The deal was the result of a year-long study of potential mergers and acquisitions. The company is still participating. Visage was making a deal, but the buyer was backing out.

The secret to Visage’s success is its ability to enable radiologists to view reports and large image files generated by X-rays and other scans from their mobile devices in seconds, enabling remote diagnostic decisions.

For an understaffed profession, this has become a game changer for medical groups trying to attract and retain staff, allowing them to offer flexible working conditions for radiologists. This has become even more important through COVID-19.

Dr. Hupert became a millionaire thanks to the growth of Pro Medicus. Alcine Ouspian

The company has developed its own streaming platform with Visage 7. This allows multi-gigabyte files to be viewed almost instantly without requiring lengthy downloads. In contrast, competitor software (owned by Philips, Siemens, GE Healthcare, and Agfa) uses traditional “press and send” technology that requires large files to be compressed, sent, and opened on the other side after a few minutes. still depends on

Today, Pro Medicus still runs radiology information system software called Visage RIS, but it’s this imaging software that accounts for most of its revenue and drives business growth.

It also uses the original Visage R.&The D-Team from Berlin is still the driving force behind Pro Medicus’ technical progress.

“They are unique and the motes around their technology are really broad,” Hester said.

“I think their competitive advantage is huge compared to their peers. I am asked if no one has a good answer.

“It’s amazing, and that’s why what they do brings in price increases and gains market share.”

Market capitalization soars

When Pro Medicus acquired Visage in 2009, the business had a market capitalization of $115.3 million.

The company is currently valued at $5.6 billion and closed Friday at $53.69 per share. This is about a 50-fold increase.

A significant increase in value puts Dr. Hupert and co-founder Anthony Hall on the rich list, with the two of them owning 26% of the business.

Earlier this month, the company revealed that revenue increased 37.7% to $93.5 million in the year ended June 30, while net income jumped 43.7% to $44.4 million.

But what really excites investors and analysts is the company’s pre-interest and tax profit, which has risen from 63% to 67%.

“We find that about 80% passes the EBIT line for every dollar of revenue growth,” Hester said.

The company has a small sales team of just a few people for a business with revenues of nearly $100 million. A lean team means very low customer acquisition costs.

“A 67% EBIT margin is unheard of for most companies,” said Morgans research analyst Ian Wilkie.

“They did all the development years ago, so we’re excluding R in progress.&They do the D work they need to stay ahead, they go out and sell the software, but it doesn’t cost much to deliver it. ”

Melissa Benson, an equity research analyst at Wilson’s, which spans both technology and healthcare, said the firm compares Pro Medicus to tech stocks as well as healthcare companies, and it still stands out. rice field.

“The comparisons we looked at were WiseTech, Xero, TechnologyOne, and Altium. They are best in class for both their technology and healthcare peers in terms of operating margin and return on invested capital,” she said. rice field.

top hospital

The company grows its user base at top US hospitals, including Yale, NYU Langone Health, Mayo Clinic, Partners Healthcare and Northwestern Memorial Hospital.

Last year, the company signed three new seven-year contracts worth $40 million and $28 million, respectively, with Novant Health in North Carolina and Allina Health in Minneapolis. Also in Northern Virginia, he signed an eight-year contract with Inova Health System and extended his contract with the German government.

Also, for the first time, two major contracts were renewed, with both Sutter Health and Wellspan Health signing new multi-year agreements worth a total of $47 million.

These were the first renewals negotiated by Pro Medicus, with the group re-signing with a longer-term, higher-paying contract. The company has six contracts that he plans to renew in the next year or two.

“what [renewals] Michelle Lopez, Head of Australian Equities at global investment firm Abdulun, said:

“If they lose a customer, that’s a big red flag for product quality.

“The contract provides a minimum contract revenue base per trial… but every contract they’ve made goes beyond that. [that minimum] This is because the number of exams conducted is always high. Testing is the underlying driver of the company’s growth. ”

Lopez said the amount generated on top of the contracted minimum is typically around 10%, but in some cases can be significantly higher.


Pro Medicus has invested not only in radiology products, but also in expanding into so-called “other disciplines”, first building cardiology imaging capabilities into Visage 7 software. The company is also investing in creating an artificial intelligence arm of its business with its first breast density algorithm (developed at Yale). Neither of these advancements have yet generated revenue.

Lopez was optimistic about the potential of both of these investments, but most analysts had yet to factor in significant benefits from these investments into their models for years to come.

“I don’t model cardiology heavily. It’s probably a 5% contribution in foreign years,” Wilkie said.

“But if one big customer, like Mayo Clinic, says they’re implementing it and gives them two thumbs up, lots of people will follow. people who do

“The AI ​​front is difficult because redemption is difficult on the front end. [from US insurers]It’s like an extra cost… bells and whistles. ”

abdrn first acquired Pro Medicus in 2019. At the time, the business was priced at around $20, but in 2020 he upped his position when the COVID-19 market panic dropped it to around $16.

Investment managers have been advising the company on improving governance and diversifying its board over the past few years, Lopez said.

Lopez, Benson, Hester, and Wilkie all use discounted cash flow (DCF) models rather than looking at price-to-earnings ratios (currently 126 times P/E) to assess company valuations. increase. Based on this, the company’s current pricing is more palatable.

“It looks expensive in the short term, but we expect it to continue to grow to multiples of that,” Wilkie said.

Benson has the highest price target of $62 per share of any analyst covering the business.

She said she runs a DCF, but thinks it’s likely she’ll get one, so she’s factoring in a significant uptick.

“They’ve been in the US for over seven years and none of them come close to achieving the technical nuances they have,” she said.

“All of the incumbent Pro Medicus with contracts from Philips, Siemens, GE, Agfa, etc. have no way to maintain their market share and are being taken over by Pro Medicus. There comes a point when the way is to buy it…we think it’s a critical time in the next 12 to 36 months.If Pro Medicus continues on this trajectory, Incumbents do something.


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