McCrae says deal will more than triple patients in his company's system to 280 million. PLUS: Obama has been so good to Orion – what happens after he's gone? | Will Orion raise more capital? With special feature audio.
Orion Health Group's deal to provide its Amadeus platform to Cognizant Group has the potential to triple the number of patient records hosted by Orion’s software, chief executive and majority shareholder Ian McCrae says.
The Nasdaq-listed Cognizant [NAS:CTSH] is the largest health insurance software provider in the US.
“The best way to look at it is that as a company we have about 90 million patients in our systems around the world,” Mr McCrae says. About 44 million of those are in the US.
“Cognizant has another 190 million patients, so this could potentially treble the number of patients we have within our systems,” he says.
“And that’s an important number because [healthcare software companies] are not getting valued on their ebitda but by the number of patients we look after.
“That’s best-evidenced by … IBM just recently purchased a company, Truven, and it was citing numbers in terms of dollars per patient.”
IBM bought Truven Health for $US2.6 billion in February, saying it would add about 212 million patient records to its system. Fortune pitched that deal as part of a global "land grab" for patients as the healthcare industry makes better use of data and analytics to improve outcomes at the lowest possible cost.
Mr McCrae says Truven's core business is insurance analytics, although there is "some overlap" with Orion. His company sometimes competes with IBM, and sometimes cooperates.
Shares soar
Big Blue was specific about the Truven deal, saying it cost $12 per patient record.
Mr McCrae won’t put any hard figures around Orion’s contract with Cognizant other than to say it’s a “material amount” and the deal will open “hundreds of opportunities.”
Despite the lack of financial detail, shareholders liked what they heard as the deal was revealed on Friday. Orion shares [NZX:OHE] jumped 15% to $2.87, partially reversing a battering that has seen the stock fall more than 55% since its November 2014 IPO. This gave the company the dubious distinction of being the worst performer in the NZX50 last year. It's now down "only" 45% over the past year.
In early Monday trading, Orion's shares were up another 4.53% to $3.00.
Life after Obama
Orion reported a first-half loss of $26.9 million for the six months ended September, from a loss of $14.8 million a year earlier. For its 2015 full-year, Orion lost $60.8 million.
First-half revenue rose to $101.7 million from $80.5 million a year earlier.
The company seems to be tracking toward the black and, investor jitters over contract delays notwithstanding, it has a huge pipeline.
But while the Cognizant deal is being cheered by shareholders, there is a potential dark spot on the horizon.
The US market has been crucial to Auckland-based Orion's success.
In particular, the Obama administration has been good for the company. Beyond its well-publicised reforms around insurance coverage, the president has allocated billions of dollars for healthcare providers to interconnect their systems. Orion was part of the winning consortium for several state-wide systems.
But the president will leave office after November, having hit his two-term limit.
As things stand, it’s odds-on he will either be replaced by Hillary Clinton or Donald Trump.
Ms Clinton advocated for healthcare reform under Bill Clinton’s presidency. It’s a safe bet she will push “Obamacare” reforms further.
Republican frontrunner Donald Trump, like others in his party, is hostile to Obamacare but vague on policy. He says he’ll replace it with “something terrific."
Mr McCrae, of course, dismisses any concerns, but it’s something for investors to keep an eye on.
“All over the world healthcare is getting modernised, things are getting put in place with slight variations from country to country,” the Orion boss says.
“I'm sure if the Republicans get in there will be some changes. It just creates new opportunity.
“[But[ Obamacare now is so advanced, the changes so entrenched, it's not something you can turn off.”
Capital raising?
Another recent tech IPO, Wynyard Group, got into all kinds of bother with its attempt to raise capital.
That won’t be an issue for Orion.
The company reported cash and equivalents of $77 million at the end of September, with cash outflow of $19.4 million in the half, up from $13.6 million a year earlier.
