Tag Archives: Alan Stoddart

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Signify Premium Insight: The Concerted Effort that TeraRecon Must Make

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Last month saw Boston-based vendor ConcertAI secure $150m in series C funding, adding to the $150m series B round in 2020 and boosting the company’s valuation to $1.9bn. The AI start-up, which specialises in offering real-world data to life sciences firms to manage regulatory clearances and develop clinical trials, and supporting healthcare providers to improve patient experience, will use the money to scale its software solutions.

The funding puts ConcertAI in a strong position. But will AV and medical imaging AI firm TeraRecon, which was integrated into ConcertAI in November 2021, also see any benefit?

The Signify View

TeraRecon first became linked to ConcertAI after being acquired by corporate parent SymphonyAI in March 2020. This portfolio of companies seeking to develop new generation AI solutions across a variety of sectors, from retail to financial services, brought TeraRecon on board and placed it alongside stablemate ConcertAI. At the time the deal seemed to offer clear synergistic opportunities for both parties such combining population data from ConcertAI with imaging biomarker technology and expertise to improve patient stratification for oncology clinical trials. Alternatively, providers could utilise imaging data from TeraRecon alongside EHRs and real-world data from ConcertAI to develop more integrated care management solutions.

Since then, however, TeraRecon has been relatively muted. Instead of revealing new, integrated products, public releases and announcements have slowed and several key c-suite personnel have left. This seems something of a regression from several years ago when TeraRecon was among the earliest of AI vendors to promote the AI-marketplace-platform model, securing patents and forging ahead with a novel approach to radiology AI’s last-mile challenges. Moreover, the senior leadership at TeraRecon were at the forefront of every industry debate and event discussing the role of AI in medical imaging.  Concurrently, the vendor was among the strongest independent AV vendors, securing good market share and beginning to make connections between AV and AI.

The firm hasn’t given up much ground from this position in AV, a market that moves slowly after all, but neither has it moved forward whilst other vendors have made headway, somewhat negating its early ascent. One initiative, for example, was to integrate AI tools from its platform with its own AV capabilities, packaging the combinations into specialist “premium” suites that were more attractive than individual tools. While TeraRecon’s progress slowed on this front, imaging IT vendors, AV vendors and modality vendors have incorporated competitive AI offerings, increasingly eroding the specialism that allowed TeraRecon to shine.

Move to the Money

Against this backdrop of increased competition and lengthy implementation cycles for clinical AI, integrating TeraRecon into ConcertAI is a sound move that offers a more direct route to financial success. Making significant returns in clinical AI is a difficult and drawn-out affair. The technology’s profitability is stymied by several barriers including a lack of reimbursement and a lack of financial impact studies, as well as the fundamental question of who will foot the bill. In preclinical and life sciences, on the other hand, the route to returns is much clearer, with pharmaceutical firms willing to invest in specific drug discovery projects, effectively using ConcertAI or alternatives as an external research team with project or milestone-based fee structures. This approach enables ConcertAI to gain commercial traction whilst waiting for the clinical market to mature. In the near term this could leave TeraRecon as a diagnostic imaging specialist whose expertise is applied to the preclinical space, with areas such as companion diagnostics a potential strength. For ConcertAI, having such expertise in imaging analysis in-house, and promising to utilise imaging data alongside other clinical data, could be a major selling point, improving the vendor’s odds of courting big-pharma and top academic provider interest.

Despite that, in the grand scheme of ConcertAI’s opportunities, TeraRecon’s existing AV business does not appear to be a  priority. ConcertAI has recently announced strategic agreements with the likes of Pfizer and Bristol Myers Squibb, so the returns of its funding round will be spent on the development of capability and service that can support such multi-billion-dollar companies. TeraRecon is not a central part of that strategy. It will, for the most part, be able to maintain the share it has carved out for itself within the AV IT market mid-term, and its technology will lend an edge to ConcertAI in preclinical, but it is unlikely to be able to chart its own course, and invest in its own growth in AV, as it would have been able to prior to its acquisition.

A Deal to be Done?

Given this impasse at which TeraRecon sits, it could be seen as an attractive acquisition target by vendors looking to round out their imaging IT portfolio. While ConcertAI will value TeraRecon’s AI capabilities and the vendor’s AV expertise, aside from being a dependable, albeit comparatively small source of revenue, it will be a lower priority to the vendor. As such ConcertAI could look to pare of TeraRecon’s AI abilities to bolster its preclinical and life sciences package, and then sell off the remaining AV business.

There are several vendors that would both benefit from such an acquisition and have deep enough pockets to make it a reality. Two of the most obvious names are Intelerad and IBM Watson Health. Since private equity investor HG Capital acquired a majority stake in Intelerad in early 2020, the imaging IT vendor has been on an acquisition spree, picking up Ambra, Digisonics and LumedX among others.

