Who'd want to be a listed health IT company?

Poor old Orion Health took an absolute bath on the stock exchange this week, its share price plummeting 15 per cent on Monday and another 14 per cent on Tuesday after it provided an update to the market. The reason? A slightly lower revenue forecast, a shrinking bank balance and a few new contracts sliding into FY 2018, including a small but important win to provide a shared care record in the county of Dorset in the UK.

Orion is doing well in the massive US sector, which has been its largest market for some time, but it's likely that the company will have to ask investors for a bit more dough in the short term or start to draw down on its debt facility. As a health IT company like Orion is a long-term bet, you do have to wonder what the scaredy cats who deserted it this week were doing investing in the first place.

It's quite remarkable when you compare the share price fortunes of Orion Health with the darling of the NZ IT industry, cloud accounting software firm Xero. Securing its one millionth customer just last week, Xero remains a rock-star stock, despite the fact that it is yet to make a profit. In 2016 the two companies had almost identical revenues – about $A207 million each – yet Xero is valued at $2.61 billion while Orion sits at just $215m at its current share price of $1.32, a fraction of the $5.70 it listed at.

That being said, many other locally listed health IT stocks aren't faring that much better. On the Australian securities exchange, only Irish firm Oneview Health is comparable. It listed at $3.50 and is currently trading at $5.35, with a market capitalisation of about $200 million. (Oneview's main rival in the patient infotainment stakes is fellow Irish company Lincor, which was set to also list on the ASX as part of a merger with Hills Health Solutions, but that deal went pear-shaped.)

The other health IT stocks have much smaller valuations in comparison – Alcidion is trading at around $24m, MedAdvisor at $20m, Global Health at $12m, with 1st Available worth $8m after numerous capital raisings. Even less favoured by the market is Jayex Healthcare, which listed with great fanfare at 32c but is struggling mightily to get its neck above 3c. This must come as a concern to its executive chairman Michael Boyd, who once did wonders with a little pathology provider called Sonic.

Orion's founder and CEO Ian McCrae said this week he was sticking to his guns in terms of the company's large R&D spend, and he fully expects the company to become profitable in the current NZ financial year. The difficulties of explaining complex health software to the market compared with the latest dinky app might be one reason why listed health IT stocks find it so hard, but then again, NASDAQ-listed Allscripts had revenue of $US1.6 billion last year.

We think that Orion's technology, potential for new customers and its existing customer base in the US will hold it in good stead for the foreseeable future. Going public means investment but also scrutiny and a lot of speculation. Solid revenue, returning customers and potential for growth are what make companies viable, and Orion certainly has all that. It just has to hang on for the ride.

Our poll last week asked: Do you think real-time prescription monitoring should be fast tracked? An overwhelming number agreed with the proposition: 92 per cent said yes, just eight per cent said no.

Tags: Orion Health

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