Friday, January 24, 2014

Healthcare Plus Data Equals IPO

What do you get when you combine the health care industry with data analytics? It might not be so obvious, but two very large industries with strong growth trends provide the perfect ingredients for an initial public offering.  IMS Health Holdings, Inc. filed a registration statement with the SEC the first business day of this year. 

IMS is not a large company, but with a revenue run rate near $2.5 billion per year, it is has some girth to its business operations  -  healthcare informatics.  The company is profitable at least in terms of operations.  Unfortunately, interest expense on the $5.0 billion in debt IMS has managed to accumulate over the years.

Most likely though investors will be too busy panting over the growth prospects for IMS to worry much about the company’s balance sheet.  IMS has been delivering growth rates in the low double digits over the past four to five years.  In its registration statement, management is promising more of the same success by entering the BRIC markets – Brazil, Russia, India and China  -  where healthcare spending is expected to increase.  These markets are already generating over 17% of total revenue as it is.

IMS management has a few other tricks up their collective sleeve.  As the healthcare industry evolves, it will become increasingly dependent upon fast, accurate collection of data.  The company claims one of the largest collections of healthcare data in the world  -  10 petabytes!  IMS is plugged into over 100,000 data suppliers and gets updated on over 85% of the world’s prescriptions and millions of patient records. 

It is not enough though to simply collect data.  IMS has been trying to take the next step.  For example, it added Evidence 360 to its offering.  It relies on technology developed by IMS Health’s strategic partner Remedy Informatics to make it possible to combine datasets from different sources and then analyze the mash-up for help in making real time decisions. 

It is clear IMS management is quite willing to use other people’s inventions.  Over the last three years IMS Health has made twenty-two acquisitions, laying out $587 million to get access to a mix of software technology, customer relationships and talent.

No doubt with bank account pumped up with IPO cash, IMS Health will be able to continue its shopping spree.  They will not need to rely on the BRICs alone to deliver sales and earnings growth.  Priced right, IMS Health could be one of the most interesting public offerings in some time.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.




I really like stocks in the healthcare sector. I especially like those companies that use technology to reduce costs.

Anonymous said...

IMS failed big time in integrating the value of the technology companies acquired. SDI added negative value and IMS did nothing with the more sophisticated companies added to their shopping basket. It is still very much around commercial data and this segment is declining fast for IMS.