IBM Takes Another Step Toward HAL

WellPoint Inc., (NYSE:WLP) which provides health care to over 34.2 million members, will use IBM’s (NYSE:IBM) super computer Watson to help diagnose medical problems and authorize appropriate treatment. Watson’s lightning speed and vast health care database is starting to resemble HAL from the science fiction movie 2001: A Modern Space Odyssey.

The WellPoint application will assemble data from three sources, namely a patient’s chart and electronic records that a doctor or hospital has, the insurance company’s record of medicines and treatments, and Watson’s huge database of textbooks and medical journals.

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IBM says Watson can analyze all the available information and answer a question within a few seconds, providing several possible diagnoses or treatments, ranked in order of the computer’s confidence, along with the basis for its answer.

WellPoint and its customers are not the sole beneficiaries in this. Pharmaceutical companies like Pfizer (NYSE:PFE) and Johnson and Johnson (NYSE:JNJ) can keep the hospitals supplied with the required medicines at the right time. Biotechnology companies like Amgen (NASDAQ:AMGN) can target the appropriate therapies based on the prevailing requirement.

Lori Beer, an executive vice president at Indianapolis-based WellPoint (NYSE:WLP) views this as a real game changer in health care. Dr. Sam Nussbaum, WellPoint’s chief medical officer, said in a prepared statement “Imagine having the ability to take in all the information around a patient’s medical care — symptoms, findings, patient interviews and diagnostic studies, Then, imagine using Watson analytic capabilities to consider all of the prior cases, the state-of-the-art clinical knowledge in the medical literature and clinical best practices to help a physician advance a diagnosis and guide a course of treatment”.

IBM (NYSE:IBM) had said early on that health care field can provide commercialization opportunities for Watson. IBM Shares are currently down about 1% to about $160. The company currently sports a Price to Earnings (P/E) ratio of about 13 which is much higher than its peers. The company also trades at a sales multiple of 1.8 which is also higher than its industry.

Technically speaking shares trade below the declining 50 day moving average and above the rising 200 day moving average. The MACD is showing a bearish crossover while RSI is pointing down at about 39. WellPoint shares are trading up over 1.5% at $62.85.

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