Executives of Irvine-based Quality Systems Inc. are bubbling over about their company’s newest deal.
The maker of software that dentists and doctors use to manage their practices bought Costa Mesa-based Mirth Corp. in September for an undisclosed price.
Mirth makes technology that help healthcare providers and institutions achieve interoperability.
That means hospitals, doctors’ offices and other providers, such as nursing homes, can easily send data among themselves.
“The complementary acquisition of Mirth has been well received, with strong interest from some of our largest customers,” Quality Chief Executive Steve Plochocki said on Quality’s Oct. 24 earnings call that covered the three months ended Sept. 30.
Having Mirth in Quality’s fold “not only strengthens our competitive position but also brings new potential products and opens the doors for expansion across other market segments in the future,” Plochocki said, adding that he believes Mirth will be a strong contributor in the 12 months that end in March 2015.
Mirth accounted for $600,000 in sales in the three months ended Sept. 30.
Chief Financial Officer Paul Holt, when questioned by Morgan Stanley analyst Zachary William Sopcak, said that amount is “going to grow, and that is an absolute certainty.”
Plochocki later explained why Quality chose to buy Mirth rather than investing internally to create interoperability technology. He said it was needed in order to serve the accountable care organization market created by healthcare reform.
Accountable care organizations offer incentives for doctors, hospitals and insurers to work collaboratively to reduce healthcare costs. Participants share clinical and case management information and coordinate comprehensive healthcare services for patients.
“It’s probably the fastest-growing trend in healthcare, as more and more of these ACOs are forming, becoming certified and are in rapid need of the tools that Mirth is bringing to our organization,” Plochocki said.
“So it was clearly a time to market (issue), buy versus make, so that we would have the opportunity to move in step, in lockstep, with this expansion of ACOs.”
Activist Investor Targets Device Maker
Volcano Corp., a San Diego-based medical device maker that was established in Laguna Hills, is under the scrutiny of Newport Beach-based activist investor Engaged Capital LLC.
Engaged, which owns 5.1% of the maker of ultrasound intravascular devices, said in a Securities and Exchange Commission filing that it’s trying to get Volcano to spend $200 million to buy back shares.
The investor said that among other things, it was fearful “of sub-optimal capital allocation via dilutive acquisitions.” It referred to a sale of convertible debt in late 2012 that gave Volcano about $500 million in cash.
Engaged added that it was concerned Volcano “may acquire a business or businesses that would make [it] a less attractive acquisition target in the future.”
Volcano was established under the auspices of venture capital firm Domain Associates, which then had an office in Laguna Hills. The company moved to the Sacramento suburb Rancho Cordova in 2003 and later to San Diego.
The company didn’t respond to requests for comment, according to a Bloomberg story.
The founder of Engaged, Glenn Welling, previously was a partner with Relational Investors LLC. Relational is run by Ralph Whitworth, who served for seven years as chairman and a director of Lake Forest-based Apria Healthcare Group Inc. when it was publicly traded.
ReShape Dishes on Trial Results
San Clemente-based ReShape Medical Inc. said a clinical trial for its ReShape Duo Intragastric Balloon medical device met its primary efficacy endpoints.
The company said in a news release that it plans to submit a premarket approval application to the Food and Drug Administration in the second quarter of 2014.
The ReShape Duo, a nonsurgical, dual-balloon medical device, reduces the stomach’s food capacity.
ReShape said in a news release that the trial involved eight sites and studied 326 patients.
The company is venture-backed and has raised more than $40 million in financing since 2007.
Investors include San Francisco-based SV Venture Partners and two Menlo Park-based firms, New Leaf Venture Partners and U.S. Venture Partners.
Bits and Pieces
Fountain Valley Medical Center, Los Alamitos Medical Center and Placentia-Linda Hospital have launched a campaign to raise awareness and understanding of the federal Affordable Care Act. The campaign also seeks to drive enrollment in Covered California, the state-run health insurance exchange. The hospitals are owned by Dallas-based Tenet Healthcare Corp. … MDXHealth SA, a Belgian molecular diagnostic company with its U.S. base in Irvine, said it expected to have continued growth in the coming quarters after striking deals with insurers that it said would expand access to its cancer diagnostic tests.
