2. Forward-Looking Statements
This presentation contains "forward-looking statements," including statements with respect to the financial results
the Company currently expects it will report for the third quarter, which are statements related to future, not past,
events, and, with respect to such anticipated report of its financial results, are based on the Company’s preliminary
review of its operations for such period, and which are unaudited and remain subject to quarter-end and year-end
adjustment, as well as potential revision upon completion of our third quarter financial statements and review
thereof by our independent registered accounting firm. Forward-looking statements usually describe our expected
future business and financial outlook or performance, and often contain words such as “will,” “believes,” “intends,”
“anticipates,” “expects,” "plans," "seeks," and similar expressions. Forward-looking statements, by their nature,
address matters that are, to varying degrees, uncertain and subject to various known and unknown risks. For us,
particular uncertainties and risks that could cause actual results to differ materially from our forward-looking
statements include: possible accounting adjustments and revisions to our current preliminary expectations as to
the results the Company will report for third quarter financial results; market acceptance and performance of our
products and services; the impact of competitive products and pricing; possible delays in the implementation of our
managed services offering; the risks and effects of our recent changes in our executive and Board leadership,
including the costs and expenses related to severance payments made to departing officers; the risks and effects
of our recent securities issues, including the issuance of certain senior secured notes; the past restatement of our
financial statements and other actions that may be taken or required as a result of such restatement; our ability to
generate sufficient cash from operations to meet future operating, financing and capital requirements, including
repayment obligations with respect to our outstanding indebtedness; risks associated with our prior delays in filings
with the SEC or our ability to continue to meet the listing requirements of The NASDAQ Stock Market; the costs,
risks and effects of various pending legal proceedings and investigations, including the formal investigation being
conducted by the Securities and Exchange Commission and the pending settlements of certain class action and
derivative lawsuits; and other risk factors detailed in our filings with the Securities and Exchange Commission.
These uncertainties and risks may cause our actual future results to be materially different than those expressed
in our forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date the statement was made. We undertake no obligation to update such
forward-looking statements or any of such risks, uncertainties and other factors.
*Note that as to Work In Progress, Merge Healthcare is not legally obligated to develop or continue to develop such
Works in Progress that may include the features and functionality described herein.
3. Merge Healthcare
Merge Healthcare Incorporated builds software solutions that
automate healthcare data and diagnostic workflow, to build a
better electronic record of the patient experience, and to
enhance product development for health IT, device and
pharmaceutical companies worldwide.
– eClinical Solutions
– Medical Imaging Solutions
– OEM Toolkits and Technologies
– Surgical Management Solutions
Working toward a better digital patient experience
5. Merge’s Competitive Advantage
1
R&D powerhouse – 4 R&D centers (Toronto, Cleveland, Raleigh/Durham and Shanghai)
Extensive IP portfolio – 24 patents granted, 31 applications
Technology
Strong academic and biopharmaceutical relationships
Leadership
Founding Member of DICOM Standard Committee
Sustained R&D investment
2
MergeCOM-3™ – the original DICOM toolkit
» The gold standard toolkit for healthcare digital imaging
Global Brand eFilm workstation® – the world’s most downloaded DICOM viewer
Recognition
» Over 100,000 downloads in the last 3 years and sold in over 70 countries
etrials ® eClinical Suite – integrated, best-in-class eClinical pioneer
» Used in more than 900 clinical trials and 450,000 patients globally
3
Channel Options: Direct, OEM, eCommerce
Geography: Global customer base
Diversified » Growing percentage of sales outside the US
Business Domain: Deep expertise in all stages of medical imaging workflow, surgery
management, clinical and business requirements, as well as clinical development
Revenue base: solid recurring revenue base + high margin software
4
Former Click Commerce management with proven track record
Extensive turnaround and M&A experience
Management Team
Substantial insider ownership
Management team is aligned with shareholders
6. Next Generation Technologies
• Handheld device solutions for data input and transfer.
• Ability to navigate and manipulate large data sets.
• Remote rendering techniques provide immediate access to
the entire data set without the need to download data to the
mobile device.
