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Filed by IMS Health Incorporated
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12 of the
Securities Exchange Act of 1934
Subject Company: IMS Health Incorporated
Commission File No. 001-14049
THE FOLLOWING IS A SCRIPT USED IN CONNECTION WITH A TELECONFERENCE WITH
INVESTORS AND ANALYSTS ON MARCH 30, 2000:
TRIZETTO/IMS HEALTH
MODERATOR: JEFF MARGOLIS
MARCH 30, 2000
12:00 P.M. MT
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the
Trizetto IMS Health conference call. All participants will be in
a listen-only mode for the duration of the conference. As a
reminder, this conference is being recorded, Wednesday, March
30th, 2000.
I would now like to turn the conference over to Miss Jeff - or,
I'm sorry, to Mr. Jeff Margolis, chief executive officer of the
Trizetto Group. Please go ahead, sir.
Jeff Margolis: Thank you very much. To begin, we're going to have Jack Walsh go
through our Safe Harbor Statement.
Jack Walsh: As a standard procedure, I like to red the Safe Harbor Agreement
for everyone since I know you've all been waiting for that.
During today's meeting of IMS Health and the Trizetto Group, we
may make certain projections regarding the trends in our
business, future events, and future financial performance. We
would like to caution you that these statements are just
predictions and that actual events or results may differ.
Certain factors which cause - which could cause these events or
results to differ are described in our filings a the SEC.
Now let me turn the meeting back over to Jeff Margolis, the
chairman and CEO for Trizetto Group.
J. Margolis: Thank you very much, Jack. And thank you all, ladies and
gentlemen, for coming our this afternoon. I guess we created
some excitement, and what we wanted to do was make sure we had a
chance to speak with you directly today. Before I go any
further, two quick things. First, I would like to introduce the
other folks up here with me today, I think most of you know
them. We have Mr. Bob Weissman, who is the chairman of the Board
of IMS Health; and Miss Vickie Fash, who is the chief executive
officer of IMS Health.
Yesterday we talked about a union of two companies, that would
create the new global leader in electronic health care, IMS
Health and Trizetto. Now, what leads us to this conclusion that
this is an exciting announcement? Well, let me talk to you about
this. This is a unique opportunity in the healthcare e-commerce
space, and electronic space, to leverage expertise from two
companies. That's never been brought together before. In
healthcare it's a huge industry, very fragmented. Information
flow between the different constituents is difficult at best,
for several reasons. One, each of the different
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constituencies in health care has a hard time managing and
piecing together its own data and information. Because of the
inherent complexities in each piece, the complexity of having
those different types of information flow together is also
extremely complex. I'm going to talk to you about why the
combination of the Trizetto Group and IMS Health is going to fix
that problem for the industry today and on into the future.
Let me take you immediately to the deal premise. What you have
up here is two very strong companies, IMS Health and Trizetto.
Trizetto, today, is the leading healthcare application services
provider. We created the ASP in healthcare. We are the only
vendor independent ASP in healthcare, but, there's a great
opportunity, and I'm going to talk about that.
Now, IMS Health, clearly, is the leading pharmaceutical
information company in the world market share, 250,000 points of
data collection. Over 98 percent of all the prescription
information in the United States flows through this company.
That information's valuable the way it's being used now, but
there's still greater value to unlock. As you look at these
statistics that the two companies bring to the table here, what
I want you to know is that what Bob and Vickie and I have been
thinking about, because we're strong companies, because we're
company that execute and perform is not just what has to go on
next quarter, or the quarter after that, okay? We're very secure
about those things. We're trying to look at what's going on in
the overall healthcare landscape, and make sure we have a
company that is positioned to be a leader in the space
immediately, and on into the future, and be in a position to
protect that leadership.
Now, I'm going to take just a moment to talk to you about what
this market opportunity means, and why bringing the companies
together makes so much sense. Those of you who listened on the
conference call yesterday may have some familiarity with the
Trizetto model. And in the Trizetto model what we say is
companies need connectivity infrastructure to connect themselves
to themselves, on a technical basis, and to the outside world,
using technology such as the Internet. They need to run the
primary applications and related business services to run their
day-to-day business. Pharmas, payers, and providers.
They need to take the information that gets produced in each of
those segments of these transaction systems, and take in data
from outside sources, and turn them into information for both
administrative and clinical decision-making. That is what a good
information technology strategy means, and that is what most
healthcare companies, today, cannot accomplish with their
internal resources. And the cost of capital for them is very
high to get there.
Well, why does this make sense? Let's take a look at the
segmentation. Most of you already know that Trizetto serves the
payer industry on an ASP basis. But, there's another huge chunk
our there, and it's the pharma space. And that is the space that
we have not been able to access, but a space that is critically
important to providers and payers in terms of communication, not
to mention what the pharmas need to accomplish themselves. And
then getting back to the model, application services is one way
we serve these customers, so on a subscription basis they can
receive the information technology they need to run themselves
on a month-to-month basis. Okay?
