News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel

News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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New Player in Market for Laboratory Information System Products Acquires Orchard Software

Sale of respected laboratory information system company may be an early sign that investors believe clinical laboratories and pathology groups are ready to upgrade their LISs and add needed capabilities

In the past 10 years there has been little disruption to the laboratory information systems (LIS) market that clinical laboratories and anatomic pathology groups use. Yet, over that same 10-year period, almost every hospital and physician group practice adopted an electronic health system (EHR), primarily because of federal financial incentives that encouraged such adoption.

For medical laboratories and pathology groups, this widespread—nearly universal—adoption of EHRs by the nation’s hospitals and physicians was disruptive. Labs were required to expend resources building digital interfaces to the EHRs of their parent hospitals and client physicians to support electronic test ordering and test reporting.

However, because that wave of EHR adoption is now over, clinical labs and pathology groups have an opportunity to assess the current state of the health information technology (HIT) that they use daily, primarily in the form of the classic laboratory information system that handles nearly all the primary functions needed to support testing and other operational needs.

This opportunity to help medical laboratories enhance and/or upgrade the capabilities of their laboratory information systems may be one motivation behind the recent sale of a well-known LIS company.

Private Equity Firm Buys Orchard Software

On Oct. 7, 2019, Orchard Software Corporation of Carmel, Ind., announced its acquisition by Franciscan Partners, a private equity firm based in San Francisco.

Orchard Software, founded in 1993, has grown steadily over the past 20 years, primarily by serving physician office laboratories, community hospital labs, and independent clinical laboratory companies. With each stage of growth, Orchard added functionality to its LIS and related software offerings and moved up-market to serve larger hospitals and larger labs.

The purchase price and the terms of the sale were not announced. Orchard’s Founder, President and CEO, Rob Bush, will retire. The new CEO is Billie Whitehurst, who came to Orchard from Netsmart Technologies, where she was Senior Vice President. The remainder of Orchard’s management team will be kept in place.

“Francisco Partners will provide capital and expertise to enable Orchard to grow at a faster pace and continue to develop its newer web-based products in an industry that has lagged behind in adoption of cloud-based software,” says Rob Bush (above), Orchard Software’s Founder and exiting CEO, in a press release. (Photo copyright: Twitter.)

Is the LIS Market Heating Up?

What makes the purchase of Orchard by a multi-billion-dollar private equity company noteworthy is the fact that it is the first significant transaction in the LIS sector probably since the mid-2000s, which saw several significant mergers and acquisitions.

During that period, Cerner Corporation (NASDAQ:CERN) purchased Siemens Health Services and Misys acquired Sunquest information Systems. Then, Roper Technologies purchased Sunquest Information Systems from Mysis. Roper later also acquired PowerPath, an anatomic pathology LIS owned by private equity company Thoma Bravo.

Other acquisitions or investments involving LIS companies need to happen before it would be appropriate to say that investor interest in the LIS sector is heating up. However, it is accurate to say that many professional investors will be watching to see whether Franciscan Partners succeeds with its investment in Orchard Software. If Orchard’s revenue and operating profits increase substantially in the next few years, that may encourage other investors to look for LIS companies and products that they can buy.

If this were to happen, that would be a positive development for both clinical laboratories and anatomic pathology groups, because these investors would have a motive to add new functions and capabilities to their LIS products. It would also wake up a sector of lab information technology that has been relatively quiet for several years.

—Michelle Robertson

Related Information:

Orchard Software Gains Boost from Francisco Partners

Orchard Software to Be Acquired by Private Equity Firm

Francisco Partners to Acquire Orchard Software

Francisco Partners, a Technology-Focused Private Equity Firm, Announced Sept. 30 Its Intent to Acquire Orchard Software

Elekta Sells Its PowerPath Pathology Software to Sunquest

Big News in Clinical Laboratory Informatics as Roper Industries Agrees to Pay $1.4 Billion to Acquire Sunquest

Medical labs and pathology groups using Sunquest LIS products likely to see positive changes from Sunquest’s fourth change in ownership since 2001

In what is likely to be the biggest deal in clinical laboratory and pathology informatics for this year, Roper Industries, Inc. (NYSE: ROP), of Sarasota, Florida, will acquire Sunquest Information Systems, Inc., of Tucson, Arizona. The purchase price is an impressive $1.42 billion dollars and the deal was announced on Monday this week.

Roper Industries will get a lot for its money. Sunquest holds a significant share of the nation’s market for laboratory information systems (LIS). Sunquest has also built a substantial market share in anatomic pathology informatics, anchored by its CoPath and PowerPath products.

Sales Price of $1.42 Billion for Sunquest and Its Clinical Lab Software

What some may consider an eye-popping sales price of $1.42 billion for Sunquest demonstrates that investor interest in all aspects of the clinical laboratory testing marketplace remains strong. In its second quarter conference call, executives at Roper Industries told the financial analysts that, during 2013, they expect Sunquest to generate $140 million in EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization). If true, that would indicate that the sales price is based upon approximately a 10-times multiple of Sunquest’s EBIDTA. (more…)

Elekta Sells Its PowerPath Pathology Software to Sunquest

Sunquest immediately becomes nation’s largest provider of clinical pathology laboratory information systems

Earlier today, a deal was announced which has major implications for the anatomic pathology informatics marketplace. Sunquest Information Systems, Inc., released the news that it acquired the PowerPath pathology information software product from the Swedish company Elekta AB. Terms of the sale were not disclosed.

The PowerPath acquisition is significant because it immediately makes Sunquest the “big dog” of pathology information systems in the United States, when measured by the number of pathology clients.

In this country, three anatomic pathology laboratory information systems make up the largest part of the market. In alphabetical order, Cerner Corporation (NASDAQ: CERN) has its CoPath product; Elekta has just sold its PowerPath product, and Sunquest has the Sunquest version of CoPath.