Tale Of Two Healthcare Tech Firms: One Seeks Public Debut Another Looks For Buyer

NextGen Healthcare Inc NXGN, a provider of software solutions to manage patients' records, is reportedly exploring various strategic options, including the possibility of a company sale.

With a market value of $1.1 billion, NextGen Healthcare is known for its lack of a traditional headquarters due to its remote work culture. 

It has hired investment bank Morgan Stanley to advise it on its discussions with potential buyers, Reuters noted, citing sources familiar with the matter.

 However, the report adds that no firm agreements have been reached. 

The decision to explore a potential sale comes when the healthcare sector is experiencing a surge in dealmaking. Companies in the industry are strategically seeking ways to achieve scale and cost savings, while private equity firms view healthcare as a resilient sector even in the face of looming economic uncertainties. 

Healthcare deals worldwide totaled an impressive $187.8 billion in the first half of 2023, marking a significant 43% Y/Y.

Waystar, a key rival to NextGen Healthcare and owned by a private equity firm, is reportedly preparing for an initial public offering with a valuation as high as $8 billion.

However, NextGen Healthcare has faced its share of challenges. The company's shares experienced a 9% year-to-date decline, significantly underperforming the 32% rise in the Nasdaq Composite Index. This underperformance is attributed to some clients scaling back their information technology spending and the company grappling with the aftermath of a federal investigation.

In July, NextGen Healthcare agreed to pay $31 million to resolve allegations that NextGen violated the False Claims Act (FCA) by misrepresenting the capabilities of certain versions of its EHR software and providing unlawful remuneration to its users to induce them to recommend NextGen's software. 

For FY23, the company reported revenue of $653.2 million, up 9.5% Y/Y, with almost 90% in recurring revenues, and expects FY24 sales of $712 million-$722 million versus consensus of $717.95 million.

Price Action: NXGN shares are up 6.63% at $17.44 on the last check Wednesday.