Now, for different kinds of companies, sometimes that means
running transactions systems, sometimes that means having the
critical information they use to run their sales forces, to make
their product decision, and so forth. How do they communicate
among one another? Well, there has to be communication
technology, and the Health Web business-to-business portal,
which is already being implemented in the 9.5 million pair lives
in the United States, and the I squared portal, which is a
global portal for the pharmaceutical industry make good sense to
put together. And IMS is highly skilled in
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creating products that where the data isn't just raw data, and
it's not just an information to query, but productizing the
information for customers so they can access it easier and,
frankly, they pay for that kind of information.
Well, if you look at this 27 box queue, right off the bat you
can see that IMS Health dominates the pharma industry for
information delivery products and the information access and
reporting area as a portal that is getting started but will
naturally become the standard of the industry given their market
share, and is able to assist delivering mission critical
information to the pharmas to help them run their day-to-day
business. Well, as you go down this pharma slice here other
opportunities are helping provide connectivity infrastructure
and primary applications and services they need to do their
day-to-day business, not currently accessible to Trizetto.
If you look at the payers' segment, or the providers' segment,
Trizetto, currently, is able to cover each of those segments
very well. We have multiple vendor relationships with over 30
different software applications vendors, dozens of technology
vendors. The idea is if you're going to create an electronic
world in healthcare you have to be able to allow your customers
to bridge their way between any of these 27 cubes. And if you're
a healthcare entity, and I can tell you, having spent 15 years
in the industry as a chief information officer for some of the
largest healthcare concerns in the country, that if you don't
have a strategy you can easily get yourself boxed in one of
these 27 cubes and not be able to work your way out of it
without tremendous time and expense. And this is why healthcare
information systems often fail, because each of these boxes is
huge. As a matter of fact, if you take a look at the
intersection of information access and reporting, in the pharma
industry we have a $1.5 billion company just for that cube. This
gives you some idea of the size.
Next slide, please. So this immediately, this transaction makes
us better from the get go. We take the unparalleled domain
expertise of IMS, and the payer and provider expertise of
Trizetto, and we can address pharma payer provider. Only company
in the world that's going to be able to to that. Our geographic
presence, IMS is in 100 countries. I think Vickie's been to
every one of them. She's promising to take me with. And Trizetto
has a strong presence in the United States, but the results of
that is a global capability. And I want you to think about that,
not just because of the distribution capability of IMS data, but
the incredible industrial strength information infrastructure
that IMS already has in place in those countries, processing
power, communications hubs, and on-the-ground sales force.
From an application services standpoint IMS provides
mission-critical information to the pharma industry and to the
payer industry through its Erisco product. Trizetto has
relationships with a number of other payer and provider software
application companies. Again, we've got the whole space covered.
I already mentioned the Internet portal. The Health Web portal
is meant to answer the question - this is not a content portal,
folks, this isn't a consumer-based portal where you're looking
to find medical content. This is a portal so that if you're a
worker in a healthcare concern, or if you're a professional in a
healthcare concern, payer, provider, or pharma, from a single
browser enabled desktop you can access all of the applications,
business-to-business content, and electronic commerce services
you need to do your job.
Now, we've been engineering this for many years. It takes a long
time to put the technology in place so that you can work with
the abundance of Legacy systems that exist out there in the
world. And it's the Legacy systems you have to tie into. You
can't just sprinkle Internet pixie dust on the healthcare
segment and make it work. Okay?
The information context, turning data into useful information.
Well, guess what? It's pretty easy to buy a database, and it's
pretty easy to load it on a computer. And then
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what happens is you have to start thinking about what you're
going to do with that and how you're going to store the data and
what questions it's going to answer and how you maintain the
quality of that data and where does it get its input from from
the various systems in your company, and, oh, by the way, most
of the information needed isn't even in your company, you need
to get it from outside sources, you need to put that data
together, integrate it, and turn it into information. That takes
incredible domain expertise.
At Trizetto, we say it takes five years to develop an
information technology professional that has a high enough
understanding of the business to be able to do data modeling in
healthcare. And then they're just able to, perhaps, manage a
piece of a project, not, necessarily, lead it. So we
instantaneously have the best of class pharma, payer, and
provider information context experts in the company as well.
Next slide, please. Now, having said all those wonderful things,
and we feel very strongly about why this deal will be
successful, we understand that we had some difficulty yesterday
with the reaction to this deal. So we're going to take these
head on with you today, and answer the following questions: Why
are we merging? Why the complex structure? I assure you we
didn't do it to cause pain. Why the RX tracker? Who's going to
be running this company? What are the numbers? And, most
importantly, why should you remain investors in either or both
companies? So that's where we're headed. We're going to answer
those questions directly, starting now.
Next slide, please. And, Vickie, who's going to join me, I will
handle the first part of this slide and turn it over to Vickie
to talk to you about the answers to a number of these questions.
