Published on the 31/03/2016 | Written by Clare Coulson

Orion Health is pulling out all the stops in an attempt to return the company to profit…

Orion Health has signed an agreement to supply its Amadeus precision medicine platform to a major US healthcare insurer. The company’s CEO Ian McCrae would not be drawn on the name of the client or the value of the deal, but he did say it is “a good-size health insurance organisation whose membership, at three million patients, is the size of a small country”.

“It’s a material transaction, it’s an important one and it’s price sensitive, so that’s how we put it on the Exchange. We would have preferred to have waited until next week [to announce it]  but that’s what happens when it’s price sensitive; if you don’t announce these things straight away you get yourself in trouble,” McCrae explained, suggesting that it could have an effect on the NZX/ASX listed company’s share price; indeed, the company’s stock rose six percent to $3.31 on the news.

The project commences in April and, with the delivery of Amadeus to the unnamed insurer’s membership base, provides “access to longitudinal patient records that include information from across all venues of care the member has been seen at”.

The good news was tempered with bad: it came on the same day that 36 North American staff were made redundant by Orion Health. McCrae explained to iStart that this was part of the company’s strategy to move towards making a profit. “They were good people and it’s a tough thing to do,” said McCrae of the redundancies. “But we have been engineering the cost of our software so that we need fewer people.

“It’s what we’ve been promising our investors and our shareholders. In America we are growing our revenues and reducing our costs,” he added.

As well as needing fewer staff to implement its software, McCrae said that the company is reducing the number of offices it has in North America. At one point it had as many as six, but he admitted that this strategy hadn’t worked. The company is now concentrating on having just one larger office based in Phoenix, Arizona. “We can get better communications and it’s far easier to create a better culture,” he said of the single office model.

Since listing on the Australian and New Zealand stock exchanges in December 2014, Orion Health has come under some pressure. The company is currently valued at a little more than $500 million on the NZX, but reported a loss of $27 million for the six months to September 30. McCrae said he hopes to announce when the company expects to make a profit at its May earnings announcement. He said that the redundancies in the States combined with a flattening of the company’s investment in R&D will help to put it on a profitable track. “We were investing 70 percent of revenue in R&D at one point – that’s pretty high – but that is flattening off now,” he said. He also noted that the $125 million raised during its December 2014 IPO will help.

Orion Health signed its first deal in the States “back when I still had hair on my head”, McCrae said. It now has in the region of the mid-hundreds of customers, ranging from the smaller end of town to the bigger organisations like the latest deal. Earlier in February, Orion Health signed a deal with US Cognizant Group/Trizetto (a provider of information technology, consulting, and business process services) to deploy Amadeus and become a preferred US systems integration partner.

These deals are part of what McCrae referred to as a “precision medicine tsunami”. Twelve months ago, he said, no one was talking about precision medicine – the ability to customise healthcare so that medical decisions, practices, and/or products are tailored to the individual patient – but then President Obama announced his precision medicine initiative and Prime Minister David Cameron made a similar announcement in the UK.

Now there is huge interest in the model, McCrae said.  We can store all of the genomic data for Australia and then serve up useful insights using machine learning and the sort of technology that Google, Instagram and Facebook are using, he explained. “It’s a fundamental change in healthcare”.