8. Global Brand Recognition
eFilm Workstation®:
a unique value in radiology for over 10 years
Cumulative eFilm downloads (in thousands)
120
#1 downloaded desktop
diagnostic imaging
100 software
Used in over 70 countries
80
Extensive user database
60 Serves as the basis for
eFilmeFilm v1.x
v1.x eFilm v2.x v2.x eFilm v3.x v3.x
eFilm eFilm building complete imaging
40
solutions and new
20
enterprise customer
acquisition
0
2001 2002 2003 2004 2005 2006 2007 2008 2009
9. Global Brand Recognition
~75% of all Modality
Vendors
~25% of all Advanced
Imaging companies
Many market adjacencies
(i.e. Non-Destructive
Testing)
175 OEM Customers
10. Global Brand Recognition
One of the most
recognized brands in
the eClinical space
Used in more than 900
trials
450,000 patients
70 countries
All Phases of clinical
development
Every major therapeutic
area
11. Diversified Business Model
Healthcare IT market
OEM Solutions ISVs
OEMs
eCommerce Solutions VARs
Distributors
HC Providers
Direct Solutions Clinicians
Pharma,
Biotech,
eClinical Software and Services Medical Device,
CROs
12. Business model example: Mammography
Multi-modality, vendor-neutral
digital mammography workstation
Integrated/Standalone/OEM options
Hundreds of systems installed
14. eClinical Deployments
North America Europe
Cardiology
Cardiology
Immunology/Infectious Disease
Endocrinology/Metabolic Musculoskeletal/Rheumatology
Gastroenterology Oncology
Immunology/Infectious Disease Other
Musculoskeletal/Rheumatology Pediatric
Psychiatry/CNS
Oncology
Urology
Other
Pediatric Asia
Psychiatry/CNS Cardiology
Respiratory Immunology/Infectious Disease
Musculoskeletal/Rheumatology
Urology
Oncology
Women’s Health Psychiatry/CNS
Africa
South America Cardiology
Cardiology Immunology/Infectious Disease
Gastroenterology Musculoskeletal/Rheumatology
Oncology Australia
Immunology/Infectious Disease
Psychiatry/CNS Cardiology
Musculoskeletal/Rheumatology Immunology/Infectious Disease
Oncology Musculoskeletal/Rheumatology
Pediatric Oncology
Psychiatry/CNS Psychiatry/CNS
15. 2009 Business Objectives
• International growth
• Investment in brand leader franchises
• Leveraging market adjacencies and
product extensions
• Strategic mergers and acquisitions
16. Q2 International Growth
• China
– Retained operations in January 2009
– Three new contracts - each for different technology
• Russia
– Revitalized OEM reseller agreement
– New Fusion distribution agreement
• India
– New OEM reseller agreement
– New eFilm Workstation® agreement
• Additional distribution agreements adding
countries in Europe, Middle East, Central
America, Australia
17. Traction in Market Adjacencies
• HL7 Toolkit
– Leverages DICOM strength to move into general health IT
connectivity
– Introduced April 2009
– 3 new customers in Q2
• Hosted RIS/PACS
– Leverages RIS/PACS strength to offer hosted solution format
– Introduced February 2009
– 2 new customers in Q2
• Adjacent segments
– OEM deal with leading EHR vendor
– Renegotiated OEM deal with largest veterinary imaging vendor
18. M&A – Surgical Solutions/Frontiers
• Certain assets acquired on April 15th, 2009 from eko systems, Inc.
• Surgical Management System Solutions
– Estimated to be less than 10% penetration rate as of 2008
– Opportunity for innovative, nimble, best of breed player
– Frontiers product designed by anesthesiologist and proven on
the market
• New version completed and major customers upgraded in Q2
19. Challenges of Paper Based
Anesthesia Records
• Patient Safety
• Compliance Support
– JCAHO
– HCFA/CMS
– HIPAA
– Local Initiatives
• Reimbursement
– DRG payments
– Pharmacy
– Materials / Supplies
– Accurate Time Capture
– Professional Service Through-Put
• Management Support
– Productivity
– QA Activities
– Best Practices
• Legal Medical Record
Frontiers™ provides digital workflow for an electronic record
20. Frontiers – Customer Feedback
Mike Abramowitz MD, Fairfax Hospital
“Frontiers allows you to spend more time directly with the patient
and not with the chart. A good example would be when I have rapid
turn cases. Typically, I might have five BMT's to do in an hour. With
Frontiers, the documentation is thorough and complete for all my
cases. By the time I get to the PACU, the records are finished. If I
were charting on paper, I would have to start my records in the
recovery room.”