But the merger rationale for Trizetto, on its face, is pretty
obvious, it accelerates the growth of the ASP. Those of you who
invested in ASP because you wanted pure, high-growth ASP type of
company, we can make it move faster. We can open up that whole
slice you saw in the cube, that access to the pharma industry,
and we have an opportunity to take this already market-leading
Health Web portal on a business-to-business basis, and using the
multi lingual talents of my colleagues up here on stage, export
that to the rest of the world.
I'll have Vickie take you forward on the merger rationale from
the IMS side, and the other questions.
Vickie Fash: Thank you, Jeff. Good afternoon everyone. There were three
assets that IMS was interested in with regard to the Trizetto
company. One of the questions that I've been asked repeatedly in
the last 24 hours is why this particular company? What was so
interesting and attractive about Trizetto? Those three items
are, first of all, technology leverage. As you heard from Jeff,
at its heart Trizetto is a technology company and it is an
Internet technology company. As many of our IMS investors in the
room know, IMS is also a technology company, trying to move into
the Internet world. This is something we've been talking with
you about for many, many months now, you've seen our new portal
come out, you've seen our initial series of attempts to move IMS
into this Internet world, but it is a long journey to get there.
Decision, with regard to Trizetto, was to leverage the Internet
technology assets of Trizetto with the IMS technology assets on
the ground around the world today. Together they're far stronger
and more powerful. Initially, you have the best of breed in IMS,
the best of breed in Trizetto, old world-new world, if you will,
and together they're far stronger than either is standing alone.
The second asset that we were interested in was Health Web. This
is the portal that Jeff talked about, a pure B-to-B portal,
therefore, very consistent with the way IMS runs and works today
in our business model. IMS, as you know, is also pure B to B,
therefore, this is a highly leverageable asset. Our intent is to
combine the Health Web portal with the work that's already been
done on the I-squared portal, and, again, together they are far
more powerful than either on a standalone basis.
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And, finally, people. We have met many of the Trizetto people
and I can personally tell you they are first class. They are
experts in two things, technology and, also, healthcare. They
know and understand the world of healthcare. This is a very
important distinction from many of the other companies that we
have spoken with, and that is a critical distinction for IMS
going forward because, consistent with IMS, which is steeped in
the knowledge of pharma, the Trizetto people are steeped in the
knowledge of healthcare. And, again, for the whole series of new
products that we're going to talk about today, that is a
critical, distinctive, competitive advantage in our view.
Now, many of the questions that we received relate to the
transaction structure and why is it structured this way. I will
try to take those head on for you this afternoon. They also
relate to the synergies, what are the synergies, and how do
those translate into the financials on a go-forward basis. So
those are the major points that I would like to try to cover
with you in a little bit more detail than we did on the call,
and then we'll open up the floor for questions. [Inaudible].
Okay. So what's the rationale here in terms of the synergies
from a merger perspective, as opposed to, again, a common
question yesterday was, guys, why didn't you guys just outsource
this? If you think about, if I may use an obvious analogy, a
car, if you consider IMS to be a car, and the engine of IMS,
today, is technology, which it undoubtedly is, IMS at its
heart's a technology company that produces information products.
If you are going to change out your engine you don't want to
outsource that work. IMS's technology factory is constantly
being retooled and upgraded and changed and updated for new
technology advances, new products, new applications, new
statistical algorithms, new data sources, it is like a living
organism. So to outsource something that is constantly being
updated doesn't make a lot of sense because you will instantly
lose the knowledge of the people who worked on the outsourcing
project. So our decision was, in terms of a buy versus build,
internally, but, also, a buy versus build in terms of an
outsourcing function. We don't think, based on the nature and
the soul of our business, if you will, that outsourcing this
technology evolution is the right business decision for IMS
today.
There is also a speed issue here. We have talked with many of
you about the need for speed and the urgency of moving IMS
forward into the Internet world as rapidly as possible. It was
our judgment that by taking this step we would accelerate that
progression very dramatically. We believe it is a three- to
five-year process building, again, internal build, to migrate
IMS to this new technology series of platforms. We think that is
simply too slow.
There is another important merger synergy here, which is market
expansion. In essence, what happens is Trizetto can move into
the pharma sector, IMS can move into the broader healthcare
arena. This generates new product opportunities, new revenue
opportunities for both companies going forward.
And, finally, the ability to maximize asset and resource
leverage is one of the main reasons for the nature of the
structure of the transaction. Go on. Okay. Take a closer look at
the transaction structure. So we start with the two equities
that are publicly traded in the marketplace today, IMS Health,
which trades on the New York stock exchange under RX, and
Trizetto, which trades on the NASDAQ under TZIX. What will
happen, literally in an instantaneous moment in time, when the
deal closes, is the Trizetto Group will be created, that will
issue three separate equities, Strategic Technologies; RX, and
TZIX.
