In its quarterly investor call yesterday, Epocrates interim president and CEO Peter Brandt announced that the company has decided to back away from its EHR initiative to re-focus on its core products, namely pharma-supported, mobile clinical apps that physicians use at the point of care. Epocrates' physician user base stands at 340,000 users, according to the company. Brandt said the company "fully intends" to help its existing EHR customers transition to another EHR platform if they decide to move to another platform, but Epocrates is also looking to find a strategic partner who will assume responsibility for the offering or an "outright sale of the asset". In any case, Brandt said that Epocrates' longterm investment in EHR will "wane".
Epocrates' EHR offering is already certified for meaningful use and it also recently added an iPad version. MobiHealthNews interviewed the company about the iPad version of its EHR just last week at the HIMSS event in Las Vegas.
Brandt said the company began to re-evaluate the strengths of its offerings three months ago when he first assumed his position as interim CEO.
"Now a question we have asked, as have many of you, is how does our electronic health record (EHR) initiative fit into that vision and build on our strengths?" Brandt asked during the investor call yesterday. Epocrates is "proud" of its EHR offering and believes it "compares favorably" to other offerings in the market since it "reflects physician and office workflow and the mobile nature of physicians better than many competitive products."
"With that said, we are already late to the game in an already crowded marketplace," Brandt admitted. "Importantly, we are acutely aware of the burgeoning costs of developing the Epocrates EHR and the drag it has had on our P&L. Additionally, our EHR efforts have hindered our ability to aggressively pursue opportunities more closely aligned with our core capabilities as described a moment ago. As a result, we are exploring strategic alternatives for our EHR offering."
Brandt contends that Epocrates' position as a leader in mobile clinical tools for physicians is still strong:
"Physician adoption of mobile technology has accelerated over the past few years with a majority using a device in their practice," Brandt said during his remarks on the call. "This will only continue to grow with the increased availability of resources for those devices. For the medical category of apps in the Apple AppStore there were upwards of 1,500 apps added in 2011 intended for physician use. Even with this app explosion, Epocrates remains by far and away the most frequently used app by physicians at the point of care. With physicians clearly going mobile, pharma companies have shifted their marketing mix as well, increasing mobile activity nearly three-fold since 2009. This is where Epocrates has an unparalleled position, providing a trusted channel for pharma to deliver information and resources to physicians at the point of care when and where prescribing decisions are being made."
More details in the press release below:
PRESS RELEASE: SAN MATEO, Calif., Feb. 28, 2012 -- Epocrates, Inc. EPOC -8.29% , a leading physician platform for clinical content, practice tools and health industry engagement, today announced a strategic streamlining of its business and reported its financial results for the fiscal fourth quarter and full year 2011.
"The foundational strength of Epocrates is our physician network," said Peter Brandt, Epocrates' interim president and chief executive officer. "We believe the opportunities to build upon that strength and expand beyond our current product portfolio throughout our physician network are significant and have the potential to generate meaningful revenue streams for the company. While we have developed a meaningful use certified, state-of-the-art electronic health record (EHR), including a native iPad version, the effort has hindered our ability to aggressively pursue such opportunities. As a result, we are exploring strategic alternatives for our EHR offering. By focusing more on the natural extensions of our core business and providing trusted content and collaborative solutions, we have the potential to support physicians to an even greater extent and to significantly grow our company."
For the year ended December 31, 2011, Epocrates' revenue increased 9.0% to $113.3 million compared to $104.0 million for the year ended December 31, 2010. Epocrates' revenue totaled $29.7 million in the fourth quarter of 2011 compared to $30.3 million in the same quarter of the prior year, a decrease of 1.9%.
For the year ended December 31, 2011, net loss was $3.6 million compared to net income of $3.8 million in 2010. On a dilutive basis, net loss attributable to common stockholders was $3.9 million, or $0.17 per diluted share, compared to net income attributable to common stockholders of $0.1 million, or $0.01 per diluted share, for the same period in 2010. For the fourth quarter ended December 31, 2011, net loss was $6.5 million compared to net income of $2.7 million in the same quarter of the prior year. On a dilutive basis, net loss attributable to common stockholders was $6.5 million or $0.27 per diluted share compared to net income of $0.8 million or $0.09 per diluted share in the previous fourth quarter. The decrease in GAAP and non-GAAP net income for the year to date and for the fourth quarter of 2011 was primarily attributable to the impairment of long-lived assets and goodwill associated with the EHR offering. Net (loss) income attributable to common stockholders is calculated as net (loss) income less the preferred stock dividend that was due to Epocrates' preferred stockholders less an allocation of any remaining net income to the preferred stockholders. Upon completion of the company's initial public offering of its common stock, the preferred stock was converted to common stock.
Epocrates' adjusted EBITDA, as defined in the GAAP to non-GAAP reconciliation provided later in this release, was $13.2 million, or 12% of revenue, for the year ended December 31, 2011 compared to $17.6 million, or 17% of revenue for the same period in 2010. Adjusted EBITDA was $3.1 million, or 11% of revenue, for the fourth quarter of 2011, compared to $7.1 million, or 23% of revenue, in the same period last year. The decline in adjusted EBITDA for the year to date and for the fourth quarter of 2011 was primarily attributable to the decrease in gross margin and operating expenses excluding the changes in non-recurring and non-cash items.
Cash, cash equivalents and short-term investments totaled $85.2 million as of December 31, 2011.
Brandt concluded, "Epocrates' success this year will be defined by our ability to realize the full potential of our physician network -- more than 340,000 strong. Our primary focus will be to strengthen our position of trust with physicians, based on value, which in turn will drive enhanced commercialization opportunities for our business."
Outlook for Full Year 2012
Epocrates expects full year 2012 revenue to be in the range of $105 million to $115 million, representing a decrease of 7% to an increase of 1.5% over full year 2011.
Earnings Call Information
Epocrates will host a conference call today beginning at 5:00 p.m. ET to discuss its strategic realignment, fourth quarter and full year 2011 results, followed by a question and answer session.
To participate in Epocrates' live conference call and webcast, please dial (877) 398-9481 (domestic) or (760) 298-5095 (international) using conference code 44991959, or visit http://investor.epocrates.com . A replay of the call will be available at the same address.
About Epocrates, Inc.
Epocrates, Inc. EPOC -8.29% is a leading physician platform for essential clinical content, practice tools and health industry engagement at the point of care. The Epocrates network consists of well over one million healthcare professionals, including approximately 340,000, or more than 50 percent of, U.S. physicians, who routinely use its solutions and services. Epocrates' portfolio includes top-ranked medical apps, such as the industry's #1 most used mobile drug reference and valuable manufacturer resources. Through these intuitive and reliable resources, the company supports clinical decisions, helps improve physician workflow and impacts patient outcomes. For more information, please visit https://epocrates.com/who .