The vendor has also shown that it is beginning to link together the capabilities of these formerly disparate businesses into one cohesive whole (see In Step with the HIMSS Set, Intelerad Marches Forward). However, this enterprise imaging platform to-be, as yet lacks an AV solution, an omission that could be readily addressed by the acquisition of TeraRecon. What’s more such a deal would also net the vendor TeraRecon’s 10% share of the North American AV IT market in 2021, handily propelling Intelerad’s total imaging IT market share from 3.5% to 5% in North America.  The story is similar for IBM Watson Health. Freed from the wider tech business Watson Health’s new owners, Francisco Partners, could handily add TeraRecon’s AV capability and market share, to advance Watson Health’s along its enterprise imaging journey.

The Here and Now

For ConcertAI, the funding is another sign of confidence in strategic focus on real world evidence for life sciences. With a valuation of $1.9bn, it is clear great things are expected of the start-up. These, in the near term at least, are unlikely to come from TeraRecon and its strengths in image analysis or AV capability.

There is an advantage to using image analysis in its preclinical and drug discovery remit. Longer term there are lucrative possibilities such as the identification and cataloguing of imaging biomarkers, enabling diseases to be increasingly diagnosed from imaging alone, reducing the need for biopsies and other interventional diagnostic procedures. Such tools could be commercially successful, but would first require significant investment in research and development and would still take several years for any sizable returns.

Instead, it seems that TeraRecon, and the capabilities it brings, may not be the best complement to ConcertAI’s trajectory, while the company’s recent quietude and personnel changes also suggest change could be afoot.

Ultimately, regardless of its origins, this change could be welcome, with the clinical markets in which TeraRecon blossomed, increasingly under pressure; AV tools are being incorporated into broader imaging IT platform vendors to enhance diagnostic capability, interest is growing in edge AI and modality vendors are looking to bring such technology to their hardware, and there is growing appetite for the care pathway approach. Competition from leading imaging giants such as Siemens Healthineers, Philips and GE Healthcare is only going to intensify as AV is encompassed into broader diagnostic care packages of modality, edge AI, diagnostic viewer and service line offerings, while emerging AI platforms such as Blackford Analysis, Aidoc and others attempt to carve out their own piece of the imaging analysis market.

ConcertAI’s funding round will not solve these problems for TeraRecon. However, as ConcertAI grows its path will increasingly diverge from TeraRecon’s AV heartland, forcing the latter to act. Whether that is as part of a different parent, or in new partnerships with others, change is essential. For TeraRecon, stasis is unsustainable.

 

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Signify Premium Insight: Imaging’s M&A Falling Behind Bullish Outlook for Healthcare & Lifesciences

This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. This content is only available to individuals with an active account for this paid-for service and is the copyright of Signify Research. Content cannot be shared or distributed to non-subscribers or other third parties without express written consent from Signify Research. To view other recent Premium Insights that are part of the service please click here.

Co-written by Steve Holloway

This month, KPMG published its 2022 Healthcare and Life Sciences Investment Outlook. This report assessed the trends in M&A across the breadth of the Healthcare and Life Sciences sectors. These broader market trends form a backdrop to the medical imaging markets, although, as will become evident, the dynamics of these distinct markets are not always shared.

Overall, KPMG’s report was very positive. The professional services firm found that despite the headwinds presented by the coronavirus pandemic, 2020 and 2021 in particular, were very strong on a dealmaking front. There were 1,839 deals (not counting joint ventures, minority investments and venture funding) sealed in 2021, an increase of almost 300 compared to 2019. The most active quarter was Q420, with 511 deals made. No quarter in 2021 topped Q420, but the elevated level was more sustained, with dealmaking at a higher level than any of the preceding eight quarters, spare the aforementioned Q420.

Several drivers spurred this activity. The consultancy identifying the larger vendors’ need to look to acquisitions as a way to sustain innovation and replace lost revenue from maturing products, and portfolio shaping, as two of the key drivers of M&A in 2020 and 2021. KPMG suggested these factors would continue to be a driving force in the coming year and offered a bullish prognosis for 2022, asserting that deal volumes would continue to soar. The firm noted that low cost of capital and internal pressure to deploy capital meant that around 70 percent of respondents to its survey expect to increase their M&A activity in 2022, while more than half of PE investors said they would do at least 10% more deals than 2021. There are still some reasons for caution. Further variants of Covid could lead to vendors scaling back their plans or pausing moves. More predictable factors are also set to temper activity, with a diminishing supply of attractive prospects, and companies’ need to complete and integrate the acquisitions they have already made also set to retard activity.

The Signify View

While these trends may be true for the broader healthcare and lifesciences sector, there is some nuance within individual medical imaging markets. This is true for the large international modality vendors, for example.

One of the central reasons given by KPMG for vendors to embark upon acquisitions is the requirement to expand their portfolios, expand their capability and win new business in other adjacent markets. The large modality vendors, however, already address most of the individual product subsectors, offering providers very broad capability. This means that in many instances, there are limited benefits to be gained from making an acquisition. This is further compounded by the level of consolidation in the medical imaging modality markets. GE, Siemens Healthineers and Philips, have near complete portfolios. Canon’s acquisition of Toshiba and Fujifilm’s acquisition of Hitachi, which both took place since 2017, represented the last opportunity for major, global modality vendors to significantly broaden their portfolios by the acquisition of a competitor with a broadly complementary range.

