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Technology and Life Sciences Blog

Digital Health Technology in the Spotlight

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News from the Annual J.P. Morgan Health Care Conference

January 21, 2015

Fogarty,MarcBy Marc Fogarty, CPA, CFE

The palpable buzz at this year’s J.P. Morgan Health Care conference indicates that valuations are still going strong and 2015 could shape up much like 2014, in terms of deals and IPOs.  This year, the number of digital health companies at the conference was much larger. Perhaps this influx was a result of the Affordable Care Act and the HITECH Act which encourages health care providers to improve health care quality, safety and efficiency. Many digital health companies were formed with the intention of helping providers achieve those goals through innovative technology. 

With interest rates near zero, the capital markets are looking optimistic for digital health companies, whether start-ups or companies that have been around for a while. Even before the conference, Qualcomm Ventures announced a joint investment company created with Novartis Pharmaceuticals with the intention to raise $100M to invest in digital health companies. There is also an expectation that several large IPOs will occur this year, including companies like HealthGrades, Evolent Health, MindBody, Doximity and Best Doctors.

The environment might be right on Wall Street since investors are aware that the health care industry withstood the 2008-2009 recession. During that time, jobs in the health care industry grew 7% while the overall job loss was 8 million.  Another positive indicator could be that investors made money last year from the IPOs of digital health companies Everyday Health and Veeva Systems.

According to Forbes, the top 10 tweets from the J.P. Morgan Health Care conference included three tweets from Rock Health, a company that provides startups with funding: 

  • “Ask VCs which industry they’re most excited to revolutionize, and odds are high they’ll say healthcare"
  • "Telemedicine may just be the biggest trend in digital health in 2015"
  • "Digital health is no longer the sideshow of #JPM15.”

The overwhelming highlight from the J.P. Morgan Health Care Conference is that digital health companies are hot. Whether they will raise funds through venture capital or IPO, digital health companies are definitely on the watch list for 2015.

Medical Device Excise Tax Update

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Pennsylvania Bio recently reported:
“Momentum for repeal of the Federal Medical Device Tax in the Affordable Care Act continued to build today as members of the U.S. Senate Finance Committee introduced S. 149, the "Medical Device Access and Innovation Protection Act," which would repeal this 2.3% tax on jobs and innovation.  The Senate legislation had 10 co-sponsors (5 Republicans and 5 Democrats), including Pennsylvania Senators Bob Casey (D) and Pat Toomey (R).
You can
click here to read the news release issued by the Senate Finance Committee.
The Senate action today comes on the heels of last week's introduction in the House of Representatives of H.R. 160, "The Protect Medical Innovation Act," sponsored by, among others, thirteen members of the Pennsylvania Congressional delegation.  H.R. 160 now has 261 cosponsors.”

For updates on the Medical Device Excise Tax, continue to check the EisnerAmper Life Sciences blog.  To the extent that the tax is repealed, we will provide further guidance with regard to filings for potential refunds and other administrative procedures.

Anti-Alibaba Ad Puts Tax Law in the Spotlight During Biggest Holiday Shopping Weekend

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January 14, 2014

Fogarty,MarcBy Marc Fogarty, CPA, CFE

This past holiday shopping season showed a continued affinity for shoppers to buy online rather than in brick and mortar stores. Retailers have argued that ecommerce companies, and the consumers who buy from them, are able to profit from a sales tax loophole. Amazon.com had been the natural target for their attacks; however, this year, attention was paid to the Chinese company Alibaba.

The Alliance for Main Street Fairness, a retail coalition consisting of big brand name retailers like Target and Home Depot, ran an advertisement urging U.S. lawmakers to pass a bill that would prevent companies, like Alibaba, from enabling online shoppers to circumvent sales tax. The implication was that foreign companies would threaten the success of U.S. retailers if such a law were not enacted. Alibaba is uniquely positioned to be their target since it’s a non-American company that handles more ecommerce than Amazon and eBay combined.

Alibaba had made its mark in America’s consciousness as it became the darling of Wall Street with its strong earnings reports, a $25 billion IPO and a recent selling of $8 billion in bonds; but, the recent bad press may apply some pressure. Alibaba, in summary, responded to the contrary that it pays taxes according to U.S. law and it provides U.S. companies the opportunity to tap into the Chinese market through its online properties. The suggestion being that their retail presence is a win-win proposition.

