IBM this week announced that it has acquired Merge Healthcare, a medicare imaging software company, for $1 billion. The deal will bring enhanced imaging capabilities to IBM Watson Health portfolio, bringing Watson a step closer to diagnosing medical images.

Merge Healthcare is a global medical imaging and processing provider based in Chicago. Its technology are used at more than 7,500 US healthcare centers, clinical research and pharmaceutical companies. By acquiring Merge, IBM advanced its medical imaging capabilities, a significant step toward its goal of applying deep learning to diagnose diseases. IBM said, Merge will enhance healthcare quality and provide imaging capabilities that IBM\’s Watson engine will use to analyze CAT scans, mammograms and X-rays. 

John Kelly, senior vice president, IBM Research and Solutions Portfolio, said in a statement: “As a proven leader in delivering healthcare solutions for over 20 years, Merge is a tremendous addition to the Watson Health platform”, and added also that: “Healthcare will be one of IBM’s biggest growth areas over the next 10 years, which is why we are making a major investment to drive industry transformation and to facilitate a higher quality of care. Watson’s powerful cognitive and analytic capabilities, coupled with those from Merge and our other major strategic acquisitions, position IBM to partner with healthcare providers, research institutions, biomedical companies, insurers and other organizations committed to changing the very nature of health and healthcare in the 21st century. Giving Watson ‘eyes’ on medical images unlocks entirely new possibilities for the industry.” 

According to IBM, medical images are by far the largest and fastest-growing data source in the health care industry. The company estimate that medical images account for at least 90 percent of all medical data today, and that the numbers still growing. But the tools to help healthcare providers extract insights from medical images remain very limited. IBM has been busy working on few other image analytics projects, including teaching Watson to filter clinical and diagnostic imaging information to help healthcare providers identify anomalies and make recommendations from the images presented. 

Under the deal, Merge\’s shareholders will receive $7.13 per share in cash, for a total value of $1 billion. The deal, which is subject to regulatory review, shareholder approval and other customary closing conditions, and expected to close later this year.

Merge’s platform will be extremely powerful when combined with Alchemy API, a cognitive computing technology platform IBM acquired in March. IBM started to beef up its Watson health business last April. It made small but strategically-important acquisitions, first with cloud-based healthcare intelligence Explorys and then with population health management software provider Phytel. IBM also made some partnerships with Apple, Medtronic and Johnson & Johnson. In addition, IBM is also developing Watson Health Cloud, a cloud-based data sharing and application-development platform designed for IBM clients and partners.