Software IPO: MedAssets Inc. Competes With McKesson, Eclipsys

Dec.10.07 | About: MedAssets, Inc. (MDAS)

MedAssets (NASDAQ:MDAS) is a provider of IT products and services to hospitals and healths systems to help them better manage cash low and improve operating margins. The company is expected to issue a public offering this week.

All quotations are from the company's most recent SEC filing with a link provided.

MEDASSETS (MDAS)
Business Overview (from prospectus)

We provide technology-enabled products and services which together deliver solutions designed to improve operating margin and cash flow for hospitals and health systems. We believe implementation of our full suite of solutions has the potential to improve customer operating margins by 1.5% to 5.0% of revenues through increasing revenue capture and decreasing supply costs. The sustainable financial improvements provided by our solutions occur in the near-term and can be quantified and confirmed by our customers. Our solutions integrate with our customers’ existing operations and enterprise software systems and require minimal upfront costs or capital expenditures.

Offering: 13.3 million shares at $14.00 - $16.00 per share. Net proceeds of approximately $182.8 million will be used to repay debt.

Lead Underwriters: Morgan Stanley, Lehman Brothers

Financial Highlights:

Total net revenue for the nine months ended September 30, 2007 was $134.6 million, an increase of $25.4 million, or 23.2%, from revenue of $109.2 million for the nine months ended September 30, 2006...Cost of revenue for the nine months ended September 30, 2007 was $17.8 million, or 13.3% of total revenue, an increase of $6.8 million, or 61.6%, from cost of revenue of $11.0 million, or 10.1% of total revenue, for the nine months ended September 30, 2006...Product development expenses for the nine months ended September 30, 2007 were $5.6 million, or 4.2% of total revenue, an increase of $0.1 million, or 2.3%, from product development expenses of $5.5 million, or 5.0% of total revenue, for the nine months ended September 30, 2006...Selling and marketing expenses for the nine months ended September 30, 2007 were $26.7 million, or 19.8% of total revenue, an increase of $2.0 million, or 7.9%, from selling and marketing expenses of $24.7 million, or 22.6% of total revenue, for the nine months ended September 30, 2006.

Competition:

Our revenue cycle management solutions compete with products and services provided by large, well-financed and technologically-sophisticated entities, including: information technology providers such as McKesson Corporation (NYSE:MCK), Siemens Corporation, Medical Information Technology, Inc. and Eclipsys Corporation (ECLP); consulting firms such as Accenture Ltd. (NYSE:ACN), The Advisory Board Company (NASDAQ:ABCO), Deloitte & Touche LLP, Ernst & Young LLP, and Navigant Consulting, Inc. (NYSE:NCI); and providers of niche products and services, such as CareMedic Systems, Inc., Accuro Healthcare Solutions Inc. and The SSI Group, Inc. We also compete with hundreds of smaller niche companies.

Within the Spend Management segment, our primary competitors are GPOs. There are more than 600 GPOs in the United States, of which approximately 30 negotiate sizeable contracts for their customers, while the remaining GPOs negotiate minor agreements with regional vendors for services. Seven GPOs, including us, account for approximately 85 percent of the market. We primarily compete with Novation, LLC, Premier, Inc., Broadlane, HealthTrust LLC and Amerinet.

Additional Resources: