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April 14, 2008

EnovateIT supplies custom computer wall stations, point-of-care carts, and articulating arms. Our mission is to create better patient care. We bring patients and caregivers closer by designing and facilitating effective solutions. Our integrated healthcare mobility solutions merge innovation, experience and technology to solve healthcare information needs from a single source. EnovateIT.

1. Tricky Dictaphone: Nuance Announces Plan to Acquire eScription

Facts and Background

Speech technology and imaging vendor Nuance Communications announced Tuesday that it will acquire transcription systems vendor eScription for $400 million. In conjunction with the transaction, privaty equity firm Warburg Pincus will buy $100 million worth of Nuance stock and warrants permitting it to purchase an addititional 3.7 million shares over the next several years.

Opinion

This is a logical transaction. I've said all along that eScription, as the #1 KLAS-ranked transcription product, would be a good catch for the right vendor. Nuance makes perfect sense.

Musings

Nuance's flagship Dictaphone product is the lowest ranked transcription and dictation application in KLAS. eScription is #1.
Biggest potential loser in the very small T&D market: Dolbey.
Nuance says it will use eScription's technology to enhance its on-demand documentation and transcription solutions.
At Nuance's revenue estimate of $65 million, Nuance paid a seemingly rich 6x revenue for eScription. However, Software as a Service companies are always valued higher than traditional software vendors.

“Healthcare starts with SCI” – from web-based self service portals and online ordering to creating the front door experience with robust scheduling and pre-registration, SCI leads the industry with more successful installs than ALL other vendors combined. We are transforming the way healthcare providers deliver a 5 Star patient experience and accelerate their revenue cycle.

2. GE: Imagine Our Stock Didn't Really Just Tank

Facts and Background

Shares in GE dragged the stock market down Friday as the company uncharacteristically announced flat revenue and a 6% profit drop, which it attributed to its financial services business lines. GE stock slumped 12%, its biggest fall since Black Monday in 1987. The Dow Jones Industrial Average dropped nearly 257 points after GE's announcement.

Opinion

If a multi-national conglomerate like GE can't escape economic pressures like credit woes, the declining dollar, and the influence of increasing oil and food prices on customers, then what company can? It's like the entire stock market dropped (which it did, actually).

Musings

GE isn't a bank, but it's darned close, with huge financial lending businesses and big exposure to sub-prime mortgages. Calls to dump those business lines (and NBC Universal) will get louder.
GE Healthcare had poor numbers too, but still booked $528 million in profit for the quarter.
The company blamed regulatory problems and declining provider reimbursement for its healthcare results.
Why didn't the company provide the usual investor guidance?
Friday's price drop knocked $47 billion off GE's market cap.
At a PE of less than 15 and still-monstrous profits, will investors jump back in?
GE is an early Q1 reporter. Expect other companies to follow their poor performance. GE may have had unusual exposure due to its financial divisions, but healthcare didn't do well either, even with strong international sales.
Upcoming earnings announcements from Cerner (April 22), Eclipsys (May 6), and McKesson (May 5) are not likely to trot out much good news. Those companies haven't warned either.

Sentillion, a company like no other. Since 1998, Sentillion has been revolutionizing healthcare IT with award winning, industry recognized identity and access management technology. Sentillion has successfully combined patented technology with a deep understanding of the healthcare industry to deliver the most comprehensive set of solutions for single sign-on, clinical workstation, user provisioning and virtualized remote access.

3. TriZetto Process Its Biggest Transaction: Selling Itself to Private Equity

Facts and Background

TriZetto Group announced Friday that it had agreed to be taken private by British private equity firm Apax Partners for $1.4 billion, a 25% premium to TZIX share price at Thursday's close.

Opinion

The "premium price" Apax Partners will pay is actually less than the closing share price in mid-February. Since investors seemed to be patient with TriZetto's performance, it's not really clear what benefits will come from going private, unless there's some big expansion underway that will require hard-to-get financing that would otherwise deflate stock price.

Musings

TriZetto customers Blue Cross Blue Shield of Tennessee and The Regence Group (which is also a BCBS organization) will make an equity investment in the company. Seems odd. If they really wanted a piece of the action, why didn't they just buy in at market price rather than sign on with private equity and its 25% surcharge?
Apax doesn't always close its deals.
Given the seemingly modest offering price, could other players interested in getting an instant healthcare presence jump in? This is exactly the kind of investment that excites companies interesting in back-office automation, particularly those in India that are enjoying a strong currency advantage to the dollar (Wipro, Infosys, Satyam, etc.)
Apax announced that the management team will remain unchanged. Unlikely.

Pring|Pierce executive search, specializing in the recruitment and development of exceptional talent in healthcare information technology. With 20+ years of experience in executive search and consulting, we specialize in providing leaders for early-stage, high-growth and mature companies in the healthcare information management market.