Tabula Rasa HealthCare (Pending:TRHC) expects to raise $52.4 million in its upcoming IPO ($60.8 million if the underwriters exercise their option to purchase additional shares).

Based in Moorestown, New Jersey, Tabula Rasa HealthCare is a provider of technology-enabled products and services for medication management and risk adjustment.

We previewed this deal on our IPO Insights platform.

Tabula Rasa HealthCare will offer 4.3 million shares at an expected price range of $13 to $15. If the underwriters price the IPO at the midpoint of that range, TRHC will have a market capitalization of $226.16 million.

TRHC filed for the IPO on January 4, 2016.

Lead Underwriters: UBS Investment Bank and Wells Fargo Securities

Underwriters: Piper Jaffray & Co., Robert W. Baird & Co., and Stifel Nicolaus & Co.

While some risks are present, we like the company and the deal and suggest investors to buy this IPO.

Business Summary: Provider of Products and Services for Medication Management and Risk Adjustment

Tabula Rasa HealthCare, Inc. provides patient-specific, data-driven technology and solutions; these enable healthcare organizations to optimize medication regimens. Tabula's solutions aim to enhance patient outcomes, reduce hospitalizations, and lower healthcare costs.

The company's cloud-based software applications include EireneRx, which is used by at-risk healthcare organizations to access its patients' medication-related information; MedWise Advisor that allows for components of EireneRx to be used independently and by a broader healthcare audience; and NiaRx, an educational software platform used in the pharmacy educational community. The company also serves prescribers and pharmacists.

Use of Proceeds And Highlights From Management's Analysis

The company's product revenue is generated through medication risk management contracts with healthcare organizations. Tabula's MRM Matrix technology enables pharmacists to optimize tailored medication programs. In 2015, Tabula began offering software solutions as standalone software-as-a-service; currently, all of the company's medication risk management clients have opted for bundled services. No revenue has been derived from standalone offerings.

According to management, quarterly revenue has grown consistently from $4.9 million for the first quarter of 2013 to $22.4 million in the second quarter of 2016.

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(Source: SEC Filings)

For the six months ended June 30, 2015 and 2016, product sales represented 84% and 89%, respectively, of total revenue, and service revenue represented 16% and 11%, respectively, of total revenue.

Impressive revenue retention and client retention rates were 99% and 96%, respectively, for 2015, and 95% and 97%, respectively, for 2014.

Tabula Rasa HealthCare intends to use the net proceeds of this IPO to pay down approximately $30 million in outstanding loans, pay acquisition costs for certain assets and intellectual property, and for general corporate purposes.

Potential Competition: Siemens Pharmacy, RxConnect, PharmNet and Others

The pharmaceutical industry does offer competition in information systems. Peers include Meditech Pharmacy Solutions, Horizon Meds Manager (Nasdaq:HZNP), PharmNet, Willow from EpicCare, CPSI, HMS Pharmacy, Siemens Pharmacy, RxConnect, Sunrise Pharmacy, and Mediware. Yet Tabula notes in its SEC filings that it believes it is unique in its comprehensive medication risk management system.

Using sales for the last twelve months ended June 30, 2016, Tabula has a very reasonable P/S multiple of 2.81, while competitor HZNP has a slightly P/S multiple of 3.4 (industry average 3.3) (Source: Morningstar public research).

Executive Management Highlights

Dr. Calvin Knowlton, BScPharm, MDiv, PhD, founded Tabula Rasa and serves as Chairman and CEO. He also founded CareKinesis, Inc., and Enclara Pharmacia, Inc. He served as Professor and Department Chair for the University of Sciences in Philadelphia in the 1990s. Dr. Knowlton received his BA from Rider College, Bachelor of Science degree in pharmacy from Temple University, Masters in Divinity from Princeton University, and PhD in Pharmacoeconomics from the University of Maryland.

CFO Brian Adams has served in his position since June 2016. His previous experience comes from positions at CareKinesis, KPMG LLP, and excelleRx Inc. Mr. Adams earned his Bachelor of Science in Business Administration from the University of Richmond.

Conclusion: Consider An IPO Allocation

TRHC shows strong revenue growth, plans to use net proceeds from its IPO to pay down debt, and is priced competitively.

In addition, the space for patient risk management solutions is large and growing. At its current valuation, we are positive on this IPO and anticipate purchasing shares this week. Adjusted EBITDA was $8.6 million and $5.6 million for year 2015 and last six months ended June 30, 2016, respectively.

At present, we hear the deal demand is strong and pricing could be at the upper end of the proposed range or higher.