Summary
link1 "SUMMARY"This summary highlights information contained elsewhere in this prospectus. This summary sets forth the material terms of this offering, but does not contain all of the information that you should consider before investing in our Class A common stock. You should read the entire prospectus carefully before making an investment decision, especially the risks of investing in our Class A common stock discussed under “Risk Factors.” Unless the context otherwise requires, the terms “we,” “us,” “our,” “our company” and “WebMD” refer to WebMD Health Holdings, Inc. and its consolidated subsidiaries following the contribution and transfer to us of the subsidiaries and certain related assets and liabilities that comprise our Parent’s WebMD Health business segment. Unless the context otherwise requires, the term “Parent” refers to our parent company, currently known as WebMD Corporation, and its other consolidated subsidiaries. We expect to retain the WebMD brand. References in this prospectus to “common stock” include both our Class A common stock, par value $.01 per share, and our Class B common stock, par value $.01 per share. Unless otherwise indicated, industry data are derived from publicly available sources, which we have not independently verified.
We are a leading provider of health information services to consumers, physicians and healthcare professionals through our public and private online portals. The online healthcare information, decision-support applications and communications services that we provide:
Our publicly available online services, which we refer to as The WebMD Health Network, include WebMD Health, our primary public portal for consumers, and Medscape from WebMD, our public portal for physicians and healthcare professionals.
WebMD Health and our other consumer portals help consumers take an active role in managing their health by providing objective and trusted healthcare and lifestyle information. WebMD Health’s content offerings include access to high quality health and wellness news articles and features, and its decision-support services help consumers make better informed decisions about healthcare providers, health risks and treatment options. Medscape from WebMD helps physicians and healthcare professionals improve their clinical knowledge and practice of medicine. Its original content, including daily medical news, commentary, conference coverage, expert columns and continuing medical education, or CME, activities are written by authors from widely respected academic institutions and edited and managed by our in-house editorial staff.
The WebMD Health Network had an average of approximately 23 million aggregate unique users per month and generated approximately 588 million aggregate page views in the first quarter of 2005. We believe our focus on creating and organizing high quality content and offering innovative interactive services has made The WebMD Health Network the leading online health destination and has made the WebMD brand among the most recognized and trusted in healthcare. According to recent studies conducted by Manhattan Research, a leading Internet market research firm, WebMD is the information source most frequently recommended by physicians to their patients for healthcare information and Medscape from WebMD is the information source most recommended by physicians to their peers.
Our public portals generate revenue primarily through the sale of advertising and sponsorship products, including CME services. We do not charge user fees for access to our public portals. The WebMD Health Network provides an efficient and effective means for sponsors to reach, educate and inform target audiences of health-involved consumers and clinically-active physicians within the trusted environment of WebMD. We work closely with our sponsors to develop programs for specific groups of consumers, physicians and healthcare professionals and give them placement on the most relevant areas on our portals. Our advertisers and sponsors consist primarily of pharmaceutical, biotechnology and medical device companies. We are also increasingly attracting advertising sponsorships from consumer products companies whose products relate to health, wellness, diet, fitness, lifestyle, safety and illness prevention.
Our private portals enable employees and health plan members to make more informed benefit, provider and treatment decisions. We provide a personalized user experience by integrating individual user data (including personal health information), plan-specific data from our employer or health plan clients and much of the content, decision-support technology and personal communication services that we make available through our public portals. We generate revenue from private portals through the licensing of our content and technology to employers, such as American Airlines, Inc., Microsoft Corporation and PepsiCo, Inc., and to health plans, such as Blue Cross Blue Shield of Massachusetts, Cigna and Empire Blue Cross and Blue Shield.
In addition to our online presence, we also have a publishing segment that provides complementary offline health content to our user community. Our publications increase awareness of our brand among consumers, physicians and healthcare professionals. These publications include The Little Blue Book, a physician directory, and WebMD the Magazine, a consumer publication launched in early 2005 that we distribute free of charge to physician office waiting rooms.
