Inovalon Holdings, Inc. INOV recently signed a definitive agreement to acquire Avalere Health – a provider of data-driven advisory services and business intelligence solutions. The transaction, valued at $140 million, is expected to close on or around Sep 1, 2015. Per the terms of the agreement, Avalere will act as a subsidiary to Inovalon.
Notably, Avalere has more than 200 pharmaceutical/life sciences clients and already serves 13 of the top 15 pharmaceutical companies. Moreover, inclusion of more than 200 analysts from Avalere will certainly boost Inovalon’s scale of production.
Meanwhile, we believe that the buyout will allow Inovalon to expand its footprint in the pharmaceutical and life sciences market, which is vastly unexploited and worth more than $30 billion, per 2013 International Data Corporation (IDC) report.
Management at Inovalon expects this acquisition to be mildly accretive to 2015 earnings per share, assuming that the deal closes within the stipulated period.
The acquisition agreement underscores a series of positive developments for Inovalon in the past couple of months.
Last month, Inovalon entered into a new multi-year agreement with Hewlett-Packard HPQ and also extended its partnership with Independent Health Association. In June this year, Inovalon also expanded its association with FamilyCare Health.
We believe that the series of agreements and the recently announced acquisition will help Inovalon gain better market traction, resulting in improved growth. However, it is to be noted that the company has reported a dismal second-quarter 2015, in which both the top and the bottom line lagged our estimates.
Currently, Inovalon has a Zacks Rank #4 (Sell).
Stocks to Consider
Some better-ranked stocks in the same sector are Attunity ATTU and magicJack VocalTec CALL. Both the companies sport a Zacks Rank #1 (Strong Buy).
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