As cultures become more globally interconnected and internet shopping continues to show borders are not an impediment, our generation continues to see the evolution of ecommerce unfold. I can’t help but wonder what the next generations will someday read in their history books and what brands will survive to that day.

What's NOT New Hallmarks Google's Plan for Long-Term Market Domination

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Marc FogartyNew products and services are the media darlings of the tech industry. Established technology giants like Microsoft, Apple and Google routinely see their stock prices rise and fall in direct relation to new product announcements. Microsoft's Surface, Apple's iPad and Google's Nexus lines of tablets are all examples of products that compete for this growing market. Each company's offering tries to define itself from the competition based upon their latest features, performance and value-to-price proposition. But, as every technology company can attest, even truly great technology offerings can lose their place in the spotlight when a new contender comes along.

The key to long-term profitability, especially in the ever-changing tech field, is to find a way to establish a secure niche in a market that can outlast the temporary hype of being "new." In fact, sometimes the least likely and least promoted products have a way of sneaking themselves into our lives and making themselves memorable and essentially indispensable. Google is an excellent example of how a company can weave itself into the fabric of everyday life by their offering software services like Google Maps and Google Search, which have become the standard for internet-based navigation and search.

Google is again making waves but it’s not with a new product. Google is marketing one of their "older" products to a distinct market and it’s very likely that this campaign will have a major impact on the purchasing decisions of the next generation. The product I am referring to is Google Chromebook – an affordable laptop computer launched in May 2011. A Chromebook runs on the Google Chrome Operating System; most of its applications use cloud computing.

Recent reports have shown that the number of Chromebook laptops shipping to U.S. schools has, for the first time, outpaced the number of iPads. In just two years, Chromebooks have gone from 0% to 25% of the educational market share. Apple and Microsoft are no doubt taking notice of Google's exceptionally fast-paced charge into their territory.

For schools, the Chromebook offers two key benefits: lower hardware cost (priced at $199) and Google’s free complimentary software Apps for Education Suite.  Microsoft is sure to compete with their own online suite of software Office 365 (which is free for students but at a cost for the schools), and the new Stream Netbook, which is positioned at the same price as the Chromebook.

Only time will tell if one brand will dominate or another competitor will come along to change the game entirely. In the meantime, the takeaway for any technology company (or company in general) is to always look for new marketing opportunities – even for products that are successful but no longer considered "new."

A Cyber Security Breach Can Happen to Any Size Company, At Any Time

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December 12, 2014
By Marc Fogarty, CPA, CFE

Fogarty,MarcIt is a misconception that if your company or organization doesn’t store financial information, then you aren’t at risk for a cyber-attack. The recent Sony Pictures data breach clearly shows that this is not the case. The fallout from this scandal will be different than a financial security breach like the ones that happened this year with Target and Home Depot.
With a financial security breach, customer data is exposed and can be used for identify theft or credit card fraud. What makes this situation unique is the type of data that was exposed and the reputational and possible legal implications from this exposure.

Here is the crux of what's in the news: It was originally postulated that the Sony cyber-attack occurred due to a disgruntled employee. Later, the attack was attributed to sympathizers with the North Korean government. The group claimed to be protesting the contents of a specific film which showed an assassination attempt on the North Korean dictator, Kim Jong Un. A separate online posting threatened physical attacks on theaters that show the film, which were credible enough to be considered a threat by homeland security and caused Sony to cancel the film's release.

Regardless of who committed the offense, companies of all sizes are at risk from a malicious attack that may have nothing to do with money. The Sony data breach exposed sensitive data such as internal and external communications, employee social security numbers, birth dates, health records and salaries.
It is one thing to expose customer's financial information, but quite another to expose sensitive data and the private communications of employees upon whom the company relies. A privacy breach may make employees feel a lack of care and respect for their personal information, and the feeling that their employer betrayed them. Reputational problems aside, there are also legal implications to the data that was exposed. In mid-December, it was announced that two former employees are suing Sony over privacy issues related to the data breach. This could have much more serious consequences since, in the state of California, it is a company’s legal responsibility to secure employee medical information.  If that isn’t bad enough, Sony is also an international company and could face legal ramifications in other regions like Europe, which have their own version of data protection laws.