There are exceptions to this rule, with GE’s 2021 acquisition of BK Medical showing that international modality vendors are still ready to make deals. However, these deals will be predominantly “tuck-in” deals to strengthen a vendor’s core capability in a product sector, such as a vendor with strength or experience in a specific clinical application, or to acquire technology assets and IP that will support the next generation of imaging modality products.

The other predominant deal type will involve moving into adjacent areas. One of the blueprints for this type of acquisition was Siemens Healthineers’ acquisition of Varian in 2020. This deal saw Siemens Healthineers add a market leading oncology therapy and care vendor to its arsenal, enabling the sale of end-to-end oncology solutions which complemented its core imaging and diagnostics focus. Other vendors could be looking to complete similar deals, either in oncology or other segments. KPMG’s warning that few acquisition targets remain rings true in oncology though, with only Elekta and Accuray as viable Varian alternatives for radiation therapy hardware.

Adjacency Approved

More likely, one of the large modality vendors could eye an acquisition of a vendor in another adjacent area, such as entering therapy with a cardiac care acquisition, for example. Another potential avenue for investment would be in surgery. This is a further area where Siemens has already made progress, acquiring surgical robotics specialist Corindus, in 2019. Imaging vendors are already selling into surgical rooms and interventional suites, so the addition of surgical robots, a technology which is rapidly gaining traction, could be a shrewd target for one of the large imaging vendors.

A further possibility would see one of the larger Chinese modality vendors such as Mindray or United Imaging swooping in to bolster their portfolio and presence on an international stage. A previous Premium Insight discussed the rationale for United Imaging making a bid for Siemens’ ultrasound unit based on rumours present at the time. While that hasn’t yet come to pass the, the arguments for a large Chinese vendor to make such an acquisition still stand, with either a larger company’s divestiture, or even a smaller challenger vendor both presenting intriguing possibilities; a combination of Mindray and Butterfly Network, or Exo or another handheld ultrasound vendor, for example.

Buying Power

Outside of modality imaging, there is different impetus for acquisitions. The healthcare IT sector has been one of the more buoyant M&A markets over the past two years. KPMG noted that it was the second most active subsector across the wider healthcare and lifesciences space, and among the most attractive targets for investment at present. The boom in telehealth as a result of the pandemic is responsible for much of this growth, but there have also been a number of high-profile deals done with imaging IT vendors, not least of which are the likes of Nuance and Microsoft and Intelerad’s spree of LumedX, Ambra, and Insignia Medical Systems.

Dealmaking looks likely to continue within the imaging IT sector. It is a market that is mature and stable, with long deal cycles. Resultantly, the opportunities for vendors to increase their market shares organically is limited. Instead, vendors in the imaging IT space look likely to show their hands with tuck-in acquisitions in a bid to increase their market share and enable competition in larger, multi-product deals. This could see many of the smaller players, or those with strength in certain regional markets, increasingly consumed by larger players as they strive to increase their install base in this stable market, or increasingly starved off opportunities and run out of the market.

There are, however, also several larger deals to be done should an acquisitor have the long-term appetite. Change Healthcare’s imaging business could be one prize. Assuming Optum’s takeover of the revenue management business goes ahead and isn’t blocked by regulators, as seems possible given recent rumours, then Change could well look to spin out its imaging business. It is a similar story with IBM Watson Health’s imaging division. Following the divestiture of IBM Watson Health, the imaging business stands apart from the rest of the unit and could subsequently represent an attractive purchase for a vendor looking to expand its customer base and take advantage of IBM’s technology. Both vendors have reasonable market share in the prized US acute provider sector, potentially tempting an acquirer to dig into its pockets to gain a foothold.

AI Gearing up for a Feeding Frenzy?

Perhaps the most keenly observed imaging sector is medical imaging AI, a rapidly evolving and fragmented market that is starting to gather commercial pace. Many leading vendors have identified AI as an area of substantial promise for medical imaging, spurring a torrent of investment from venture capital and private equity. However, despite a gradual thinning of the field and emergence of strong potential candidates (see Medical Imaging’s Top Tier: The $100m Club), no major global imaging vendor has made a big acquisition of an AI vendor or AI orchestration platform yet; in fact, it is an imaging centre provider (RadNet) that has made the most bullish bet on imaging AI so far.

This hesitancy is due to three main fundamentals. Firstly, most vendors are still early in commercialisation and have, to date, no tangible customer base or scale to justify their inflated valuations. Secondly, reimbursement for AI use outside of a few select cases (FFR-CT (HeartFlow), CT-stroke detection (RapidAI, VizAI, et al.) has not been granted, adding greater risk to any investment requiring a long wait and uphill battle for an acquirer to commercialize at scale. Thirdly, healthcare provider customers have not made AI a significant enough priority in recent years to drive leading vendors to bring AI “in-house”. With many applications still in the pilot or assessment stage, a loose association or basic integration with existing imaging IT platforms has satiated most customers. Furthermore, the Covid pandemic has paused or extended many providers’ assessments of AI as a future investment, meaning imaging IT and modality vendors see no rush to dig deep into cash reserves to pay lofty AI valuations.

