Falling Revenues for WebMD and Epocrates

According to eMarketer, online ad spending by healthcare and pharmaceutical companies is projected to grow from $1.03 billion in 2010 to $1.86 billion in 2015. The pharma industry accounted for 4% of overall online ad spending in the U.S., with a total of $25.8 billion spent. The industry’s share is projected to rise to 4.2% by 2015. Growth in advertising spending will help medical information providers increase revenues.

WebMD’s Financials
WebMD’s (Nasdaq:WBMD) Q4 revenues fell 11% over the year to 150.7 million. By segment, public portal advertising and sponsorship revenues fell 11% to 130.8 million, and private portal services revenue declined 8% to 19.8 million. EPS of $0.31 was also significantly lower than previous year’s $0.48. The market was looking for revenues of $150.4 million with EPS of $0.44.

Traffic to WebMD’s Health Network grew 29% over the year to 2.32 billion page views accessed by an average of 111.8 million unique users per month. Traffic growth was driven by an increase in traffic to their owned and operated sites. Traffic grew 33% over the year to 91.9 million unique users per month, and page views grew 30% over the year to 2.14 billion.

For the year, revenues grew 5% to $558.8 million, with EPS falling 10% over the year to $0.90.

Although market reports may talk of increasing ad spending by pharma companies, WebMD’s management does not seem convinced. They claim that their current visibility shows that pharmaceutical consumer advertising revenues are lower than earlier anticipated, making WebMD project declining revenues for the current quarter. For the quarter, WebMD expects revenues to fall nearly 20% to $105 million, compared with Street projections of $118.9 million. They expect to end the quarter with a loss of $9.5 million, significantly short of the market’s projected earnings of $6.6 million. WebMD expects to end the current fiscal with revenues of $500 million-$535 million, in line with the Street’s target of $517.7 million.

WebMD’s Mobile Expansion
WebMD continued to expand their mobile offerings and recently launched a Baby App for the iPod Touch and iPhone. The free app provides pediatrician-approved baby health and wellness information to parents of infants and toddlers. Content for the app can be personalized depending on the baby’s age so that parents can view relevant information.

WebMD’s Sale Collapses
Last quarter, the market was abuzz with news that WebMD was searching for a potential buyer. A list of potential buyers included the likes of Yahoo. Recently though, plans to sell the organization fell through. The company’s failed sales talks also led to the resignation of their president and CEO, Wayne Gattinella.

The stock is trading at $25.61 with a market capitalization of $1.43 billion. It touched a 52-week high of $58.55 in May 2011.

Epocrates’s Financials
Epocrates’s (NASDAQ:EPOC) Q4 revenues fell 2% over the year to $29.7 million, ahead of the market’s target of $28.3 million. EPS of $0.05 was also ahead of the Street’s projected break even quarter. They ended the year with revenues growing 9% over the year to $113.3 million. EPS of $0.10 for the year was ahead of previous year’s earnings of $0.01 per share.

For the current year, Epocrates projected revenues of $105 million-$115 million compared with the market’s projected revenues of $123.7 million.

Epocrates Partners for Research
Epocrates recently partnered with Tokyo-based healthcare research firm M3 Inc. The tie-up will lead to the world’s largest verified physician and healthcare provider panel. The partnership will grant research firms, marketers, and investors access to healthcare professionals. The panel created as part of the agreement spans more than 1.7 million healthcare professionals spread across more than 70 countries.

The stock is trading at $8.29 with a market capitalization of $200.63 million. It reached a 52-week high of $26.51 earlier this month.