Internal and external company communications were also exposed that involved business partners, celebrities and others. These leaked emails and correspondence could consequently cause physical, reputation or financial damage to those third parties, who could then have a possible legal claim.

In the end, it is highly probable that Sony Pictures will survive this fiasco and return to business as usual because of their size and financial resources. Their defense is also bolstered by the U.S. government, who wants to pursue the attackers, since the breach accompanied a terrorist threat to theaters and an attack on Sony's ‘freedom of speech’ rights to make the movie.  But it begs the question: What would happen to a small or mid-size company under similar circumstances? Could they survive the fallout from such a serious data breach?

If you think your company’s data isn’t at risk, think again. Every company has internal and external emails and records that contain confidential information and sensitive employee information such as addresses, social security numbers, dates of birth, performance reviews, salaries, resignation letters and more. The Sony data breach is a wakeup call for all companies to re-examine their cyber risk and take appropriate measures to minimize that risk as much as possible.

Holiday Shopping Stats Show Clear Internet Trend

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December 10, 2014

Fogarty,MarcBy Marc Fogarty, CPA, CFE

As the economic statistics for Black Friday and Cyber Monday came in, there was a wide range of opinion on its success depending on which news channel you paid attention to. Despite a prediction of growth in holiday shopping, the National Retail Federation's preliminary retail report quoted an 11% drop in sales; however, they still predict an increase in overall sales for the holiday season.

A major factor that may have affected the holiday economic reports was that many retailers offered discounts days and weeks before the Thanksgiving weekend. Many shoppers may have started shopping earlier, so Thanksgiving and Black Friday specific sales results may have been diluted.

Regardless, there are several favorable economic indicators for this holiday season: 

  • The Consumer Electronics Association reported 45% of shoppers bought electronics which was an increase over the past 3 years. 
  • Target reported that Thanksgiving was the best online shopping day ever.
  • Wal-Mart reported Thanksgiving as its second highest ever. 
  • According to ComScore, there was an increase of over 25% in online sales on both Thanksgiving Day and Black Friday. 
  • IBM reported an online sales increase of a little over 14% on Thanksgiving and an almost 10% on Black Friday when compared to the numbers from last year.

These statistics, as well as commentary from several analysts, seem to support a significant shift toward online shopping, and a decline in in-store traffic.

Without even looking at the Cyber Monday economic stats, it is apparent this year that online shopping is seeing a sharper incline in the percentage of holiday sales business. This reinforces the premise that, more than ever, retailers need a strong Internet sales presence to compete in our ever-increasingly technology-driven world.

A Boom in Technology Public Company Spin Offs – Will Investors Get Dizzy?

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December 8, 2015

Fogarty,MarcBy Marc Fogarty, CPA, CFE

A new trend popping up in public companies is the spinning off of their technology products to become two publicly traded companies. Within a short period of time this fall, eBay announced a spin-off of PayPal, Symantec publicized a planned split of their security and information divisions and Hewlett-Packard announced a spin-off of its personal computer and printer business.

So what’s up with all the breakups, and is breaking up a good thing? With technology changing so rapidly and divisions within a business wishing to pursue their own direction, from my perspective, this seems to be a natural progression.

By spinning off and becoming two distinct companies, leaders of each part of the original company now have the flexibility to better compete within their specific market and each have the ability to show individual profit to further their appeal to investors. From an investor perspective, someone might like the idea of just buying stock in the one part of a company that seems to be doing better than the other, or they may have more confidence in that technology sector as a whole.

For example, PayPal’s IPO was in 2002, and they were acquired by eBay soon after. At the time, the two products worked hand-in-hand, and it may have been a good business move to have both companies under one umbrella. Now, as the technology landscape has continued to quickly evolve, they could be worth more apart than together. PayPal as a separate publicly traded company could possibly compete with Apple’s new ApplePay product. This might give PayPal the ability to raise capital specifically for them which could make them more agile in maneuvering the digital payments market.

Only time will tell if breaking up is a good thing. In the meantime, it will give some publicity to the tech companies and should give investors plenty to consider.
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