Our revenues have increased to $134.1 million in 2004 from $84.2 million in 2002, an increase of $49.9 million. Our net income for 2004 was $6.5 million compared to a net loss of $24.4 million in 2002, an improvement of $30.9 million. We cannot assure you that our revenues or net income will continue to increase; however, to the extent that our revenues increase in the future, we expect that our net income as a percentage of our revenues will continue to increase.
Our goal is to provide an efficient and effective means for advertisers and sponsors to reach, educate and influence health-involved consumers and clinically-active physicians within the trusted environment of WebMD. We believe that we are able to fulfill the needs of our clients with a differentiated offering based on our following strengths:
The Internet. The Internet has emerged as a major communications medium and has already fundamentally changed many sectors of the economy, including the marketing and sales of financial services, travel and entertainment, among others. The Internet is also changing the healthcare industry, as more consumers and physicians use it as a convenient source for up-to-date health information and interactive decision-support tools. Until recently, quality healthcare information was not easily accessible. Most consumers relied on their physicians, conversations with family and friends, their neighborhood library and magazines when they needed answers to healthcare questions. Physicians relied on medical societies, journals and other publications, reference textbooks, conferences, pharmaceutical sales representatives and industry meetings and other physicians to keep informed. The Internet has transformed how consumers and physicians find and utilize healthcare information and WebMD has been a leader in enabling this transition.
Advertising and sponsorship trends. Internet advertising continues to grow rapidly. According to a February 2005 report by eMarketer, an Internet market research firm, total online advertising spending was about $9.5 billion in 2004, is projected to grow approximately 20% in 2005 to $11.5 billon, and is expected to reach approximately $17.6 billion in 2008. We believe that this market growth is driven by the benefits of online advertising relative to traditional media, which include interactivity, rapid and measurable user feedback and the ability to target consumers more efficiently.
Based upon industry estimates, we believe that pharmaceutical, biotechnology and medical device companies spent approximately $12 billion on marketing and education activities during 2004, excluding costs of product samples. We estimate that these companies currently spend less than 5% of their marketing and educational budgets on online media, but are becoming increasingly aware of the benefits of using online media, including the ability to reach targeted audiences cost-effectively. As a result, we expect these companies’ online marketing and educational budgets to continue to increase. According to an April 2005 report sponsored by the Interactive Advertising Bureau, pharmaceutical and other healthcare advertisers accounted for 6% of total online advertising in 2004, an increase from 4% in 2003. We believe that we are well positioned to benefit from the trend toward increased online spending by these companies because of our track record in providing a more efficient use of advertising expenditures than traditional media and our strong working relationships with a significant number of the major pharmaceutical, biotechnology and medical device companies.
Healthcare industry trends. Our business is affected by the following trends in the healthcare industry:
We believe that our private portals are well positioned to benefit from these trends because they provide the tools and information employees and plan members need to take a more active role in their healthcare, such as helping them make more informed decisions about healthcare provider, benefit and treatment options. Employers and health plans can help their employees and members make choices that reduce overall healthcare costs by implementing our services and making the needed information and decision-support tools available through a convenient and easy-to-use online service. In addition, as employers continue to implement high deductible and consumer-directed healthcare plans, we believe we will be able to attract more employers and health plans to use our private online portals. Additionally, the increased financial responsibility of consumers for their healthcare will also benefit our public portals as we continue to expand the public portal decision-support and personal health information applications and as consumers and healthcare professionals increasingly utilize the Internet for the information and tools necessary to manage their health decisions.
We have positioned our services to benefit from the trends described above, and the other trends affecting the Internet, online advertising and healthcare industries described in this prospectus. Our goal is to be the leading provider of online health information services in each of the markets in which we participate and to use our content, technology platform and expertise to continue to enter additional complementary markets. To achieve our goal, we intend to:
Our principal executive offices are located at 224 West 30th Street, New York, New York 10001 and our telephone number at that address is (212) 624-3700.
