Avia Health Informatics: news flow bodes well for the firm ahead of final results

Shares in Avia Health Informatics (LON:AVIA) have had their ups and downs during the past year. Having hit an all-time low of 32 pence last November, after posting weak interims amid challenging conditions in its UK market, they bounced back earlier this year – getting as high as 60 pence each by late February.

Since then, and in spite of a series of news releases that suggest demand for its clinical decision support software is growing, Avia’s share price has fallen back again to 45 pence. Weak stock markets, and the general poor performance of London’s Alternative Investment Market (on which Avia’s shares reside) during the past few months, can be blamed for the failure of Avia’s share price to maintain the gains seen between December and February.

And there are plenty of reasons for the firm’s investors to remain optimistic about its prospects.

Certainly, house broker Panmure Gordon thinks so. Panmure says that recent announcements, including customer wins, geographic diversification and a strengthening of the firm’s “channel ecosystem” are all positive developments. The broker has set a target price of 80 pence each for the shares.

Avia has been selling its clinical decision support software, branded Odyssey, for 16 years. The software powered the NHS Direct helpline until the year 2000, when the contract was awarded to Axa Assistance and MDS International. “Odyssey has been used to support around 16 million remote assessments, mostly within the UK,” says Barry Giddings, Avia’s chairman.

Odyssey uses a Bayesian, statistics-based system of questions and answers that mimics the human reasoning process. Avia says that this makes it more intuitive to use, unlike decision support software that use algorithms.

Odyssey is pre-diagnostic software with products targeted at both clinicians and non-clinicians. It can be used for self-assessment on touch screen devices and it can also be accessed via the Internet by clinicians who are working directly with a patient or consulting with the patient over a telephone.

As well as providing decision support for general healthcare settings, the Odyssey range includes products targeted at specific environments such as Odyssey FirstAssess (designed for use in prisons and other detention centres) and Odyssey MarineAssess (designed for the shipping industry).

Odyssey TeleAssess supports telephone triage by nurses and the provision of up-to-date self-care advice. It is also used to manage demand for clinical services in an efficient manner. Customers include GP out-of-hours services, ambulance trusts and the Ministry of Defence.

Part of Avia’s strategy is to be able to offer its healthcare customers end-to-end systems to help them improve the efficiency of their services: ideally to become a sort of “one-stop shop”. The recent acquisition of PathFinderRF – a referral facilitation and clinical communication system – was a key step in this strategy.

Avia acquired the intellectual property rights to PathFinder from Nene Commissioning Group, an award winning commissioning body within the NHS, six weeks ago. Nene developed PathFinder in order to provide an innovative online referral facilitation and clinical communication system and it has already successfully rolled out this system across Northamptonshire

Avia intends to target PathFinderRF at NHS Commissioning Groups and other Primary Care organisations to manage referrals from GP surgeries to specialist and community services for further treatment.

“It supports the clinician. It does not replace the clinician. It helps the clinician to get the patient on to the right referral,” says Giddings, explaining that it supports the clinician to decide which hospital or other service a patient should go to, when he or she needs to go there and so on. “It makes sure the patient gets the right level of care.”

Avia will pay Nene for the acquired IP solely out of the revenue it makes by selling licences in PathFinderRF, on a decreasing sliding scale over five years. It will also fund what it describes as the “limited” continuing development costs of the product.

More recently, Avia announced it had teamed up with K3 Healthcare to help promote its Odyssey product range to providers of ‘remote healthcare’.

The agreement will see K3 Healthcare, the commercial arm of the Institute of Remote Healthcare, collaborate with Avia in developing Odyssey sales opportunities to remote healthcare organisations around the world.

Avia said that the K3 team has more than 30 years’ experience in delivering healthcare solutions both for the public and private sector, working in more than 20 countries across the world.

Recent contracts by Avia include a sale into the UK’s prison service and an Odyssey TeleAssess sale to a US client.

Avia sold its Odyssey FirstAssess clinical decision support software to HMP Swaleside in a deal which the firm expects will lead to further wins within the UK prison sector. HMP Swaleside is the largest prison within the Kent cluster of three prisons, and it bought Avia’s software after identifying the need for a system that would assist it with protocols and reduce risk in terms of possible litigation, clinical governance and standardisation of the prison’s services.

Avia has designed Odyssey FirstAssess specifically for prison and secure healthcare environments. As well as supporting clinicians in prison to provide a high standard of care and consultation, the system will also help to reduce risk associated with clinical consultations and provide support in reducing the overall cost of healthcare provision.

The firm said that the contract value with HMP Swaleside is circa £50,000 but that the deal represents “an important strategic contract win”. Avia pointed out that the prison is known as a strategic and “vocal” prison within the UK prison service and it expects the contract to facilitate it in selling to other UK prisons.

Avia’s one-year contract with US-based GuardiMi is for the supply of multiple licences of its Odyssey TeleAssess product. GuardMi, an Ohio-based company that operates a Medical Call Centre, plans to begin using Odyssey TeleAssess in September.

Panmure said recently that despite positive developments at Avia it was not changing its forecasts, since Avia’s final results are imminent.

For now, the broker estimates earnings per share for the year to 31 March 2011 to reduce to 2.6 pence (from 5.2 pence in 2010). For next year, it has predicted an EPS figure of 4.8 pence.

Market: AIM

Symbol: AVIA

Price: 45p

Market cap: £3m