In 2022, while we expect to see a gradual consolidation of the AI segment via AI vendor to AI vendor mergers and partnerships, the oft-discussed feeding frenzy from imaging sector leaders is highly unlikely. Instead, many will stick to their holding pattern while continuing to strengthen partnerships and planning integration strategies, should the time come to aggressively acquire assets. Given the other market pressures facing the imaging market near term, some may also be holding on in the hope they can sweep up assets as investor confidence in start-up AI vendors falters and vendors burn through cash reserves quickly.

Caveat Emptor

Overall, many parts of the medical imaging market look less ripe for strong M&A activity than the broader healthcare and lifesciences sector. Several vendors have explicitly stated their acquisitive ambitions, and some vendors’ broader strategies into areas such as precision medicine and digital twins would require additional capability, but often these are more linked to the wider company rather than a vendor’s imaging division.

This run of acquisitions could peak in 2022. If these deals are to be done, vendors should focus on doing them quickly. For many of the medical imaging markets, growth is set to peak between 2024 and 2026 as the fruits of the rebound from the coronavirus pandemic, as well as purchasing based on pent-up demand take hold. If vendors are going to use an acquired company to take advantage of this growth, then they will need to do a deal soon.

These deals will happen. They may not be on the scale of some of the deals that have taken place in the past such as the combinations of Fujifilm and Hitachi and Canon and Toshiba, or of a similar complementary nature, but, as vendors look to move forward with their strategies, acquisitions will be a necessary step. However, unlike in KPMG’s assessment of the broader sector, this activity will not be universal, with imaging vendors having to be more selective in approaching what is sometimes a very limited pool of targets. Many vendors have the cash, but the creativity to make the right choices and execution to integrate is what will set them apart.

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Signify Premium Insight: Trends and Takeaways from RSNA 2021 – Medical Imaging Modalities

This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. This content is only available to individuals with an active account for this paid-for service and is the copyright of Signify Research. Content cannot be shared or distributed to non-subscribers or other third parties without express written consent from Signify Research. To view other recent Premium Insights that are part of the service please click here.

There have been some major announcements throughout the year that may have somewhat robbed RSNA of its thunder. From Philips launching its latest flagship spectral CT scanner in May, to Siemens revealing its photon-counting CT system, and a new whole-body, low-field MRI system over the past months. Other factors could also have put a dampener on the radiology conference. As has been widely reported attendance at the event was far lower than it was in previous years, while a few high-profile vendors also were unable to attend due to coronavirus restrictions in their countries and companies.

However, despite all this, the vendors, radiologists and providers in attendance were generally very positive about the conference. This was perhaps in part the result of meeting in person again for the first time in two years, but also no doubt down to the solutions being shown to providers.

Tools for a Job

One of the themes that united these different products from different vendors was their focus on straightforward, practical utility. Vendors did, of course, show off their latest feature-rich flagship systems, but they were also keen to promote the mid-tier ‘workhorses’ of their ranges. This is in large part due to the situation providers find themselves in. With large backlogs of patients, which had elective procedures and examinations postponed because of Covid restrictions, providers are looking for cost effective and efficient systems across the modalities, which will allow them to address this backlog most effectively. In most cases vendors were looking to meet this need with existent products, often with new features and software applications, rather than showing new products specifically catering for this product tier.

A corollary of this pattern saw vendors exhibiting products that had feature sets which enabled providers to attend to patients more efficiently and increase patient footfall. This was particularly true in MRI and CT, which have higher scan times, as opposed to X-ray and ultrasound. Imaging vendors were increasingly drawing attention to tools such as embedded cameras to enable technicians to more easily assess a patient’s position before the image is taken and ensure that the scanner will be able to capture the required image.

These hardware developments were also tied to software improvements, with technologies such as smart protocolling being demonstrated at the conference. These technologies offer numerous benefits. They will improve the broader departmental efficiency by improving the number of ‘right-first-time’ scans, and therefore saving radiology departments from having to conduct rescans and reducing the preparation time needed for scans. They will also help make the process of scanning individual patients more efficient and minimise a system’s set-up time. Another benefit is that it makes the systems easier to use, allowing providers to maximise the utility they can gain from the systems, despite potential limitations caused by shortages of technicians or inexperienced technicians.

Although there were fewer product announcements for ultrasound, the technologies on show and vendor positioning were also primarily focussed on workflow efficiency. That said, there was also a strong focus on the ever-improving imaging capabilities of ultrasound as an alternative to advanced modalities in certain applications, with continued focus on contrast-enhanced ultrasound imaging, elastography and micro-vascularization assessment. Other key trends were the increased focus on liver imaging, with Siemens Healthineers and Philips launching new liver analysis capabilities, and the increasing infiltration of AI-based features, not only for clinical decision support but also to assist the user during image capture through probe placement guidance, organ detection and automated labelling.

Technician Tailored

Modality vendors at RSNA 2021 were also looking to aid users through hardware improvements. Some technicians suffer from ailments or injuries caused or worsened by their repetitive use of imaging equipment. To this end, vendors have also been focusing on both the ergonomics and useability of systems to address the technician’s as well as the provider’s and patient’s requirements.

