Epocrates plans $75 million IPO, again

By Brian Dolan

Epocrates iPhone medical appEpocrates, a popular provider of mobile drug reference tools, has re-filed for an estimated $75 million initial public offering, that will see its shares traded on NASDAQ under the symbol EPOC. Epocrates plans to use proceeds from the IPO for working capital, research and development, sales and marketing and capital expenditures, according to a filing with the SEC. Epocrates filed similar $75 million IPO plan with the SEC in 2008, but later rescinded its plans in the face of the weakening economy.

Epocrates reported a loss of $855,000 for the first three months of this calendar year, compared to a profit of $993,000 during the same period in 2009. Epocrate's revenue slid 1.6 percent to $24.3 million.

Epocrates IPO filing sheds light on the company's user base, business model, future strategy and more. Here are some of the key excerpts from the filing:

Epocrates describes itself as a provide of mobile reference tools to healthcare professionals:

"Epocrates is a leading provider of mobile drug reference tools to healthcare professionals and interactive services to the healthcare industry. Most commonly used on mobile devices at the point of care, our products help healthcare professionals make more informed prescribing decisions, enhance patient safety and improve practice productivity."

Breakdown of Epocrates' user base, customer base and paid vs. free:

"Our user network consists of over one million healthcare professionals, including more than 290,000, or 40% of, U.S. physicians. We offer our products on all major U.S. mobile platforms including Apple (iPhone, iPod touch and iPad), Android, BlackBerry, Palm and Windows Mobile devices. To date, our interactive services clients have included all of the top 20 global pharmaceutical companies by sales and over 350 individual pharmaceutical brands."

"The number of users who are U.S. physicians increased approximately 17%, from approximately 240,000 at March 31, 2009 to approximately 280,000 at March 31, 2010. This high growth rate was largely due to rapid iPhone adoption by physicians. We expect our network of users to continue to increase at a lower rate."

"Users who paid for a subscription represented 32%, 16% and 12% of total active users as of December 31, 2007, December 31, 2008 and December 31, 2009, respectively."

Future strategy: Epocrates to expand free products while paid users continue to decrease

"As part of our strategy to strengthen and maintain our network of users and leverage this network to generate high margin revenue streams from healthcare industry clients, we plan to devote significant resources to expanding our free product offerings and more actively focus our marketing efforts on increasing awareness and adoption of our free products and services. We expect paid users to continue to represent a decreasing percentage of total active users. As a result, we expect revenues from subscriptions to our premium products to decrease as a percentage of total revenue in the future."

Epocrates EHR offering: Managing expectations, might be "too late to the market"

"We have invested significant resources during the three months ended March 31, 2010 to develop an EHR product and we expect to continue to invest significant resources through the remainder of 2010 and beyond. The EHR product has not generated any revenue as it has not yet been released. The market for such products is competitive and we have limited experience in that market. Several of our competitors have been participating in this market for many years and have invested significantly more resources in the development of their products than we have. Even if our product meets the requirements of meaningful use as defined by American Recovery and Reinvestment Act of 2009, and is certified as such, we may be too late to the market to compete for the growing number of physicians and others expected to adopt such products in order to qualify for the government incentives beginning in 2011. In addition, numerous other factors, including, but not limited to, development delays, unexpected intellectual property disputes and our inability to compete in the market could hinder customer acceptance of the product."

Read the entire SEC document for Epocrates' IPO here