This decline was due to expiration of patents and delay in approval for new drugs. In 2012, around $34 billion worth of U.S. drugs lost patent protection, which includes drugs like Lexapro, Seroquel, Plavix, and Singulair. As a result of the patent loss, the company reported a fall of 7% year-over-year in the first quarter of 2013.
It is expected that 35% of the advertisement displayed by WebMD Health Corp. (NASDAQ:WBMD) are from those drugs which are losing patents in the coming 18 months. This will result in revenue downfall. However, this loss should be offset after the approval of new pipeline drugs, including Xeljanz, Invokana, Eliquis, and Tecfidera.
On the other hand, the company witnessed total revenue growth of 5% year-over-year, amounting to $112.8 million in the first quarter of 2013. The key driver of this revenue was its public portal, which contributes around 82% of the total revenue. This portal grew 6%, year-over-year to $93.4 million in the first quarter of the current year. The public portal of the company includes WebMD Health Corp. (NASDAQ:WBMD).com, rxlist.com, emedicine.com, and emedicinehealth.com.
Its portal offers a diversified portfolio of health information, which includes diagnosing illnesses, treatment, and wellness advice. This growth in the revenue is due to modifying contract structure and prices. With this modification, its customers can now buy a part of the advertisement program, rather than the whole, which will increase revenue for the company. The total revenue in the current year is expected to be around $481.5 million, followed by $511.7 million next year.
Bottom line
Medidata Solutions Inc (NASDAQ:MDSO) should benefit from its cloud technology which collects data for clinical trials. Further, higher retention rates should boost its revenue.
Cerner Corporation (NASDAQ:CERN) has developed EMR to record hospital records in electronic form. This system is in high demand, opening opportunities for the company.
WebMD Health Corp. (NASDAQ:WBMD) witnessed a decline in its revenue due to patent expirations, however, it is expected that new product lines will offset the decline.
I recommend a buy for Medidata Solutions Inc (NASDAQ:MDSO) and Cerner Corporation (NASDAQ:CERN) and a hold for WebMD Health Corp. (NASDAQ:WBMD).
Madhukar Dubey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Madhukar is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article 3 Healthcare Information Service Companies Worth Watching originally appeared on Fool.com is written by Madhukar Dubey.
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