Another manifestation of this drive for efficiency materialised in launches of on-scanner AI solutions which helped improve the acquisition of medical images from the advanced modalities. These deep learning-based image reconstruction techniques can dramatically cut the time it takes to acquire MR images. This  reduces both the effective cost of utilising the modality and the time required, diminishing some of the barriers stopping MRI being more broadly used in clinical practice. The higher scanning efficiency also improves the patient experience and enables providers to scan more patients per day. Similar tools for CT imaging also offer the added benefit of reducing the radiation dose patients are exposed to, whilst improving imaging quality, an increasingly important consideration given the growing interest in CT-based screening programmes in some countries.

Among the broader themes in terms of modalities at RSNA was the fact that innovation and developments are increasingly focused around 3D imaging. There are multiple reasons for this, but in essence, these modalities have greater clinical potential, and with the greater level of precision imaging they provide, enable radiologists to make better diagnoses. This is being illustrated with investment being promoted in these modalities. In China, for example CT is forecast to grow significantly over the coming years, with the Chinese government actively prioritising the modality. This prioritisation means that in some markets CT looks set to increasingly take market share away from high-end radiography systems as the cost of CT becomes more affordable.

This will also be facilitated in part by developments such as those seen at RSNA. The major barriers stalling the adoption of MRI and CT are the investment required both in terms of upfront cost and the time investment required to capture and read the images. Advances in software to expedite image capture and analysis will help diminish these barriers, and enable providers to consider MR and CT systems, where they wouldn’t have previously. For vendors, this also represents opportunity. The maturity of the X-ray market in developed countries means that most sales will be on a replacement basis. CT and MRI on the other hand are markets in which growth for new installations is still possible, through systems which are less expensive and resource intensive to purchase, and therefore enable providers to choose the modalities for the first time. This trend is being catered for further by the likes of Siemens and Hyperfine, for example, who are both marketing smaller and lighter systems, that require less extensive infrastructure for them to be installed within smaller hospitals, clinical departments (e.g., orthopaedic, emergency and intensive care) and outpatient centres.

Efficiency Above All

Ultimately, the factor that united the majority of the developments at RSNA was efficiency and allowing providers to do more with less. Whether that meant less expenditure, less infrastructure, less time or less expertise, most of the new developments at the show opened up increased possibilities for providers. In many instances, instead of demonstrating new high-end clinical tools, vendors were showing providers how they could address the incoming backlog of scans within their budget and time limitations.

This, at times, happened in unexpected places. In many instances, the use of AI in medical imaging was expected to aid image analysis. While this is a developing trend and such tools look set to have a dramatic impact in the future, at present AI has had the most success on the scanner rather than in the reading room. One of the reasons for this is that in many instances, it is easier to demonstrate a return on investment for AI based on scanners compared to image analysis systems. Vendors can demonstrate that AI-enhanced systems can reduce scan times, which directly translates to the ability to conduct more scans for providers. On-scanner workflow tools, such as positioning support, intelligent protocolling and automatic image accept and reject meanwhile can offer a clear route to the necessity of fewer rescans, again clearly enabling radiology departments to operate more efficiently.

Problem Solvers

More broadly RSNA 2021 will have been a successful show for most vendors. While there were less attendees, and some initial consternation at the reduced footfall, in the end, the consensus was that it had actually enabled vendors to have more focused conversations. There were fewer conversations to be had, but those that vendors did have with providers would have been with qualified buyers and focused around solving providers’ specific problems of the moment. These problems would have, in many cases, revolved around dealing with the enormous backlog of patients, and attending to them effectively and efficiently. This focus would have allowed vendors to directly address this problem. Vendors’ displays at RSNA showed that they weren’t resting on their laurels, and have been continuously innovating, with, once again, a great deal of focus on the clinical workflow and efficiency that providers need at present.

This year’s conference will have no doubt benefited from the ‘buzz’ that a return to Chicago will have caused, and with providers’ purchasing disrupted over the last two years and an unprecedented volume of patients to be seen in the coming months and years, RSNA 2021 was always going to represent a golden opportunity for vendors. By giving providers what they need, both in terms of the hardware itself and its integration into the workflow, this opportunity has been seized.

 

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Signify Premium Insight: IBM’s RSNA AI Platform Push

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Co-written by Dr. Sanjay Parekh

At RSNA 2021, IBM Watson Health revealed a new cloud-based AI orchestration platform, which the vendor says will allow health networks to deploy and use medical AI applications more easily and efficiently. The new platform is vendor neutral and, IBM believes that along with its existent marketplace, will help providers solve the ‘last mile’ challenges of selecting, deploying and integrating imaging tools from multiple AI developers into their clinical workflows.

The Signify View

Signify Research’s Machine Learning in Medical Imaging report has, for several years, highlighted that one of the key barriers to greater AI adoption is the current lack of its integration into clinical workflows. The advantages of a key AI solution could be myriad and profound, but that will count for naught if providers are faced with challenges around integrating these tools and doctors are unable to utilise the tools easily and effectively in their everyday clinical practice.

