Orion Health inks technology deal with Boots UK - not enough to reverse sliding share price

Wednesday 30th September 2015

Orion Health, the listed healthcare system software developer, announced a deal to roll out its technology to 2,400 Boots community pharmacy stores across the UK and Ireland.

The value of the contract has not been disclosed but chief executive Ian McRae said it was a mid-sized deal for Orion and potentially reaches 750,000 Boots customers. The announcement wasn't enough to reverse a 48 percent decline in Orion's stock since its listing last November, and the shares fell 2.7 percent to $3.25 today.

It is the first major deal Orion has signed in the pharmacy sector and McCrae said it was part of a trend towards care coordination extending beyond primary health givers such as hospitals toward pharmacies, big pharma companies, medical device firms, insurance companies, and co-ordinated healthcare providers. He said the same software it provided could be used across seven or eight sectors.

The Boots contract follows a successful pilot programme between the two companies involving a smaller number of stores.

McCrae said the company had several other big contracts due out before Christmas across other sectors, although he declined to name them.

Orion reported a $60.8 million loss for the year ended March 31, in line with its strategy to increase revenue before becoming profitable. Annual revenue rose 7 percent to $164.1 million. In a quarterly update in July, the company said it remained in growth mode and expected to have negative cash flow in the short-to-medium term as it grows capability.

Orion’s share price has been on a downward path since raising $125 million in an initial public offering and listing on the NZX last November. Investors got spooked when it failed to achieve revenue targets in the December quarter and the shares are now well down on its $5.70 IPO price.

McCrae, who remains the majority shareholder, said “I wish I knew” when asked what was driving the share price trend. “Essentially we’ve achieved our forecasts. Analysts are forecasting us to grow 30 percent and if that was wildly wrong, we’d have to correct it,” he said.

Forsyth Barr analyst Blair Galpin said two factors were weighing on its share price. The first was an overall conservative turn in investor sentiment in the past six weeks away from growth stocks that aren’t generating profits and towards more certain dividend yields. Another factor was a lag in Orion announcing some big contracts in the US that have been slow to materialise.

Galpin said a lot of the price movement in Orion’s shares had come off quite small volumes being traded.

BusinessDesk.co.nz

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