What’s with the Pro Medicus (ASX:PME) share price today?

The Pro Medicus Limited (ASX: PME) share price is inching lower despite announcing a new contract award. Here’s what you need to know.

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The Pro Medicus Limited (ASX: PME) share price is inching lower today. This comes despite the company announcing a new contract award with a major university health system in the United States.

At the time of writing, shares in the leading health imaging company are slightly down 2% to $46.

What’s driving the Pro Medicus share price lower?

The Pro Medicus share price is in negative territory as investors seem unfazed by the company’s latest contract win.

According to its release, Pro Medicus advised that its United States wholly-owned subsidiary, Visage Imaging, Inc., has signed a 7-year, $31 million deal with a major academic health system.

This includes UC Los Angeles (UCLA), UC San Francisco (UCSF), UC San Diego (UCSD), UC Davis (UCD) and UC Irvine (UCI).

Based on a transactional licencing model, the agreement will see the company’s Visage 7 Viewer deployed across all five campuses. This will create a unified diagnostic imaging platform which will replace the current PACS systems. Pro Medicus noted that this will be the first time the entire system will operate under the Visage platform.

In addition, the deal allows the option for the health system’s affiliates to adopt the Visage platform.

Pro Medicus revealed that it will begin planning the rollout, with the initial go-live date set for H2 CY21. It expected all campuses to be operating the Visage platform within the next 18-24 months.

Management commentary

Pro Medicus CEO, Dr. Sam Hupert, hailed the contract win, saying:

This was a highly sought after, extremely competitive tender and as you would expect for such a large and highly sophisticated client, they underwent a very extensive evaluation process that included onsite pilots involving all five main campuses.

The fact that we won unanimous endorsement speaks to the strength of our offering.

We have won six out of six of the major contracts in our market over the last seven months. These have been across a broad range of opportunities in both the academic and non-academic-IDN space, five in North America and one in Europe. Two have been for more than one of our products and three will be deployed in public cloud. This confirms our view that our solution, more so than any other, is ideally suited to a large percentage of the total addressable market.

It’s worth noting that the Pro Medicus share price is up over 30% year to date due to positive investor sentiment. Earlier this month, the company announced it received United Stated Food and Drug Administration (FDA) approval for its Breast Density Algorithm. In January, the company won a 7-year, $40 million contract with Intermountain Healthcare.

Based on the current share price, Pro Medicus commands a market capitalisation of close to $4.8 billion.

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Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Pro Medicus Ltd. The Motley Fool Australia has recommended Pro Medicus Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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