IPO Report: Inovalon Holdings (INOV)

Francis Gaskins |

Inovalon.jpgInovalon Holdings (INOV) is a leading technology company that combines advanced cloud-based data analytics and data-driven intervention platforms to achieve meaningful insight and improvement in clinical and quality outcomes, utilization, and financial performance across the healthcare landscape. It is based in Bowie, MD.

Six other companies are scheduled for the week of Feb. 9, 2015. The full IPO calendar is available at IPOpremium.

Manager, Joint-managers: Goldman Sachs, Morgan Stanley, Citigroup, BofA Merrill Lynch, UBS Investment Bank
Co-managers: Baird, Piper Jaffray, Wells Fargo Securities, William Blair

INOV scheduled a $500 million IPO with a market capitalization of $3.3 billion at a price range midpoint of $22.50 for Thursday, Feb. 12, 2015 on Nasdaq. 

SEC Documents

Inovalon Holdings Overview

INOV is a leading technology company that combines advanced cloud-based data analytics and data-driven intervention platforms to achieve meaningful insight and improvement in clinical and quality outcomes, utilization, and financial performance across the healthcare landscape.

INOV's powerful platform drives high-value impact, improving quality and economics for health plans, hospitals, physicians, patients, pharmaceutical companies, and researchers.

A January 2013 McKinsey report estimates that utilizing data analytics could drive improvements in healthcare resulting in a beneficial economic impact of $300 billion to $450 billion annually.

Inovalon Holdings Valuation

Glossary

Retained earnings (mm)

.

.

$168

     

Per share dilution

.

.

-$19.93

     

-----------------------------------------------------------------------

     

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

annualizing Sept 9 mos

         

Inovalon Holdings (INOV)

$3,251

9.0

49.6

7.4

8.8

15%

           

Inovalon Holdings Conclusion

Positive

Cloud-based healthcare analytics

Rev +22% to $360mm, after -1% decline yr previous

Net income +66% compared to -40% yr previous

P/E of 49.6.  Earnings history is spotty


Price-to-sales 9; Price-to-tangible bk 7.4

Gross profit of 69%, for Sept 9 mos

Inovalon Holdings Business

INOV is a leading technology company that combines advanced cloud-based data analytics and data-driven intervention platforms to achieve meaningful insight and improvement in clinical and quality outcomes, utilization, and financial performance across the healthcare landscape.

INOV's powerful platform drives high-value impact, improving quality and economics for health plans, hospitals, physicians, patients, pharmaceutical companies, and researchers.

The value INOV delivers to clients is achieved by turning data into insights and those insights into action.

Through INOV's large proprietary datasets, advanced integration technologies, sophisticated predictive analytics, and deep subject matter expertise, we deliver seamless, end-to-end platforms that bring the benefits of big data and large-scale analytics to the point of care.

NOV's analytics identify gaps in care, quality, data integrity, and financial performance, while providing clients with differentiated capabilities to resolve these gaps.

100 Clients

During 2014, INOV provided these services to more than 100 clients representing approximately 200 patient populations, providing analytics informed by INOV's data and insight on more than 754,000 physicians, 248,000 clinical facilities, 120 million unique patients (covering approximately 98.2% of all U.S. counties), and 9.2 billion medical events, a number that has been increasing at a rate of approximately 3.0% compounding monthly, or 42.6% annually since 2000.

Inovalon Holdings Seasonality

INOV typically experiences the highest level of revenue in the second quarter of each year, which coincides with specific accreditation and regulatory deadlines.

In particular, as a result of certain data filing deadlines established by CMS, state departments of health, and the National Committee for Quality Assurance, or NCQA, clients typically engage INOV to perform higher levels of data-driven analytics and data-driven interventions during the first two quarters of each year when compared to other quarters of the year.

Conversely, the third quarter of the year has relatively few such deadlines and, as such, typically has lower levels of analytics engagement activity than other quarters of the year

Inovalon Holdings Rising Healthcare Costs

Healthcare costs in the United States have been increasing significantly for many years, currently approaching almost $3 trillion annually.