John E. Lindsey Jr. MD, President Orthopaedic Anesthesia
Specialists, LLC.
“Frontiers' user friendly software and intuitive documentation tools
have enabled our clinicians to rapidly transition from time consuming
paper-based documentation to electronic record keeping. Frontiers
has significantly reduced the time we devote to documentation and
has thereby provided us with more time to focus on the patient.”
21. M&A – Merge eClinical
• Acquired etrials Worldwide Inc. on July 20,
2009
• Clinical trial data management technology and
services
– One of the last industry segments that have yet to convert from
paper to electronic processes
• Customer base of major pharmaceutical
companies and CROs, as well as small and
mid-sized pharma, biotech and medical device
companies.
22. eClinical Market Challenge
52
$800M
Increasing R&D costs, cost recovery extended
• Real pressure to get new and safer drugs to market
faster
• R&D costs on the rise (clinical & discovery) – by as R&D New
much as 50%2 Cost Drugs
• Cost recovery time is down by as much as 30%3
Increasing demands by regulatory agencies
• Increased regulatory pressure & oversight by FDA
and regulatory authorities
• Approval process is slowing and arduous
• Mandate for use of clinical technologies for
submissions and patient reported outcomes 1996 2006
Merge eClinical Proven to Increase the Chance for Trials’ Success
by as Much as 30%, While Decreasing Overall Costs by Almost 30%
Sources: 1: Big Pharma's Black Hole, 1/22/07, Forbes.com , (http://www.forbes.com/business/2007/01/19/pfizer-pharma-cuts-fda-biz-
cz_mh_0122pfizer.html) , 2, 3: Lehman, Tufts and CenterWatch
23. MRGE Financial Highlights
Dollars in thousands, except for share data Three Months Ended
9/30/2008 12/31/2008 3/31/2009 6/30/2009 TTM
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Software and other $ 7,398 $ 7,828 $ 8,684 $ 9,020 $ 32,929
Services and maintenance 7,218 7,233 6,625 6,333 27,409
Total net sales 14,616 15,061 15,309 15,353 60,338
Software and other 1,314 1,279 1,230 880 4,703
Services and maintenance 2,528 2,200 2,150 2,373 9,251
Amortization and impairment 742 1,105 650 623 3,120
Total cost of sales 4,584 4,584 4,030 3,876 17,074
Gross margin 10,032 10,477 11,279 11,477 43,264
Softw are and other GM % 82.2% 83.7% 85.8% 90.2% 85.7%
Services and maintenance GM % 65.0% 69.6% 67.6% 62.5% 66.2%
Overall GM % 68.6% 69.6% 73.7% 74.8% 71.7%
Sales and marketing 1,824 1,817 1,672 1,826 7,139
Product research and development 2,931 2,089 2,271 2,543 9,834
General and administrative 3,483 2,368 3,252 2,104 11,207
Restructuring & other expenses (205) (46) - - (251)
Depreciation & amortization 654 576 548 546 2,324
Acquisition-related expenses - - - 339 339
Total operating costs and expenses 8,687 6,804 7,743 7,359 30,593
Operating income 1,345 3,673 3,536 4,119 12,671
Other expense 648 1,700 672 3,652 6,671
Income before taxes 697 1,973 2,864 467 5,999
Income tax expense 269 55 22 21 366
Net income $ 428 $ 1,918 $ 2,842 $ 446 $ 5,633
EPS - diluted $ 0.01 $ 0.03 $ 0.05 $ 0.01 $ 0.10
Weighted average shares outstanding - diluted 56,859 56,792 57,190 57,905 57,905
24. Key Financial Metrics
Gross Margin % Operating Income Margin % EBITDA Margin %* Net Income Margin %*
74.8
73.7
69.6
68.6
40.6 41.1
34.8
31.1
26.8 26.0
24.4
23.1 22.3
21.1
17.9 18.6
12.7
9.2
2.9 2.9
Q3 2008 Q4 2008 Q1 2009 Q2 2009
* Dotted lines represent EBITDA and Net Income adjusted for non-cash equity impairment of 1.4M and 3.5M for Q4 08
and Q209, respectively.