The impact of this lack of integration could be particularly acute in imaging, where there is both a growing volume of diagnostic imaging, and distinct shortage of radiologists, often leading to intense time pressures. Adopting AI into the clinical workflow to address these challenges may improve productivity, but this will be negated if solutions require physicians to leave and enter distinct software packages, wait for tools to run, and make extra clicks. AI orchestration platforms aim to overcome these problems, by, for example, curating AI solutions that provide greater value to the radiologist, enabling them to focus more on patient care.

IBM Watson Health’s new AI Orchestrator platform aims to minimise these inconveniences, with the platform making it easier for providers to leverage the advantages of a range of AI tools, without deploying and integrating them individually. Under IBM’s AI Orchestrator, solutions from developers which have partnered with IBM such as Cortechs.ai and Behold.ai (under development), will be seamlessly available to users of IBM’s Orchestrator, regardless of their PACS or other informatics systems. However, curiously, there is still a disparate approach from the company, as it has not yet incorporated any of its AI marketplace partner applications onto its AI orchestration platform. Whether IBM chooses to do so remains to be seen, at this instant it seems a missed opportunity in terms of swiftly expanding the value of its AI orchestration platform at its launch.

Cloud First

One of the notable things about IBM’s new solution is that it is entirely cloud-native. While increasing numbers of vendors have developed cloud native AI platforms, and, as detailed in Signify Research’s Cloud Adoption in Imaging IT report, it is one of the clear directions in which the medical imaging IT market is heading, IBM’s relative strength in the broader cloud infrastructure could be an advantage. Furthermore, the AI orchestrator platform was announced in sync with a new broader cloud-native workflow platform, Imaging Workflow Orchestrator, in which IBM has brought to market what it believes will the new industry standard in diagnostic workflow environments.

This solution is, in some ways, more important than the vendor’s AI platform, given IBM’s additional exposure to the PACS and VNA markets compared to the AI platform. The Workflow Orchestrator brings some significant features to IBM Watson Health’s portfolio, namely integration of advanced enterprise worklist (including AI triage results), diagnostic viewer and pertinent EMR-based patient data (Watson Patient Synopsis) into a singular user interface. This is, in part, achievable because the new platform is heavily tied to the IBM VNA. Watson Patient Synopsis, utilises AI to identify the most relevant data from a patient’s record in an EMR system and makes it readily available to a radiologist, addressing an increasing focus in diagnosis in bringing relevant patient data to front line diagnosticians in a digestible format. The integration of these functionalities, and the fact that it is cloud native, gives IBM an advantage over some similar enterprise radiology products from the other larger informatics vendors, which are less progressed in terms of their cloud native strategy; Workflow Orchestrator’s seamless integration with the AI Orchestrator could also give the vendor a further competitive edge.

IBM also hopes that its cloud expertise within the broader company, particularly on the back-end through its acquisition of Red Hat in 2018, should help sway customers. Some providers might be wary of entrusting their precious medical data to public cloud from the likes of Google, or Amazon, but being able to gain cloud capability from the same vendor that facilitates their AI toolset and broader imaging IT platform could be enough to convince them. As such IBM Watson Health will hope that the new AI Orchestrator, Workflow Orchestrator and its cloud capability will drive business to the vendor and bring with it opportunities to sell additional products. However, IBM is also not wed to its own cloud services as the new AI Orchestrator can be deployed on any cloud.

AI Answers

Many providers, however, are not yet ready for full cloud deployments. Some have invested heavily into their own on-site data centres or have preference for keeping their data on site for other reasons. There are others still which aim to take advantages of the benefits of cloud-based deployments, but do not wish to entirely give up on premise solutions and so are looking to utilise hybrid deployments, either as a temporary measure on the way to complete cloud nativity, or as a preferred permanent solution. IBM’s new AI Orchestrator can facilitate these hybrid cloud deployments, opening up its use to a far greater range of providers and allowing for more flexible deployments. However, whether the need to accommodate a range of different deployment architectures will harm its functionality, remains to be seen, but it is critical the availability and performance of its solutions aren’t offset by its need to appeal to a very diverse range of providers. This could simply lead to a poor experience for a greater range of people.

There are also other challenges set to weigh on IBM’s strategy. One of the keenest is the increasing levels of competition from both other vendors and other solutions. There are now several platform solutions available. Some offer advantages that are unique, or at least uncommon. Aidoc’s, for example, focuses on a means to deploy its growing portfolio of native applications, supplemented by AI solutions from third-party vendors. Blackford Analysis, on the other hand, has curated a much broader ecosystem of applications from third-party vendors, with the ability for providers to select the AI solutions that work best on their populations and case mix.

Other platforms created by larger imaging IT vendors, such as GE Healthcare and Sectra, are potentially better integrated into a broader imaging IT workflow but focus on partnering with AI vendors for their content.  On the other hand, vendors such as Siemens Healthineers have chosen to develop most of their AI tools in house, carefully creating and curating only a choice selection of native and close-partner integrations, ensuring they are fully integrated into the vendor’s wider imaging IT solutions.