Strategic Technologies will be structured as a spin off. It will
have an independent Board of Directors, an independent
management team, very similar to the classic spin off
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profiles of all of the other spin offs that have happened since
the original D&B spins occurred. Very similar. RX and TZIX will
be publicly traded equities. RX will continue to trade on the
New York Stock Exchange under RX. TZIX will continue to trade on
the NASDAQ under TZIX. They will share a common Board and a
common management team structure, but very, very different
equity profiles.
Now, if we take a look at - I think it's yours. If we take a
look at the components from a business perspective of what is in
the three equities that will be created, it's pretty
straightforward. RX will hold the core IMS business, the market
research business, and the sales management business. These are
the database businesses. So, in essence, what this does is it
sharpens the focus of IMS on its database businesses. It will
also continue to hold Cognizant Technology Solutions, which is
part of our IMS Health group today. What we're going to do is
combine Trizetto with Erisco. Erisco is a payer-based company.
It shares many common customers and many business synergies with
Trizetto. It is a very logical combination. It's much more
logical to put Erisco with Trizetto, candidly, than to leave it
with IMS. Erisco is a software company, it is not a database
company. So Ariso will reside with TZIX, and, again, ST will be
a separate, standalone corporation.
Now, why do it this way? This is the most important question,
why do it this way? Why not simply merge the two together?
Right? Okay. There are a series of reasons why that I would like
to walk through with you, and ask you to keep in mind, as we
walk through these, the merger with AOL and Time Warner, the
merger with AOL and Time Warner. Because a key objective of this
strategy is to overcome many of the issues in merging an off
line, an old economy company, if you will, with a new economy
company. That's what this is attempting to do. It is attempting
to create a structure that will balance those two worlds and
preserve the investment profile of both of those worlds and both
of the equities as they are constructed today, without ending up
with a blended multiple and, essentially, the Trizetto flier,
the Trizetto Internet equity being lost inside of IMS.
Now, if you look at the equity profiles of these two companies,
they are dramatically different. They are dramatically
different. Specifically, RX, IMS is valued on EPS, is valued on
EPS. It is, therefore, not at all the same, of course, as
Trizetto, which is valued on a multiple of revenues. One of the
reasons for the construct with Trizetto the way it is is, simply
stated, to preserve the purity of the profile of RX. What you'll
see if you're an existing RX investor, is that this is virtually
identical to RX's current profile. And, in fact, that is part of
the rationale. Revenue growth in mid teens, operating margins 30
percent plus, strong positive cash flow, modest debt. That is
the profile of IMS Health today, that does not change with this
transaction. TZIX, revenue multiple basis; high revenue growth,
very high revenue growth; losses in 00; profit in 01; cash
consumption; and no debt. Again, that is very consistent with
the current TZIX profile. And, as you can see, once again, just
to repeat the point, they're dramatically different equities.
They also, today, have dramatically different investor bases. So
the important point here is to acknowledge that they are
different, and to allow investors a choice.
So the rationale, therefore, or the structure is to preserve
those two very distinct equity profiles; to enable, at the same
time, a common management of resources across those two
companies to leverage both more effectively, things like the
technology infrastructure, as an example, things like
investments, as an example; to provide investors with a choice;
to solve the blended multiple issue that was so apparent in the
only other online/off line merger of size yet announced, AOL
Time Warner; and to unlock hidden value from the current IMS
portfolio of assets. This is, in fact, the reason for the
Strategic Technologies spin off.
Those of you who are familiar with our ST business know that
once again that is a very different business from the IMS
database businesses. It is a sales force, automation
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system business, essentially, a software business. And if you
are familiar with its competitors in the marketplace, it has a
virtually identical company profiled competitor called Dendrite
in the marketplace. ST is almost exactly the same size as
Dendrite, it has almost identical growth-rate profiles, and,
again, part of the rationale for the transaction is to free the
value of ST so that it has the potential for expansion to a
comparable valuation level with a Dendrite.
Spend a few minutes on the revenue synergies that we believe are
very executable in the transaction. These, essentially, bucket
into two major groups, if you will, those on the ASP side, and
those on the information product side. And I'd like to ask Jeff
just to spend a few minutes on the ASP revenue synergies.
J. Margolis: Very quickly, Erisco has a footprint of 70 million members in
the United States that utilize the software. It's the highest
market share software program out there in the pair space, and
for certain medium- and large-size payers it's their best
choice. So we will immediately begin offering Erisco on an ASP
basis. And we will immediately be going to the existing customer
base of Erisco, the standalone customer base, and trying to
convert them to ASP customers, as we have done successfully in
the past with our own enterprise manager software on the
practice management side, where we converted about,
approximately, 80 percent of our standalone customers to ASP.
Entering the pharma space, the pharma companies have spent a lot
of time, actually, for a long time they've been outsourcing a
primary amount of their information technology needs, and as
different combinations occur change always triggers need for
differences in services, and whether it be financial systems or
sales support systems or productizing or injecting the IMS data
into other products that the pharmas use on a day-to-day basis,
as opposed to just handing them information, we will access
pharma. And perhaps the most exciting thing here, I think we got
a really good thing going with the ASP and healthcare in the
United States, but there's needs around the world. Much of what
we do is already relevant, and, again, I'll just point you out
to the existing industrial strength technology infrastructure of
IMS Health that exists around the world today, and also the
on-the-ground sales force that used to selling technology
products.