The businesses that comprise our company include acquisitions made by our Parent beginning in 1999. Our operations were, until 2001, commingled with other operations of our Parent. In 2001, our businesses were organized as a separate segment of our Parent, which is currently called “WebMD Health.”
WebMD Health Holdings, Inc., the registrant whose name appears on the cover of the registration statement of which this prospectus is a part, was incorporated in Delaware on May 3, 2005 to be a holding company for our Parent’s WebMD Health business segment in order to conduct this offering. Prior to the completion of this offering, our Parent will contribute and transfer to us the subsidiaries and certain related assets and liabilities that comprise our Parent’s WebMD Health business segment. We intend to change our corporate name, prior to completion of this offering, to a new name that has not yet been chosen, but that will include “WebMD,” which will also continue to be the primary brand name for our products and services. Our Parent intends to take the steps, over the next several months, needed to change its corporate name to one that does not include “WebMD” and to cease using “WebMD” as a brand name for the products and services of its other segments.
Prior to the completion of this offering, the certificate of incorporation of WebMD Health Holdings, Inc. will be amended and restated to, among other things:
Immediately following this offering, holders of our Class A common stock will own approximately % of our outstanding common stock and % of the combined voting power of our outstanding common stock (approximately % of our outstanding common stock and % of the combined voting power of our outstanding common stock if the underwriters exercise in full their option to purchase additional shares).
Immediately following this offering, our Parent, which will hold 100% of our Class B common stock, will own approximately % of our outstanding common stock and % of the combined voting power of our outstanding common stock (approximately % of our outstanding common stock and % of the combined voting power of our outstanding common stock if the underwriters exercise in full their option to purchase additional shares).
As a result, our Parent will continue to control us following the completion of this offering, and will be able to exercise control over all matters requiring shareholder approval, including the election of our directors and approval of significant corporate transactions. In addition, our Parent’s controlling interest may discourage a change of control that the holders of our Class A common stock may favor.
As of the date of this prospectus, our Parent has indicated that it has no current intention to sell or otherwise dispose of its Class B common stock. However, our Parent is not subject to any contractual obligation to retain any of its Class B common stock, except that it has agreed not to sell or otherwise dispose of any of our common stock for a period of 180 days after the date of this prospectus without the prior written consent of the representatives of the underwriters, as described in “Underwriting.”
We expect to enter into a number of agreements with our Parent governing our separation from and our future relationship with our Parent, including a services agreement. Under the services agreement, we expect that our Parent will provide us with administrative services, including payroll, accounting, tax, employee benefit plan, employee insurance, intellectual property, legal and information processing services. We anticipate that the services agreement will provide for an initial term of five years. We will, as a result, initially be dependent on our relationship with our Parent for shared services following this offering. It is also possible that some or all of these services would be provided for longer periods than the initial term. See “Certain Relationships and Related Party Transactions — Agreements Between Us and Our Parent.”
Unless we specifically state otherwise, all information in this prospectus:
You should read the following summary combined consolidated financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our combined consolidated financial statements and notes thereto and the unaudited pro forma financial statements and related notes, all included elsewhere in this prospectus. The “Pro Forma” combined consolidated statement of operations data below is adjusted to reflect our acquisitions of MedicineNet, Inc. and HealthShare Technology, Inc., as though those acquisitions occurred as of January 1, 2004. The “Pro Forma” combined consolidated balance sheet data reflects the acquisition of HealthShare Technology, Inc. as though the acquisition occurred on December 31, 2004. The pro forma information is provided for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred if the transactions had been consummated as of January 1, 2004, nor is it indicative of future operating results. In addition, the “Pro Forma As Adjusted” combined consolidated balance sheet data below is further adjusted to reflect the sale of the shares of our Class A common stock offered hereby and the receipt of the estimated net proceeds after deducting underwriting discounts and commissions and the estimated offering expenses.