Orion geared up for 'R&D arms race' - McCrae

CEO Ian McCrae (right) and Chairman Andrew Ferrier at the Orion IPO briefing. Photo / Jason Oxenham.

Orion Health chief executive Ian McCrae says there's going to be an "R&D arms race" in the healthcare IT sector.

And he says his firm - flush with cash following its $125 million stock exchange float - is looking to bulk up its research and development team with 350 new staff over the next two years.

That would double Orion's R&D headcount to 700.

The Auckland-based company's newly listed stock surged more than 15 per cent above the $5.70 issue price to be trading at $6.60 just before noon today, giving the company a market capitalisation of $1.06 billion.

McCrae said the company, which raised $120 million in new capital through the offer, was now well-resourced in terms of funding for the first time in its 21-year history.

"Now we can invest ahead of our revenues and we need to do that because the whole market is going to change," he said. "There's going to be an R&D arms race."

McCrae said the IPO would allow Orion to invest heavily in R&D and "try and get a jump on the market".

"What this [IPO] does is give the springboard for Orion Health to become a major company in the health information space," he said. "That market is probably a fifty billion dollar market."

McCrae said the bulk of the 350 new R&D staff the company was looking to hire would be based in New Zealand.

However, he said securing top talent was a major challenge and the company would have to recruit many of the new employees from outside New Zealand.

"The schools and universities and not training enough people," McCrae said. "If it wasn't for immigration we'd be in big trouble."

Orion raised a total of $125 million through its IPO, which included $5 million worth of shares sold into the offer by an entity associated with McCrae.

Orion's technology facilitates the sharing of information between hospital departments, healthcare providers and health professionals.

The company is preparing to make a major growth push into international markets, particularly the United States.

Founded in 1993, it now has more than 450 customers in 25 countries and posted total revenue of $153 million in its last financial year.

The company reported a loss of $14.8 million in the six months to September 30, according to its prospectus, which did not include any earnings forecasts because the company decided its "lumpy" revenue, which comes via large contracts, made providing accurate guidance too difficult.

McCrae was expected to retain a roughly 50 per cent shareholding in the business following the IPO.