V. Fash: [Inaudible]. As we've been talking about with you, there are a
series of new information products for pharma that are
potentially enabled by the presence of the Internet. The
presence of the data is not something new, however, the ability
to access this data on a cost-effective basis is a critical new
element that the Internet brings to play in this synergy arena.
Now, there are a series of products listed up here that we think
are a value, clearly, to pharma, which we have assumed we are
going to move after and capitalize on in the future. However,
one of the attractive things about Trizetto is these products
are, in many cases, also a value, potentially, in the payer
space as well.
So, in other words, the information, once you have the
information captured in a data file you have the ability to
generate products to multiple constituents, to multiple audience
from that central database repository. Let me give you an
example of what one of these is. Medical products, there is a
whole series of information resident today that IMS already
captures related to the practice of medicine. This information
is, of course, obviously, the prescription databases, which are
huge, and that is, essentially, the majority of our revenue
sources today are driven by that product series. However, there
are also additional clinically based information products that
we capture today.
Much of the data for these products is resident in two areas.
It's resident in the doctors' offices, in the doctor's practice,
and also resident with the insurance companies. Not in terms of
the claims information, but in terms of treatment information
that the insurance companies retain. Therefore, the ability to
capture that information at a level of scale, that's the key
point here, at a level of scale, similar to the huge massive
scale databases
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that IMS runs its products off of today, is what this play is
all about in terms of generating that new product series. That
new product series would have very high value. Certainly we
already know this from talking to our pharmaceutical customers
for pharma, but we believe it could also have very high value to
the payers as well. Launch provider promotion, these are flavors
of other similar products. The important thing that they share
in common is that they require the integration of multiple
databases from multiple points of source. So this is not a
single source, it is, essentially, a replication of the current
IMS business model, but extended into the broader healthcare
arena. Okay?
We have also indicated cost-saving synergies that we have ranged
in the 20 to $50 million on an annualized basis, that we believe
will be achieved by year three. These are in two primary areas,
technology and in infrastructure. By the combination of the
technologies in the two companies that are existent today, and
the acceleration of the pace at which we move IMS into an
Internet world, not only in terms of our products but in terms
of our production processing, we believe that we can drive down
the cost points, drive down the fixed costs rather dramatically
in a fairly short horizon. This is important because if you know
our business model, what you will recognize is that our costs in
these areas tend to be relatively static, so the reduction of
costs in these areas is something that we'll hold at a level
going forward. Infrastructure, of course, this is the normal
things that you would expect in any merger from infrastructure
savings, however, the big play here is in the combination of
technology.
Now, we'd like to give you a snapshot of the out year
projections on revenue and net income for the IMS pro forma new
company, and the Trizetto pro forma new company, and let me just
give you the basis for these and then I'll ask our two CFOs to
walk you through them. What we have done is to try to show you a
1999 historical snapshot. So, in other words, if, and we'll be
glad to get these to you soon, I have to write them all down,
but what we're trying to do here is show you a '99 snapshot as
if the company had been running this way in terms of its '99
baseline. So this is a baseline set of financial that you're
going to see, it does not include the synergies. It does not
include either the revenue synergies or the cost savings that I
showed just a minute ago.
Okay, so what I'd like to do is ask Jim Malone, from IMS, to
start. Jim?
Jim Malone: As you see here, these are the pro forma -- numbers under 1999
reflect the transaction on the - restated. And moving forward,
as Vickie had said earlier, IMS is going to continue performing
the way it has in the past, and these are our projections. We
continue to show strong, strong growth on the revenue line. On
net income, again, we have reflected the transaction by moving
Erisco, ST, and the pro forma net income reflects that. Again,
we continue to show very, very strong growth. As we said on the
call yesterday, we will be issuing a very detailed investor
pack, similar to the ones we have done in the past, in the next
two weeks, to really walk you through these numbers. But we just
wanted to give you a little comfort level here, to say that IMS
is going to continue as it has in the past under this new
transaction.
V. Fash: Okay. Yeah. Next slide [unintelligible]. Okay. So what are the
important take-away messages with regard to the IMS core
financial performance? The important take-away messages are the
growth and profit profile is very consistent with what IMS is
showing investors today, so in other words, no change. We are
going to also see improved margins and cash flow. Now, why? The
reason is pretty straightforward. What you're doing is you're
taking out Erisco, right? Because it goes to the Trizetto
company. You're taking out Strategic Technologies as it spins.
These businesses are lower margin than the core IMS database
businesses, and they have lower relative cash flow. So the
lifting out, if you will, of those two businesses improves the
performance profile. And, finally, the synergies are additive in
terms of revenue upside and cost savings upside.
[Unintelligible].