“We raised the money [$125 million with our IPO], we have a plan, and we have the money to deliver the plan. There is no intention today to raise extra money,” Mr McCrae says.
POSTSCRIPT
In an attempt to discern Donald Trump's healthcare policy, I waded through the New York Times' transcript of the latest Republican presidential debate, held in Houston on Feb 25. Read this excerpt and I promise you your eyes will bleed.
RUBIO: What is your plan on healthcare?
TRUMP: You don’t know.
CNN CHIEF POLITICAL CORRESPONDENT DIANA BASH: (inaudible)
TRUMP: ... The biggest problem...
(CROSSTALK)
RUBIO: ... What’s your plan...
TRUMP: ... The biggest problem, I’ll have you know...
RUBIO: ... What’s your plan... TRUMP: ... You know, I watched him melt down two weeks ago with Chris Christie. I got to tell you, the biggest problem he’s got is he really doesn’t know about the lines. The biggest thing we’ve got, and the reason we’ve got no competition, is because we have lines around the state, and you have essentially....
RUBIO: ... We already mentioned that (inaudible) plan, I know what that is, but what else is part of your plan...
TRUMP: ... You don’t know much...
RUBIO: ... So, your only thing is to get rid of the lines around the states. What else is part of your healthcare plan...
TRUMP: ... The lines around the states...
RUBIO: ... That’s your only plan...
TRUMP: ... and, it was almost done – not now...
RUBIO: ... Alright, (inaudible)...
TRUMP: ... Excuse me. Excuse me.
RUBIO: ... His plan. That was the plan...
TRUMP: ... You get rid of the lines, it brings in competition. So, instead of having one insurance company taking care of New York, or Texas, you’ll have many. They’ll compete, and it’ll be a beautiful thing.
RUBIO: Alright...
(APPLAUSE)
RUBIO: So, that’s the only part of the plan? Just the lines?
BASH: (inaudible)
TRUMP: The nice part of the plan – you’ll have many different plans. You’ll have competition, you’ll have so many different plans.
RUBIO: Now he’s repeating himself.
TRUMP: No, no, no.
(LAUGHTER) (APPLAUSE) (CHEERING)
TRUMP: (inaudible)
RUBIO: (inaudible)
(CHEERING)
TRUMP: (inaudible) I watched him repeat himself five times four weeks ago... RUBIO: ... I just watched you repeat yourself five times five seconds ago...
(APPLAUSE)
TRUMP: I watched him meltdown on the stage like that, I’ve never seen it in anybody...
BASH: ... Let’s stay focused on the subject...
TRUMP: ... I thought he came out of the swimming pool...
RUBIO: ... I see him repeat himself every night, he says five things, everyone’s dumb, he’s gonna make America great again...
BASH: ... Senator Rubio...
RUBIO: ... We’re going to win, win win, he’s winning in the polls...
BASH: ... Senator Rubio, please.
RUBIO: ... And the lines around the state.
(APPLAUSE)
RUBIO: ... Every night.
BASH: Senator Rubio.
(CHEERING)
UNIDENTIFIED MALE: I tell the truth, I tell the truth.
BASH: Senator Rubio, you will have time to respond if you would just let Mr. Trump respond to what you’ve just posed to him...
RUBIO: ... Yeah, he’s going to give us his plan now, right? OK...
BASH: ... If you could talk a little bit more about your plan. I know you talked about...
TRUMP: ... We’re going to have many different plans because...
BASH: ... Can you be a little specific...
TRUMP: ... competition...
RUBIO: ... He’s done it again.
(CHEERING) (APPLAUSE)
TRUMP: There is going to be competition among all of the states, and the insurance companies. They’re going to have many, many different plans. BASH: Is there anything else you would like to add to that...
TRUMP: No, there’s nothing to add.
(CHEERING) (APPLAUSE)
TRUMP: What is to add?
BASH: Thank you. Thank you both.
RUBIO: Alright.
Read the full transcript here.
