Greenway Medical (GWAY) IPO Suggests Big Opportunities For EMR Vendors

Posted on February 2, 2012 I Written By

Anne Zieger is veteran healthcare consultant and analyst with 20 years of industry experience. Zieger formerly served as editor-in-chief of and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. Contact her at @ziegerhealth on Twitter or visit her site at Zieger Healthcare.

While there’s a number of  large, publicly-traded EMR vendors out there — General Electric (NASDAQ: GE) and Cerner (NASDAQ: CERN) immediately come to mind — to date we haven’t seen many mid-sized or small companies kick off an initial public offering. But one medium-sized EMR/practice management vendor has broken the mold.

Today, Greenway Medical Technologies (NASDAQ: GWAY) took the plunge , pulling in $67 million to fund its operations. While the company had hoped to raise $100 million, its take is nothing to sneeze at. Health IT is a tricky investment, even for pros like yourselves, readers, and institutional investors in particular are a conservative bunch. The fact that they’re spending on a risky business means a lot.

Greenway, whose EMR is bundled with practice management software, had one heck of a ride today, with its stock climbing 30 percent during its first day of trading. The company sold 6.7 million shares at prices below its expected $11 to $13 range, diluting its intake somewhat, but the stock closed at a promising $13 per share.

The Carrollton, Ga.-based vendor has certainly done well in recent times. According to insider Wall Street blog Seeking Alpha, Greenway revenues shot up 55 percent, to $25.7 million, during the last quarter of operations. Operating margins went from negative to a positive 2 percent, which is at least a start.  Its biggest cash generator during the quarter was licensing revenue, which climbed 49 percent.

What’s interesting about this IPO isn’t just the fact that it ended well for Greenway. After all, it did take in less than planned, and the Wall Street crowd justifiably wonders how it will fare in a mind-boggling competitive market.  But it’s worth asking whether Greenway did better because it bundles both an EMR and practice management tools. Did the fact that Greenway wasn’t relying solely on EMR revenue contribute to its growth and financial success?  It would be interesting to find out, as that might help predict whether the bundled model is especially popular with physicians.

As for those who’d seek to imitate Greenway, they may have a chance if they move soon. Seeking Alpha editors think HITECH will still pump enough money into the EMR market to make these companies a reasonable investment. And given how many doctors and hospitals are still struggling to put EMRs in place, I have to agree.  In fact, given that an amazing number of hospitals and medical practices junk their first EMR, there may be a whole second wave of opportunity within three to five years.

All told, if the market’s response to a smallish IPO is any indication, you can expect a bunch of other EMR players to follow in its footsteps.  I’m thinking it will be companies in the $100m to $200m range, as they’re small enough to need capital (much cheaper capital than banks offer these days!) and nimble enough to benefit from the cash influx. Stay tuned and in coming months, I’ll tell you which other EMR and HIT companies I’m betting will climb onto the launch pad.