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Mike Sunderland:Thank you, Vickie. My name is Mike Sunderland, I am the CFO of
the Trizetto Group. Just to take you through the Trizetto
projections on a combined basis, pro forma basis, if you will,
in 1999 the combined revenue is 81, we expect that to grow, this
is pre-synergies, okay, to between 110 and 120, growing out to
2003 to between 280 and $290 million. Those are growth rates
that represent 42 percent year over year, low 40s into the low
30s. Okay? Now, when you add the synergies on top of that
revenue, the synergies are going to be created, as Vickie had
indicated, and Jeff had indicated earlier, by the incremental
products that we expect to bring to bear to the market as a
result of this transaction.
And in terms of total revenue, we are growing from the base,
existing base of 81 to between 365 and $375 million by 03. What,
essentially, that means is we are able to apply the identical
or, in fact, higher growth rates, that we have projected to the
street for Trizetto alone, on a much higher base of both revenue
and EBITDA here. So it's important for everybody to understand
here that from the street perspective, the highest street view,
if you will, of Trizetto, was growing at approximately 2 - in
the out years, to $211 million in terms of revenue, and $51
million in terms of EBITDA. This is incremental. And I think it
clearly shows that.
V. Fash: Okay. So, again, just to translate into English what the numbers
are saying, we double the revenue base for Trizetto. There is,
clearly, an acceleration, and remember, Trizetto is a revenue
multiple entity, therefore that acceleration is extremely high
value in terms of driving the equity value of the Trizetto
group. So acceleration and what is already very rapid ASP top
line growth, higher profitability in 2001. Again, this is simple
math. The Erisco business is profitable today, so when we look
at the out year horizons the absolute profit level is higher for
the new Trizetto Group. And, finally, again, the synergies, as
you saw, are additive. Okay?
So if you sum all of this up on a 2000 through 2003 horizon, you
end up with a revenue total that you see up there at the top,
and cost synergy upside in the 20 to 50 mil range. And, as you
can see, it is a fairly significant and fairly steep revenue
growth ramp. So let's go on to the governance issues, if we may,
and I'll ask Jeff to be up with me on this one.
Who will be running the company? This is, in essence, a shared
governess structure, and it is one company with two separately
traded equities. Bob, Jeff, and I will be running the company as
the executive management team. The Board structure is a shared
governance structure. We'll have three independent Directors
from the current Trizetto Group, three independent Directors
from the current IMS Health Board, and the three of us will
comprise the new Board of Directors.
Unidentified: It's shared.
V. Fash: We think that this is, again, not only focused management power,
but the ability to combine the best of the old world and the new
world in terms of management talent, if you will. IMS is,
clearly, a large company with a huge global presence with a
strong operational track record with a management team that's
been in place and successfully executing and successfully
delivering for many years now. Trizetto's got exciting,
energetic, aggressive, young Internet talent and management, as
you can see for Jeff, so the ability to have both of those in
the same company, working together to build a future company
that, again, combines the best talents from the old economy and
the new economy is what the management story is all about there.
J. Margolis: One of the reasons I can appreciate the structure we have set up
is because I have spent a majority of my career in older types
of companies. Last stint was a $4.5 million
<PAGE>
company, and what I found, immediately, in talking with Vickie
and Bob and IMS was this level of executive management
oversight. I don't know how many of you have ever been CEOs or
presidents of publicly traded companies, anyone out there in the
room? There's a lot to do, there's an awful lot to do. You have
a Board that you interact with and manage, and we're all on the
Board. You have to deal with financial issues, deal issues. We
have to take care of our constituents. We have to take care of
the analysts, we have to take care of our shareholders, we have
to take care of our employees. In a big company that's a lot of
stuff to do. Okay? When a company is trying to accelerate its
growth path, it is trying to technologically retool itself, and
it's trying to be out there out front as a market leader you
need to do some divide and conquer work. And I think the
structure we have set up is a very comfortable one, I know it is
for me, to rely on the background and strength of Bob and Vickie
to oversee the executive functions of the company while I take
on the operating and strategic role in conjunction with them,
and help - we all work together to get this thing moving a
little bit quicker. That's the kind of focus, I think, makes
sense. Otherwise, when you put two companies together, if you
don't have someone paying enough attention to that integration
and to what makes them work together you can have some problems,
and I've been through about half a dozen major mergers and
acquisitions in my career. This makes sense.
Unidentified: [Unintelligible] stated emphatically.
V. Fash: So if we summarize then why we believe this deal generates value
to IMS Health shareholders today, there are series of, we
believe, compelling reasons. The first, of course, is this is an
Internet play, but it's an Internet play with a difference, it's
an Internet play that couples the very solid rock of Gibraltar
equity with a rocket ship Internet company in what we think is a
very compelling combination. It unlocks hidden value in terms
of, obviously, the synergies, but also the release of the
Strategic Technologies equity to trade independently in the
marketplace, it accelerates the Internet conversion process for
the IMS Health business, and, as well, opens up a series of new
data sources and, therefore, broadens market opportunity, plus
the leverage that we get from the knowledge of the payer space
brought to us by Erisco and Trizetto, and, finally, it's
sustains our competitive leadership by taking us the next step
in the evolution of IMS from both a business model perspective,
and also from a technology perspective.
