While the red-hot biotech IPO market has grabbed headlines over the past year, tech companies that service these businesses have also cashed in. IMS Health signaled its intent to hop aboard the bandwagon at the start of the year, and it is now reportedly weeks away from going public.
Reuters reports IMS is expected to price its IPO at $18 to $21 a share and raise almost $1.4 billion from the sale. If IMS achieves the top end of the range, the IPO will value the business at almost $7 billion and generate sizable returns for the private equity firms that took the company private in 2009. Since then IMS has made a string of acquisitions to strengthen its capabilities in social media analytics, customer relationship management (CRM) and other areas.
Many of the takeovers have involved companies with cloud-based technologies, reflecting a trend that has reshaped IMS' business and is expected to make it attractive to investors. "Right now there is big demand for IPOs that are subscription and cloud based," Francis Gaskins, research director at Equities.com, told Reuters. Over the past three years, 90% of IMS' information revenue has come from subscription or license-based contracts.
IMS' IPO comes in the wake of other cloud-based health tech companies Veeva Systems ($VEEV) and Castlight Health ($CSLT) going public. Both companies had impressive IPOs followed by strong early trading, but have struggled to maintain momentum. CRM provider Veeva's stock has fallen 25% since its October IPO, while Castlight has plummeted more than 30% in less than two weeks. Both are younger companies than IMS though. While IMS is profitable, Castlight's 2013 losses were 5 times its revenues.