IBM will have to demonstrate real additional value and a unique proposition if providers are going to select its AI Orchestrator over these tools from competitors. This could come from the platform itself, or from the range and quality of AI tools integrated into the platform. Or, as is more likely the case, from leveraging its Patient Synopsis and Clinical Review tools that integrate upstream and downstream of the clinical workflow. Watson Patient Synopsis, utilises AI to identify the most relevant data from a patient’s record in an EMR system and makes it readily available to a radiologist. Clinical Review is a retrospective analysis tool that compares the radiologist’s report (including image analysis) to determine potential areas for reconciliation.

A Persuasive Proposition

Whether it can achieve this and therefore secure commercial success remains to be seen. This question is particularly pertinent given the year’s earlier rumours of a sale of IBM Watson Health. A previous Signify Premium Insight commenting on the rumours suggested that one of the motivations for the sale was the broader company’s increasing focus on cloud. Offering customers a desirable cloud-native platform could bolster sales in the company’s cloud business, in much the same way as Microsoft’s acquisition of Nuance is at least partially driven by the big tech firm’s ambition to use healthcare to bolster its own cloud business.

Regardless, IBM Watson Health’s platforms are unlikely to materially change the fortunes of the business unit, and ultimately a sale is unlikely to prevent its software from being run from IBM’s cloud. But, the fact that IBM is still investing in its R&D suggests that the businesses fate is not yet sealed.

As it stands, the vendor has a mid-single-digit share of the North American medical imaging IT market, this share could render it difficult for IBM to have a sizeable market impact by only focusing on its own Imaging IT customers. Instead, the new AI orchestrator’s vendor neutrality should be emphasised, and IBM should highlight the platform’s ability to enhance other vendors’ packages and provide an effective software infrastructure to providers looking to add AI capability. Moreover, the vendor’s cloud focus in its foray into AI platform deployment could also prove beneficial and could form an integral part of a future cloud-based enterprise imaging deployment.

For the time being though, IBM has brought together a lot of existing capability into a single, cohesive, cloud-native package. Many providers will pay little mind to this development, and duly wait for comparable capability from their current imaging IT vendor. The relatively few integrated AI applications may also leave some potential customers waiting a little longer to see how quickly the firm can scale up to a more comprehensive AI partner ecosystem, especially with no version combining the marketplace and orchestrator yet available. For others, however, IBM’s AI Orchestrator brings together its existing upstream and downstream AI capabilities within a single, flexible platform, promising streamlined participation in the growing trends of cloud and AI. This may just be enough to help providers forgive the overpromising of the past on AI and convince them of a potentially bright future second time round.

 

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Signify Premium Insight: The Enviable Problem Facing Siemens Healthineers

This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. This content is only available to individuals with an active account for this paid-for service and is the copyright of Signify Research. Content cannot be shared or distributed to non-subscribers or other third parties without express written consent from Signify Research. To view other recent Premium Insights that are part of the service please click here.

Siemens Healthineers has enjoyed a run of very strong results over recent quarters, even accounting for the disruption caused by the coronavirus pandemic. The Healthineers business, a market leader in many of its core segments, has exceeded most industry expectations since it announced its IPO from Siemens AG. This however leaves Siemens with a problem, albeit a rather good one: where can it go from here?

In its recent Capital Markets Day and Shape 22 presentations, Siemens Healthineers laid out its answer to this tricky question, and emphasised the technologies and strategy that it was going to rely on to power the next phase of its growth. This plan, which it has dubbed the New Ambition will focus on three areas, Patient Twinning, Digital, Data and AI, and Precision Therapy, and is hoped to bring together the different sides of Siemens Healthineers’ business to accelerate growth.

The Signify View

Siemens Healthineers’ imaging business has been very successful of late. Its most recent results (Q4 2021) showed revenues 12.7% higher than Q4 2020, and 6.2% higher than Q4 2019, before the Covid pandemic took hold, while its steady stream of product releases highlights its technical leadership in some market segments (most notably first to market with photon counting CT – see below). These successes are predominantly found in markets where there are well established mature healthcare customer groups, both in global terms, with the vendor performing strongly in mature markets, and in clinical terms, with Siemens being one of the go-to-vendors in radiology and general imaging.

However, if Siemens is going to achieve its new growth target of 6-8% per annum in the period between 2023-25, it will have to rely on growth from other areas. It is after all, according to its own figures, the market leader in CT, MRI, X-Ray and Molecular Imaging, so establishing strong footholds in new markets will be essential to build on this position. This will involve targeting less mature geographic markets, or less premium tiers of mature markets. This shift was illustrated by some of the products announced at the Shape 22 event, including the Magnetom Free.Star. This new 60cm bore MRI scanner with a field strength of 0.55 Tesla will offer a total cost of ownership around 30 percent less than comparable scanners. The new scanner is being positioned by Siemens to make the modality more accessible to the 50 percent of the global population that currently has no access to MRI.

The Magnetom Free.Star is the second product in the Magnetom Free line-up, following the Max, which was unveiled a year ago. Siemens Healthineers expects these products to expand MRI’s reach geographically, but also in targeting new clinical segments. Instead of MRI being focused only on radiology departments, Siemens hopes to derive revenues by selling into other care settings, such as orthopaedics, paediatric and emergency medicine for example.