J. Morgalas: From a Trizetto perspective, again, it's straightforward. We're
growing this ASP fast, we want to grow it faster, we want to
keep gaining market share and footprint out there in the
marketplace. I think most of you know the ASP is a pretty solid
business model. I know we get referred to as an Internet company
because we have Internet-enabled technology, but the way an ASP
makes money is it gets a subscription fee for a level of
services, and each year the people costs, the technology costs,
and the software costs related to that decline on a relative
basis to revenue, and you grow your EBITDA and your
profitability in out years. If you grow that faster you make
more money, and we certainly created the company to make real
live returns for our investors. And when I mentioned earlier
that we have to look out more beyond a quarter or two, I'm not
worried about the next quarter or two. I'm worried about growing
Trizetto into the largest company, the largest market share
position that it can be going forward, and there's moves afoot
in the market today that make sense for us to take this kind of
action now.
We've already talked about global expansion entry into the
pharma, just a word about cash. Frizetto manages its cash well.
Those of you who know us know that our burn rate on cash is
significantly lower than other technology companies in the e
space, and much, much lower than pure Internet companies. But,
the question is can we grow faster with cash resources that
aren't necessarily available to us today, and if we can access
those cash resources on a very easy and non-dilutive basis? And
the answer is, of course we can. Of course we can grow faster,
and of course we can do more. So that is one of the
<PAGE>
reasons for this deal structure and the ability to take assets
across the two different companies with a single Board
governance structure.
So you put this all together. We tried to answer or address your
questions today, why are we getting together? Why the structure?
Why the tracker and the different equity profiles? Who is going
to run this company? What are the numbers? And why would you, as
an investor, want to continue to hold this company. Now, it goes
without saying that we created some confusion yesterday in the
marketplace. Bringing, as Vickie said, different investor
profiles together. We're aware of those different investor
profiles. If you look at the metrics on a pro forma basis of IMS
pro forma, Trizetto pro forma, and the ST spin, I hope that
leads you to a conclusion of why we thought this was a fair deal
for our investors, and then, why, after the time of the clothes
we think we got a rocket to strap onto here.
We are committed to being the global leader in the healthcare
space, and with that we would, I guess, open up for any
questions you may have for Bob, Vickie, or myself. And I'm going
to let Bob -
Bob Weissman: Uh-huh.
J. Margolis: -- who has the true radio voice, moderate the question and
answer session.
B. Weissman: Yes.
THIS RELEASE MAY CONTAIN FORWARD-LOOKING INFORMATION (STATEMENTS THAT ARE NOT
HISTORICAL FACTS AND RELATE TO FUTURE PERFORMANCE) THAT INVOLVES RISKS AND
UNCERTAINTIES. THE FORWARD-LOOKING STATEMENTS ARE MADE PURSUANT TO THE SAFE
HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE
FORWARD-LOOKING STATEMENTS MAY INCLUDE STATEMENTS ABOUT FUTURE NET REVENUES,
PROFITS, AND FINANCIAL RESULTS, THE MARKET FOR TRIZETTO'S SERVICES, FUTURE
SERVICE OFFERINGS, CLIENT AND PARTNER RELATIONSHIPS, AND TRIZETTO'S OPERATIONAL
CAPABILITIES. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE STATED IN ANY
FORWARD-LOOKING STATEMENTS BASED ON A NUMBER OF FACTORS, INCLUDING THE
EFFECTIVENESS OF TRIZETTO'S IMPLEMENTATION OF ITS BUSINESS PLAN, THE MARKET'S
ACCEPTANCE OF TRIZETTO'S SERVICES, RISKS ASSOCIATED WITH MANAGEMENT OF GROWTH,
RELIANCE ON THIRD PARTIES TO SUPPLY KEY COMPONENTS OF TRIZETTO'S SERVICES,
ATTRACTION AND RETENTION OF EMPLOYEES, VARIABILITY OF QUARTERLY OPERATING
RESULTS, INCLUDING THE EFFECTS OF THE CLIENT PURCHASING PATTERNS DUE TO YEAR
2000 ISSUES, COMPETITIVE FACTORS, RISKS ASSOCIATED WITH ACQUISITIONS, CHANGES IN
DEMAND FOR THIRD PARTY PRODUCTS OR SOLUTIONS, WHICH FORM THE BASIS OF TRIZETTO'S
SERVICE OFFERINGS, AND RISKS ASSOCIATED WITH RAPIDLY CHANGING TECHNOLOGY, AS
WELL AS THE RISKS IDENTIFIED IN TRIZETTO'S SEC FILINGS, INCLUDING INFORMATION
UNDER THE HEADING OF RISK FACTORS IN ITS FORM S-1 FILED IN OCTOBER 1999.
