NantHealth investment deal paves way for IPO

Los Angeles billionaire Patrick Soon-Shiong said he plans a public stock offering for his healthcare company by year’s end, fueled by a big investment from an electronic medical records firm.

Allscripts Healthcare Solutions Inc. disclosed Tuesday that it would pay $200million for a 10% stake in Soon-Shiong’s Nant-
Health, valuing the firm at $2 billion.

Soon-Shiong is also investing $100 million of his personal wealth in Allscripts, which is based in Chicago. The financial investments strengthen the partnership between the two companies, Soon-Shiong said.

NantHealth of Culver City says it will combine medical data and patients’ genetic information to find individualized treatment for cancer and other diseases. Analysts believe the new partnership benefits both companies by combining Allscripts’ medical data with NantHealth’s expertise with genetics.

“I think it’s a good long-term move by both companies,” said David Francis, an analyst who covers Allscripts for RBC Capital Markets. “Allscripts is one of the leading companies in providing clinical information tools to hospitals and physicians; they have unique access to lots of clinical information. And clinical information is what NantHealth is trying to get its hands on to assist in creating very individualized health solutions.”

A national pioneer in personalized cancer treatment and part owner of the Lakers basketball team, Soon-Shiong is the world’s richest doctor and the wealthiest person in Los Angeles, with a net worth that Forbes recently pegged at $12.2 billion.

The partnership with
Allscripts was a key step in getting NantHealth ready
to go public, Soon-Shiong said.

“We feel we have one or two transactions to accomplish, then we will initiate the public offering that we anticipate will happen probably within this year,” he said. “We’re setting the infrastructure, so when we’re in the public world we can really execute,” Soon-Shiong said.

A successful initial public offering of NantHealth stock could provide a quick profit for Allscripts, but it may take years for the partnership to generate significant revenue, said analyst Gene Mannheimer, who covers Allscripts for Topeka Capital Markets.

“The goal is to deliver a clinical platform that streamlines delivery of care for the most rare and dangerous illnesses, cancer included, and improve patient outcomes,” Mannheimer said. “Nobody’s done that to date. It if works, it’s going to be fantastic, but it may not work. That’s the downside of it.”

Investors seemed cool on the deal, driving Allscripts stock down about 2%. The stock fell 25 cents to $13.68.

“Wall Street doesn’t see the deal doing anything favorable in the near term, so they sold the stock,” Mannheimer said.

Francis said the companies now both have a strong incentive to stick with their mutual strategy for the long term.

Allscripts’ investment strengthens the partnership between the two companies and “solidifies that there’s skin in the game for both companies,” Francis said.

Twitter: @spfeifer22