Expanding Imaging

In addition to seeking new customers from outside its current core markets, Siemens also hopes to be able to use its innovation to drive new sales, and more lucrative sales at existing customers. The vendor was proudly promoting its Naetom Alpha scanner at the events. This, the world’s first photon-counting CT system, is indicative of how the vendor hopes to be able to drive increased spend at providers. It is an innovative new system which offers greater capability than other top end scanners. This will encourage providers to replace older systems for the new PCCT system, which will, initially at least, be sold at a significant premium (see FDA Approval Lets Siemens Make CT Count). Furthermore, photon counting CT produces a huge volume of data, which Siemens also hopes will encourage providers to also use more of its software portfolio, founded on the new Syngo Carbon interoperability platform.

Data will also form a key part of Siemens Healthineers’ New Ambition in other ways too. AI will play a major part in this strategy, and Siemens, arguably has the upper hand compared to some of its key competitors, which are increasingly looking to partner with third parties to add AI capabilities to their ecosystems. Siemens has instead predominantly been focused internally. The vendor now claims to have more than 60 AI enriched offerings, 1.3bn curated data sets and aims to provide solutions for anatomies covering 85% of imaging procedures by 2025, up from 35% today. This could be a real differentiator in supporting providers in tackling the challenges of today, with imaging volumes continuing to increase and a dwindling pool of clinician resource to interpret scans. Additionally, Siemens advances in AI are also set to help facilitate the targeting of new customers, who may not have the same training and experience as those in established imaging departments. Advanced clinical decision support tools will somewhat offset that lack of expertise and should smooth the transition of imaging modalities to new areas and new markets.

New Challenges Will Come

It won’t all be plain sailing for Siemens Healthineers, however. The vendor has been very successful in many markets, but it has really made its name in premium segments. Striving to deliver growth in value-orientated segments and a greater focus on emerging markets will provide several stern challenges. One of these will be selling the systems. While the product might be attractive, if Siemens doesn’t have the right operational sales and service support, it could still flounder. Other vendors have better established sales channels in emerging markets today, with sales teams and distributor networks better connected to providers and teams more experienced in selling value-focused products. In these markets, loyalty to other lower-cost brands will also play a part, as too will aggressive price competition.

Siemens could also find itself increasingly competing with Chinese vendors, which are becoming increasingly capable despite being more affordable than their western counterparts. This is evident in the growing presence of vendors such as United Imaging, both in the Chinese market but also in mature markets where Siemens holds a leadership position. China is also becoming more focused on AI, with multiple vendors having secured sizeable funding rounds and many solutions already deployed for clinical use in the domestic Chinese market. Despite Siemens’ best effort, the value proposition provided by these vendors could prove too appealing for less premium customer tiers and the German vendor could miss out.

Siemens may also face competition from vendors willing to adopt innovative business models. In emerging markets, smaller challenger vendors which are looking to offer their products on pay-per-scan basis, or in other innovative ways, could grant cash-strapped providers additional imaging capability for a lower upfront cost than Siemens. This alone could be enough to tempt providers away.

A Problem that Must be Solved

While these obstacles are tangible, they are not insurmountable. What’s more, regardless of the challenges they offer, if Siemens is to achieve its growth target laid out in its New Ambition, they must be faced. Siemens Healthineers is uniquely placed to achieve this though, with the vendor’s scale bringing with it opportunities that would be out of reach for almost all other vendors.

Siemens can afford to invest heavily in technologies like CT, MRI and AI, it should also invest in the growing service side of the business which will help grow stable revenues in markets where it is strong, and it can invest in market education and sales in new markets. Further, we expect Siemens to continue to leverage its new market positions in Oncology (via the Varian acquisition) to support cross-sell of imaging competency into Oncology, while also moving the needle further towards more personalised, precise care provision in mature markets.

The business does have areas where it is less strong such as Ultrasound, in which it is according to Siemens, ranked fifth, and in some specialities. But on balance these gaps are relatively few and far between. Digital competence will also play an increasingly important part in the future success of the business. While the firm has a legacy of technical hardware innovation, its digital record in imaging has been patchier. To address this the firm has clearly laid out its roadmap plans in imaging for improved interoperability between its portfolio, under the Syngo Carbon brand. As deals with providers increasingly focus on digital assets as well as hardware assets, the success of Carbon will become more and more important to underpin its New Ambition strategy. Mid-term, Carbon is also expected to play a central role in underpinning Siemens’ broader digital precision medicine play too, especially in bringing data from its Imaging, Oncology and Diagnostics divisions more closely together.

Siemens Healthineers’ recent events detail how the vendor will combine strengths from across its business to solve its enviable problem and indicates where its growth will come from next. Now all that remains for the firm is the hard yards – the realisation of this ambition.

 

About Signify Premium Insights

This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. This content is only available to individuals with an active account for this paid-for service and is the copyright of Signify Research. Content cannot be shared or distributed to non-subscribers or other third parties without express written consent from Signify Research. To view other recent Premium Insights that are part of the service please click here