In a sign that Royal Philips Electronics may be refining its healthcare division, Nuance Communications has announced that it has acquired the Dutch electronic giant's Speech Recognition Systems business unit.
Vienna, Austria-based Philips Speech Recognition Systems (PSRS) is expected to fit in nicely with Burlington, Mass.-based Nuance's line of speech-driven clinical documentation and communication systems and expand Nuance's foothold overseas.
"Nuance has been disciplined and focused in our pursuit of the healthcare opportunity in North America, a strategy that has paid dividends both in our rapid growth and the broad adoption of our solutions," said Paul Ricci, Nuance's chairman and CEO, in a press release. "PSRS provides a solid foundation of customers, partners and European language-solutions as we expand our business in Europe and enable broader geographical leverage for Nuance's portfolio of healthcare products and services."
The deal is worth roughly $96.1 million (66 million Euros), comprised of a cash payment of roughly $31.6 million on September 26 and a deferred payment of roughly $64.5 million in cash on Sept. 21, 2009. Nuance officials expect the acquisition to add $37 million to $40 million in non-GAAP revenue in fiscal 2009 and $36 million to $39 million in GAAP for revenue after adjusting revenue lost in purchase accountings.
PSRS offers speech recognition software in 25 languages and more than 100 integration partners worldwide, including recent acquisitions in Germany and Spain.
"With multiple industry initiatives and significant government investment toward healthcare information standardization, Europe offers a large and growing market for innovative technology that improves provider productivity and the clinical documentation process," said Marcel Wassink, PSRS' CEO. "Together with Nuance and our broad partner base, we believe we can accelerate access to advanced, speech-enabled solutions that enhance the way medical reports are created and shared, as well as speed the utilization of electronic medical records."
Philips officials said PSRS' main focus in Europe is on the professional medical and legal sectors, while Philips Healthcare focuses more on services for the "diagnostic and therapeutic needs of patients and their caregivers." The company said applications powered by PSRS' SpeechMagic platform "tend to focus more on improving document creation and information management, as part of a hospital's administrative process, and are therefore not considered a strategic fit for Philips' healthcare business."
Nuance's portfolio of products includes Dragon Medical for real-time medical speech recognition, the eScription on-demand platform for computer-aided medical transcription, the Dictaphone Enterprise Express on-premise platform for integrated transcription workflow and speech recognition, and radiology products including PowerScribe, RadWhere, RadPort, RadCube and Veriphy crfitical test results management systems.
Thomas Beaudoin, Nuance's CFO, said the acquisition was spurred by Nuance's strong performance in Europe this year and the sustained performance of positive cash flows this year and projected cash flows next year.
"We anticipate that our healthcare business will now deliver worldwide revenues in excess of $410 million in fiscal year 2009," he said. "Operating margins in our healthcare business should be up sharply, above the corporate average for the full fiscal year, as we realize the synergies from fully integrating PSRS and leverage the operational momentum in our North American healthcare business."
According to Nuance executives, an estimated $10 billion is spent each year on medical transcription services in North America, while an estimated $2 billion is spent annually in Europe on manually processing clinical information. In England alone, the executives pointed out, the government has invested as much as $24 billion into the National Health Service National Programme for IT.
Philips had just announced a few days ago that the company will be integrating PSRS technology with Microsoft's Amalga suite of healthcare information technology. Last June, the company sold its 69.5 percent stake in transcription company MedQuist, Inc. And in March, the company announced that it was restructuring its healthcare informatics division.
How will this deal affect Nuance? Is this move really in Philips' best interests? Send your comments to Managing Editor Eric Wicklund at eric.wicklund@medtechpublishing.com.