THIS RELEASE INCLUDES STATEMENTS WHICH MAY CONSTITUTE FORWARD-LOOKING STATEMENTS
MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. ALTHOUGH IMS HEALTH BELIEVES THE EXPECTATIONS CONTAINED IN
SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT
SUCH EXPECTATIONS WILL PROVE CORRECT. THIS INFORMATION MAY INVOLVE RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS OF IMS HEALTH TO DIFFER MATERIALLY
FROM THE FORWARD-LOOKING STATEMENTS. FACTORS WHICH COULD CAUSE OR CONTRIBUTE TO
SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO (I) THE RISKS ASSOCIATED WITH
OPERATING ON A GLOBAL BASIS, INCLUDING FLUCTUATIONS IN THE VALUE OF FOREIGN
CURRENCIES RELATIVE TO THE U.S. DOLLAR, AND THE ABILITY TO SUCCESSFULLY HEDGE
SUCH RISKS, (II) TO THE EXTENT IMS HEALTH SEEKS GROWTH THROUGH ACQUISITIONS AND
JOINT VENTURES, THE ABILITY TO IDENTIFY, CONSUMMATE AND INTEGRATE ACQUISITIONS
AND VENTURES ON SATISFACTORY TERMS, (III) THE ABILITY TO DEVELOP NEW OR ADVANCED
TECHNOLOGIES AND SYSTEMS FOR ITS BUSINESSES ON TIME AND ON A COST-EFFECTIVE
BASIS, (IV) REGULATORY, LEGISLATIVE AND ENFORCEMENT INITIATIVES, PARTICULARLY IN
THE AREAS OF MEDICAL PRIVACY AND TAX, AND (V) DETERIORATION IN ECONOMIC
CONDITIONS, PARTICULARLY IN THE PHARMACEUTICAL, HEALTHCARE OR OTHER INDUSTRIES
IN WHICH IMS HEALTH'S CUSTOMERS OPERATE. ADDITIONAL INFORMATION ON FACTORS THAT
MAY AFFECT THE BUSINESS AND FINANCIAL
<PAGE>
RESULTS OF THE COMPANY CAN BE FOUND IN FILINGS OF THE COMPANY MADE FROM TIME TO
TIME WITH THE SECURITIES AND EXCHANGE COMMISSION.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
IMS Health Incorporated ("IMS") and The TriZetto Group, Inc. ("TriZetto") plan
to file a Registration Statement on Form S-4 and other relevant documents with
the Securities and Exchange Commission (the "SEC")in connection with the Merger,
and IMS and TriZetto expect to mail a Joint Proxy Statement/Prospectus to
stockholders of IMS and TriZetto containing information about the Merger.
Investors and security holders are urged to read the Registration Statement, the
Joint Proxy Statement/Prospectus, and other documents filed with the SEC
carefully when they are available. The Registration Statement, Joint Proxy
Statement/Prospectus, and other filings will contain important information about
IMS, TriZetto, the Merger, the persons soliciting proxies relating to the
Merger, their interests in the Merger, and related matters. Investors and
security holders will be able to obtain free copies of these documents through
the website maintained by the SEC at http://www.sec.gov. Investors will be able
to obtain copies of the documents free of charge from IMS by directing a request
through the Investor Information portion of IMS's website at
http://www.imshealth.com or by mail to IMS Health Incorporated, 200 Nyala Farms,
Westport, CT 06880, attention: Investor Relations, telephone: 203-222-4250.
Documents filed by TriZetto will be available free of charge from TriZetto by
directing a request through the Investor Information portion of TriZetto's
website at http://www.trizetto.com or by directing a request by mail to The
TriZetto Group, Inc., 567 San Nicolas Drive, Newport Beach, CA 92660, attention:
Investor Relations, telephone: (949) 219-2200. In addition to the Registration
Statement and the Joint Proxy Statement/Prospectus, IMS and TriZetto file
annual, quarterly and special reports, proxy statements and other information
with the SEC. You may read and copy any reports, statements or other information
filed by IMS or TriZetto at the SEC public reference rooms at 450 Fifth Street,
N.W., Washington, D.C. 20549 or at any of the SEC's other public reference rooms
in New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. IMS's and
TriZetto's filings with the SEC are also available to the public from commercial
document-retrieval services and at the Web site maintained by the SEC at
http://www.sec.gov.
INVESTORS SHOULD READ THE JOINT PROXY STATEMENT/PROSPECTUS CAREFULLY
WHEN IT BECOMES AVAILABLE BEFORE MAKING ANY VOTING OR INVESTMENT DECISIONS.
IMS, its directors, executive officers and certain other members of
management and employees may be soliciting proxies from IMS stockholders in
favor of approval and adoption of the merger agreement. Information concerning
the participants in the solicitation will be set forth in the Joint Proxy
Statement/Prospectus when it is filed with the SEC.
