronic health records.
This contract marks a significant milestone for Pro Medicus and highlights the company’s growing presence in the global healthcare technology sector.
Shares in PME jumped in this morning’s trading, up by 10.40% to trade at $78.59 per share, helping keep the healthcare sector as the only sector in the green today. Pro Medicus is in the top 20 best-performing stocks within the ASX’s Health Care sector this year, gaining 49.59% in the past 12 months.
So what else has been pushing the stock up, and will it have further scope to rise?
Source: TradingView
Cloud-engineered growth
This contract seeks to replace multiple legacy PACS (picture archiving and communications systems) archives deployed across Baylor Scott & White Health’s extensive network.
The legacy systems will be replaced by the fully cloud-based Visage 7. The transition will be done in a multi-phased approach with targeted ‘go-lives’ scheduled to begin in Q1 of 2024.
Once the implementation is complete, Visage 7 will be used by nearly 500 radiologists at BSWH.
Visage 7 is a unified diagnostic imaging platform with an extensive suite of modules and workflows, which are all online.
The contract is the eighth contract the company has signed this year, but is worth approximately $52 million more than all the other contracts combined.
Pro Medicus chief executive officer Dr Sam Hupert said BSWH was the latest client to opt for a fully cloud-engineered solution — a trend that has become the standard in the North American healthcare market.
In a statement released today, he highlighted the significance of the contract, saying:
‘Baylor Scott joins our impressive list of Tier 1 clients and represents our first major client win in Texas,’ he said.
Dr Hupert pointed at the development of cloud-based systems as a significant factor in the recent growth of contracts the company has experienced this year.
‘We are increasing the speed at which we can implement and the cloud has certainly been a factor… it provides a more standardised environment minus a hardware purchasing cycle which previously could take between six and nine months,’ he said.
‘With the cloud, we can spin up a version of Visage in a matter of days [and] we are continually refining our implementation and training processes using a hybrid of onsite and remote implementations.’
‘It is the way the industry is moving and we are the leaders in that transition, being the only vendor capable of a truly full-cloud implementation so it is of enormous strategic value to us.’
The contract is based on a transactional licensing model, meaning that PME will earn revenue based on the number of images stored and processed by Visage 7.
This gives PME the potential to earn additional revenue if BSWH’s imaging volume increases over the course of the contract.
Outlook for Pro Medicus
This contract is a significant win for Pro Medicus. It’s the company’s largest contract in North America to date and represents its first major client in Texas.
The deal is a sign of the growing popularity of cloud-based imaging platforms. Cloud-based imaging platforms offer several advantages over traditional on-premises imaging systems, including scalability, flexibility, and cost savings.
It should also prove to be a validation of PME’s imaging platform for larger healthcare providers. Visage 7 is one of the few cloud-based imaging platforms on the market, and it is increasingly becoming a preferred choice of healthcare organisations.
As more and more healthcare organisations transition to cloud-based imaging, PME is well-positioned to capitalise on this trend.
It also highlights the company’s growing presence in the North American market. PME has been expanding its presence in North America in recent years, and the latest contract will be seen as a major milestone.
This expansion was reflected in its most recent financial results, showing revenue from North America was up 41.8%, Australia was only up 9.4%, and Europe was down 12.2%.
The fall in Europe was mainly attributed to a lapsed German contract, so it should not concern investors as the medium-term pipeline looks strong, with interest from academic, public, and private healthcare providers.
The trends within healthcare are generally moving towards cost-saving, modular systems when larger hospitals attempt to change legacy systems. This should favour cloud-based systems like Visage 7 with much smaller capital outlays.
Overall, the contract is a very positive development for Pro Medicus, and it’s a sign of the growing popularity of its cloud-based imaging platforms.
Source: SimplyWallSt
The company is in a period of solid growth, and thus offered only a 17-cent fully franked dividend in its last report — bringing the year’s total to 34 cents.
That’s a dividend yield of 0.5% for the year. It’s not great, but it’s unsurprising for a growth stock.
But when markets look dicey, many investors hunt for stocks in the typically defensive healthcare sector.
But not all stocks are the same.
Finding dividends that are worth your time
The ASX 200 has gone nowhere for a year. It’s currently down -0.08% for the year and looks shaky.
With gas prices likely to remain at record highs until the end of the year, fear of inflation is creeping back into the market.
When things look uncertain in the stock market, maybe it’s time to change tactics.
Many investors focus on quality stocks that provide safety and pay dividends.
But blindly buying the ‘best dividend-payers’ could be a fruitless move beyond the short term.
That’s why our investing expert and Editorial Director, Greg Canavan, has spent his time finding a balance.
He calls it the Royal Dividend Portfolio, and he believes it’s the sweet spot between growth and dividends.
Click here to learn more about what that looks like.
Regards,
Charles Ormond
For Money Morning
