Tabula Rasa Healthcare (TRHC), which made its IPO debut in September 2016, reported Q3 earnings last week. Since the name is not well known, we wanted to provide some color on what the company does and how it did in terms of its Q3 earnings results.
Tabula Rasa Healthcare is a provider of medication management systems that enable healthcare providers and pharmacies to make sure proper medications and the correct dosage levels are given to patients. TRHC has been raising awareness of the serious and deadly consequences associated with adverse drug events (ADEs) which are especially prevalent in patients taking multiple medications.
About 40% of people over age 65 take five or more prescriptions. When you add non-prescription medications, many people are taking 8 pills per day. The current software used by pharmacists, electronic health records, and PBMs is 30-40 years old and does not analyze multi-drug combinations simultaneously.
Pharmacies are becoming more open to TRHC's platform. Also doctor reimbursement incentives are moving from providing episodic reactive care to comprehensive services. To succeed, they will need to understand how to better identify and mitigate multi-drug risk.
In terms of recent news, in September 2017, the company announced it acquired SinfoníaRx, a provider of Medication Therapy Management (MTM) technology for Medicare, Medicaid, and Commercial Health plans. TRHC views this transaction as an extension of its vision, which is to be the vanguard in optimizing medication therapy. SinfoníaRx offers a full suite of MTM services supporting more than 50 mln patients including: Part D compliant MTM programs, Star improvement programs, community pharmacy performance programs, and transition of care/chronic care management programs.
Turning to the Q3 results, which were reported on November 6, non-GAAP EPS doubled YoY to $0.08. Revenue rose 37.6% year/year to $33.27 mln, which was better than prior guidance of $29.5-30.5 mln. For Q4, TRHC expects revenue of $37.5-$39.5 mln. Non-GAAP Adjusted EBITDA in Q3 was $4.6 mln, an increase of 43% compared to a year ago. Adjusted EBITDA margin was 14.0%, up slightly from 13.5% last year and in-line with management's expectations.
The momentum TRHC experienced in 1H17 continued in Q3 throughout all areas of the business. Its proprietary medication risk stratification engine and medication risk score continue to get recognized as a tool for health plans to better manage medication risk for their members. By the end of 2017, TRHC expects to have run 10 mln patients through its engine for a variety of commercial and government sponsored health plan prospects.
In sum, it was another good quarter for TRHC. From a broader perspective, the company is a play on the shift to value-based healthcare (and away from fee-based services). As this shifts more of the financial risk on the healthcare providers, this is incentivizing them to focus more on preventing ADEs and making sure patients are taking the right medication in the correct dosage levels. TRHC is fairly small with 2017 revenue expected in the $128-130 mln range, but it's profitable and growing nicely. The stock has done quite well since its IPO debut.