Investors cautious about e-health sector - analysts
By Angela Moore
NEW YORK, Oct 24 (Reuters) - Electronic health care companies need to show investors that in the third quarter they moved toward profitability and gained a firmer financial foothold as the fledgling industry struggles for survival, analysts said.
``In terms of financial results, it won't be a very important quarter, but we do want to see traction for the businesses,'' said Kevin Berg, an analyst with FAC/Equities.
``It's a process that's going to take place over the next three to five years, not over the next three to five months,'' he said. ``That was the original misperception with this industry, that it was going to change overnight. That has not happened, but it's progressing in the right direction.''
Almost by default, the leadership position in the sector has been snagged by WebMD Corp. (NasdaqNM:HLTH - news) which offers systems for exchanging medical and administrative information over the Internet.
Its wild rise and fall and, most recently, the integration of the acquisition of its main competitor, CareInsite Inc., and CareInsite's parent, Medical Manager Corp., have been closely watched by Wall Street
Since the deal closed last month, the company has announced a major restructuring, unveiled a wireless product and unseated several executives, including the co-chief executive, from the former regime.
The e-health sector encompasses insurance claim processing, eligibility checks, online supply purchasing, appointment scheduling, prescription writing, personalized content, digital medical records and the ordering of laboratory tests. Eventually, many of these applications will be run by hand-held computer or a wireless device.
But much of this is still a dream. While there are dozens of companies that process insurance claims electronically, for instance, only a handful of these use the Internet.
Pure content has been the kiss of death for many technology companies and health Web sites have been no exception. These companies, which offered free content to consumers, relied on advertising revenues and strategic alliances for much of their financial support.
Beleaguered drkoop.com Inc. (NasdaqNM:KOOP - news) has been the most high-profile casualty of the fickle market. The company made its market debut with fanfare in June of last year, but this August the company installed a new management team and cut its work force by one-third. This came after it had laid off another 35 percent of its staff in May.
Shares have been hovering at less than $1 each.
``I'm sure we'll see better numbers in drkoop's next earnings report and they're making an effort to create new revenue streams and to boost their relationships with pharmaceutical companies,'' Rachel Terrace, an analyst with Jupiter Research, said. ``But their traffic with consumers has been decreasing so that'll hurt ad revenue.''
The company, which was co-founded by former U.S. Surgeon General C. Everett Koop, is expected to try and revamp its unpopular business-to-consumer strategy and reposition itself as a business-to-business company.
Companies that supply content, like adam.com Inc. (NasdaqNM:ADAM - news) could survive the shakeout, because more bricks and mortar health care companies are working to beef up their online offerings.
``Major health insurers are beginning to look at making a more useful consumer site,'' said Elizabeth Boehm, an analyst with Forrester Research. ``While movement is slow, it's going to create opportunities for content providers who don't have to have a destination site in order to survive.''
Most investors are in a wait-and-see mode, analysts said, and interest in the sector will remain weak for the short term as the sector shakeout continues.
``Over time companies will have to do a better job of emphasising their ability to deliver a return on investment for customers,'' Merrill Lynch analyst David Risinger said. ``There has to be more emphasis on substance and value than on hype and marketplace momentum.''
Company Q3 EPS estimate Q3 year ago
adam.com ($0.22) ($0.13)
Allscripts ($0.19) ($0.25)
drkoop.com -- ($0.68)
Medscape ($1.92) --
Neoforma ($0.39) ($0.46)
WebMD ($0.22) ($0.17)
NOTE: Analyst consensus estimates provided by First Call/Thomson Financial.
biz.yahoo.com |
