Epocrates seen as boon for athenahealth
"The acquisition will immediately provide a fertile lead generation source and longer-term revenue synergies," wrote Piper Jaffray analysts Sean Wieland and Mohan Naidu, in a Jan. 10 brief. They wrote the brief after having dinner with athenahealth chief financial officer Tim Adams and Vice President of Marketing Rob Cosinuke. Cosinuke, who is a co-founder of Digitas, will oversee Epocrates, which will run as a separate division.
"Every physician who has used Epocrates has a love affair with this brand," said Cosinuke. As he sees it, that bodes well for athenahealth. Athenahealth can tap into this love affair, he said, and access for physicians and exploit this unique combination of synergies.
Athenahealth has deep information and deep functionality, a great match for a company like Epocrates, he said, which at one time set out to build an electronic medical record (EMR).
Epocrates executives were showing off an iPad version of their new EMR at the HIMSS12 Conference and Exhibition in Las Vegas, Feb. 20-24, but before the month was out they announced they would back away from their two-year effort to better focus on their mobile applications.
Today, the Epocrates acquisition is being viewed as a way for athenahealth to grow its market.
"We are more bullish on athenahealth's continued growth prospects," the analysts wrote, while noting that Piper Jaffray served as financial adviser to Epocrates.
More than 330,000 physicians use Epocrates, according to company officials.
"A minimal 10 percent cross-sell rate would double the size of the company (revenue and docs on network, from ATHN stand-alone), and we think the cross-sell rate could ultimately be as high as 30 percent," Wieland and Naidu wrote.
Athenahealth CEO Jonathan Bush, of course, is also bullish on the pending acquisition.
"I have been an admirer of Epocrates since it first emerged and have watched the company grow consistently, one app download at a time, as it has cemented itself into the consciousness of America's physicians," said Bush. "No other company has been able to replicate the brand awareness, familiarity and trust that Epocrates has across the clinical mobile user base."
When asked if he worries about growing too fast, Bush said, on the contrary, he worries about growing too slow.
"My concern about growing slow is, you know, we only have 5 percent of the doctors in this country on this network. Networks only work, having a telephone only works, if there's someone to call. So one of the key elements of this vision is that there be receivers coordinated on this network, so we need to hurry up and get more or nobody will want to be on it."
The boards of directors of athenahealth and Epocrates have agreed to a price of $11.75 per share, in cash, for a purchase price of about $293 million. The purchase price represents a 22 percent premium over the closing price per share of Epocrates on NASDAQ Jan. 4. The all-cash offer for all outstanding shares of Epocrates' common stock.
Athenahealth intends to finance the acquisition using available cash and funds available from its existing credit facility, Bush said.
The closing of the transaction is subject to the approval of Epocrates shareholders and other customary closing conditions. The closing is expected to occur early in the second quarter of 2013. Epocrates shareholders representing approximately 17.5 percent of the outstanding common stock have agreed to vote their shares in favor of the transaction.
Athenahealth believes it will be able to better serve an expanded network of providers with the acquisition by building on Epocrates' success to date in transforming the way physicians access and engage with clinical information, with each other, and with their patients, Bush said.
"We are confident that we can provide Epocrates with the stewardship and resources it needs to grow and develop within healthcare, and that Epocrates' capabilities are going to mesh exceptionally well with athenahealth's cloud-based physician and patient services," he added.
"It one of the great band names in the physician space," Cosinuke said.