This rise in healthcare costs has driven a broad transition from consumption-based payment models to value-based payment models across the healthcare landscape.

As a result, the specific disease and comorbidity status, clinical and quality outcomes, resource utilization, and care details of the individual patient have become increasingly relevant to the various constituents of the healthcare delivery system.

Concurrently, the count and complexity of diseases, diagnostics, and treatments — let alone payment models and regulatory oversight requirements — have soared.

Inovalon Holdings Granular Data & Data Analytics

In this setting, granular data has become critical to determining and improving quality and financial performance in healthcare.

INOV believes that the opportunity is substantial as data increasingly becomes the lynchpin in healthcare — from clinical quality outcomes and financial performance, to the consumer experience and drug discovery.

A January 2013 McKinsey report estimates that utilizing data analytics could drive improvements in healthcare resulting in a beneficial economic impact of $300 billion to $450 billion annually.

As a reflection of the increasing need for data analytics, in the last several years, INOV's advanced analytics and data-driven intervention platforms have been driving significant economic impact through improvements in clinical and quality outcomes, disease and comorbidity data accuracy, and utilization, achieving hundreds of millions of dollars per year in quantified beneficial financial improvement for our clients.

Inovalon Holdings Intellectual Property

INOV owns and uses trademarks in connection with its applications and services, including both unregistered common law marks and issued trademark registrations in the United States.

Material trademarks, service marks and other marks include: CAAS, CARA®, Caresync Advantage, CCS Advantage®, CEDITM, ChaseWiseTM, Circle Logo®, Data-Driven Improvements in Health CareTM, Distributed AnalyticsTM, EMR AccelerationTM, eCAAS Advantage®, ePASS, Healthcare Empowered®, Healthier Members, Healthier Business®, HEDIS Advantage, HCC SurveillanceTM, HIX Foundation®, iDCT, INDICES, Inovalon, Inovalon — US, Inovalon — EU, Inovalon Healthcare Empowered (and Spiral Design to left) — EU, Inovalon (and Spiral Design on top), Inovalon (and Spiral Design to left), Inovalon Healthcare Empowered (and Spiral Design on top), Inovalon Healthcare Empowered (and Spiral Design to left) — US, Inovalon Healthcare Empowered (wordmark), Insights: a business intelligence solution, iPORT, iTCC, MORE2 Registry, PCIS, Prospective Advantage®, QSCL TM, QSFD, QSI TM, SRSA, Star Advantage®, Turning Data into Insight and Insight into Action®, and We See SolutionsTM. We also have trademark applications pending to register marks in the United States and European Union.

Inovalon Holdings Competition

The competitive landscape can be characterized by the following categories of companies that provide capabilities or solutions that compete with one or more components of INOV's platforms:

Providers of enterprise-scale, industry agnostic IT solutions, such as Oracle, Dell, SAP, SAS, and IBM;

Large-scale IT consultants and third-party service providers, such as Accenture and Deloitte Consulting;

Large-scale healthcare-specific solutions providers, such as McKesson, OptumHealth, Truven, and Verisk;

Point solution providers, such as DST Health, The Advisory Board, Alere, Altegra, Matrix, edifecs, and Silverlink.

5% Shareholders Pre-IPO

Keith R. Dunleavy, M.D.            44.8%  

André S. Hoffmann       23.4%                                     

Meritas Group, Inc.        38.7%

Lapis Ventures SAC Limited       16.0%

Meritas Holdings, LLC  6.1%    

Rick W. Lasch and Suzanne C.E. Lasch 5.7%    

Inovalon Holdings Dividends

No dividends are planned.

Inovalon Holdings Use of proceeds

INOV expects to receive $465 million from its IPO and use it for the following:

for working capital and other general corporate purposes; however, INOV does not currently have any specific uses of the net proceeds planned.

Additionally, INOV may use a portion of the proceeds for acquisitions of complementary businesses, technologies, or other assets or to repay outstanding indebtedness.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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