Tabula Rasa Healthcare (TRHC) is trading lower today (-4%) after reporting Q4 earnings last night. Since you're probably not familiar with Tabula Rasa, a little background would help. First, the name is a bit weird, but the company gets its name from tabula rasa, a Latin phrase which translates as "blank slate" in English.
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.
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 made its IPO debut in September 2016. It actually priced at just $12, below the expected range. But the stock has done very well since trading publicly.
In terms of recent news, in September 2017, the company 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 Q4 results, non-GAAP EPS came in at $0.09, which was down a penny from 4Q16. Revenue rose 60.9% year/year to $43.9 mln, which was better than prior guidance of $37.5-39.5 mln. Non-GAAP Adjusted EBITDA grew 47.3% YoY to $7.1 mln, which was at the higher end of prior guidance of $6.2-7.2 mln. Non-GAAP Adjusted EBITDA margin was 16.1%, down slightly from 17.5% last year, but was in-line with guidance. TRHC notes that 4Q16 was impacted favorably by a non-recurring project contributing approximately 2.0% to Adjusted EBITDA margin. Looking ahead, TRHC expects Q1 revenue of $42-43 mln and adjusted EBITDA of $4.0-4.5 mln. For all of 2018, the company expects revenue of $185-195 mln and adjusted EBITDA of $28-32 mln.
TRHC says that 2017 was an exciting year for Tabula Rasa as it expanded its leadership position in the PACE market, which is a Medicare/Medicaid program that helps people meet their health care needs in the community instead of going to a nursing home. PACE stands for Programs of All-Inclusive Care for the Elderly. TRHC also says it made meaningful progress in the health plan and at-risk provider markets, and its integration of recent acquisition SinfoníaRx has progressed nicely as TRHC is capitalizing on abundant cross-selling opportunities.
Taking a look at the bigger picture, TRHC says it has seen very promising trends from the healthcare industry and Washington as awareness of the risks associated with adverse drug events and benefits that can be achieved through personalized, effective treatment regimens increases. More specifically, its Medication Risk Mitigation platform directly addresses the rising epidemic of accidental opioid overdoses.
In sum, the stock is trading lower as the EPS result came in below expectations even though there was some revenue upside. It's possible that the SinfoníaRx acquisition may have impacted EPS results, so it's not clear if that's a clean comparison. However, investors are using the Q4 report as an excuse to take some profits as the stock has been very strong of late.