IMS Looks To Outperform In A Sluggish Economic Environment

| About: IQVIA Holdings, (IQV)
This article is now exclusive for PRO subscribers.


IMS Health is uniquely positioned to capitalize on the shift toward value based care.

IMS Health has increased its addressable market from just the $5B pharma data market to now a $75B market which includes data/IT/analytics for the broader healthcare industry.

IMS is being more competitive on pricing to win larger deals across both Info and Tech Services.


IMS Health Holdings, Inc. (NYSE:IMS)


IMS Health is a life sciences industry data and technology provider with a 60+ year legacy as the leading provider of pharmaceutical data in 100 countries. The company offers sales management, market research services, consulting and professional services and is now providing extensive technology related services. IMS's information segment accounts for approx. 60% of revenues and includes IMS's core data solutions based on 10 petabytes of proprietary data. Technology Services which makes up the remaining 40% of the business includes hosted and cloud based technology solutions, fully integrated workflow applications and real world evidence and clinical trial related offerings. 16% of its revenues are from developing markets.

Acquisitions broadens product portfolio - IMS acquired the CRM and strategic data divisions of French health information firm Cegedim for 385M Euros (approximately $417M) in 1H15. Key acquired assets include OneKey, a proprietary database of around 14M healthcare professionals and MI Touch, a mobile CRM offering that will become part of the IMS Nexxus commercial application suite of SaaS-based sales, measurement and marketing tools. OneKey is the marquee database in the healthcare industry and an important leverage point as IMS attempts to gain share in the highly competitive CRM market. IMS acquired Dataline Software in 1H15 to extend its technology-enabled Real-World Evidence (RWE) platform and accelerate delivery of integrated clinical and cost-of-care insights for assessing healthcare value and performance.

Industry analysis

The health care technology industry includes companies that provide application systems, data processing software, internet-based tools and IT consulting services to doctors, hospitals and businesses in the health care sector. Key elements of the health care IT industry (HIT) such as clinical decision-support systems and computerized physician order entry (CPOE) can minimize medication dosing errors in the in-patient pediatric and neonatal intensive care settings. Other HIT systems such as electronic medication administration records, pharmacy-based robots, infusion pumps/devices and medication bar-coding are likely to reduce medication errors but still require in-depth and expensive research. Electronic health/medical record (EHR/EMR) systems increase efficiency but require heavy investment.

Privacy and data security remain among the major policy and operational issues in US healthcare. Health Insurance Portability and Accountability Act (HIPAA) compliance is not only complex but expensive. HIPAA standardizes transactions and code sets but the application of HIT to clinical records (the EHR) has been slow. Only 10% of US hospitals have implemented HIT while 16% of primary care physicians have adopted EHRs and 37 states have e-health activities in Medicaid.

There is growing convergence of various technologies. Major growth drivers are the elderly population, baby boomers, and the need for compliance with federal and state regulations (HIPAA). These factors will promote increased demand for availability and efficiency of information.

Competitive advantage

IMS Health has changed since it went private in early 2010 and it is now more customer centric vs. data centric company. IMS has increased its addressable market from just the $5B pharma data market to now a $75B market which includes data/IT/analytics for the broader healthcare industry. It had acquired and built IT, analytics and application hosting capabilities, brought in-house development capabilities and increased focus on developing markets. This has led to accelerating organic revenue growth and faster EBITDA growth versus declines pre buyout. IMS's exposure to developing markets where demand for information and tech services is strong and its strategic acquisitions (e.g. Cegidim and Dataline software in 2015) is likely to expand IMS's data assets and add adjacent services and capabilities to Technology Services


  • Margin pressure due to integration hurdles related to the Cegedim acquisition integration
  • Slower penetration of Technology Services into IMS's existing Information segment client base
  • 65% of the Tech Services revenues is non-license/subscription based that can be negatively impacted by slower economic conditions or competition
  • IMS has 17% revenue exposure to developing markets and if emerging market risk aversion spikes, this could slow down IMS's faster growing exposures
  • Pharmaceutical company mergers or drug patent expirations that have a bigger negative impact on revenues than expected


Sustainable strategic path - IMS is now offering quality analytics and services that tie directly into the IMS data and provides with an opportunity to drive faster growth in the technology services segment. This entry into new markets expands IMS TAM (Total Addressable Market) from an estimated $5B to $75B which now includes core offerings, expanded offerings along with new customers. The company's new growth strategy leverages proprietary data contained within its legacy Information platform ($5B market) to provide a suite of technology services ($45B market) to existing pharma and life sciences clients. This is expected to provide a unique cost and efficiency advantage vs. pure IT-peers and underpins the company's double-digit growth outlook for technology services.

Big Data & Healthcare Analytics Company - IMS is a global leader in pharma/life sciences Intelligence and Technology services. The company's Intelligence platform (55% of revenues) is the industry gold standard for prescription drug sales and market IT services (45% of revenues) provide cloud-based applications (data management, analytics, CRM), real world evidence and consulting services and its business model is similar to an analytics company


FYE - Dec 31st





Revenue ($, mn)






Technology services





Total revenue





Annual growth (%)





Operating expenses ($, mn)






Technology services





Cost of revenues ($, mn)





SG&A ($, mn)





EBITDA ($, mn)





EBITDA Margin (%)





Investment Rationale

IMS Health has a significant presence among life science companies and given the growing importance of robust and reliable data collection and data analytics to improve patient care and optimize costs. It is uniquely positioned to capitalize on the shift toward value-based care, given its data capabilities and customer footprint that spans the entire healthcare supply chain from manufacturers to distributors to providers and patients as well as payers. IMS also has a diversified customer base that spans over 100 countries which help reduce quarterly earnings volatility and variability. It has high stability in its revenue with around 70% recurring revenue and about two-thirds of its revenues are derived from outside the US. This global scale is a unique value proposition that differentiates and positions IMS to further grow its partnerships with life science companies, providers and payers.


IMS looks to outperform in a sluggish economic environment as investors look for stocks that can create value despite economic headwinds. Hence it is an attractive investment vehicle in healthcare analytics space and investors will be willing to pay a premium for healthcare end-market exposure which has favorable industry trends and steady core business growth. It has strong prospects for revenue growth and margin leverage over the next 2 years from both continued momentum in key Tech Services offerings (including RWE offering and Workflow Analytics) as well as cost and revenue synergies from the Cegedim acquisition

IMS currently trades at $24.13 (closing price as on 8th Jan) with its 52-week range of $23.86 - $33.52 and looks attractive for potential upside from current levels over medium-term as outlined below -

  • With a revenue base of around $3bn and annual growth rate of 9-10% and EBITDA margin of 25% it is all set for strong EPS growth
  • Cegedim acquisition provides a source of potential upside for IMS driven by cost synergies while leveraging acquired assets through its distribution network
  • IMS can grow its EPS significantly over the next few years as it has strong potential to tap into the TAM of $75B
  • Strong growth in technology services likely as the company gains a larger share of pharmaceutical company spend in all areas (sales and marketing, IT, R&D) and successful penetration of existing information segment clients
  • IMS RWE offering is unique and greatly demanded in the current environment of drug pricing scrutiny while it is recharging the growth of its CRM offering which is a large market

Supporting Documents

  1. IMS-Q3-_15-Earnings-Call-Slides-FINAL.pdf

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Sources: Company Annual Reports, Company Press Releases, Investor presentations, SEC Filings -Form 10-K, 10-Q, Morningstar, Reuters, Dataline, Company website, Yahoo Finance)