Here’s why the Volpara (ASX:VHT) share price is surging 5% higher

The Volpara Health Technologies Ltd (ASX: VHT) share price has returned from its trading halt and is pushing higher on Tuesday.

In morning trade, the health technology software company’s shares are up 5% to $1.56.

Why is the Volpara share price surging higher?

Investors have been buying Volpara’s shares this morning following the announcement of a new acquisition.

According to the release, the company has acquired CRA Health for US$18 million upfront, with an additional US$4 million payable upon it meeting recurring revenue and staff retention targets over the next 18 months. Post-acquisition, Volpara will have ~NZ$35 million cash.

CRA Health is a breast cancer risk assessment company that was spun out from Massachusetts General Hospital, a Harvard Medical School teaching hospital.

The release explains that CRA Health’s cloud based CRA software is tightly integrated into major electronic health record (EHR) systems. It receives patient information, including breast density, and returns the risk of breast cancer alongside appropriate recommendations.

This includes whether additional imaging or genetics testing is advised and reimbursed according to established guidelines. CRA also has electronic interfaces built with all the major genetics companies.

CRA is a profitable, operating cash-flow-positive software-as-a-service (SaaS) company with low customer acquisition costs due to its relationships with the major EHR companies. It now has annualised recurring revenues (ARR) of over US$4 million (NZ$6.2 million) after experiencing strong growth over the last year despite the COVID-19 pandemic.

Its software covers around 2.4 million women, or approximately 6% of US screenings, with an average revenue per user (ARPU) of approximately US$1.70. Unaudited revenue for its last financial year ended 31 December 2020 was US$3.1 million.

A very significant acquisition

Volpara’s CEO, Dr Ralph Highnam, believes the acquisition of CRA is significant.

He said: “The acquisition of CRA is very significant for Volpara. CRA is a leading provider of risk assessment tools within major EHR systems and has integrations already built with the main genetics companies. CRA has a strong science background, just like Volpara, and provides us with world-class knowledge about risk and genetics. CRA is expected to benefit the Volpara brand and will accelerate us on our mission to save families from cancer by preventing advanced-stage breast cancer.”

The acquisition will increase group ARR to ~US$17.5 million (NZ$26.9 million) and group ARPU to over US$1.40.

Volpara’s Chair, Paul Reid, added: “We have known CRA for a long time, and they share our values, mission, and scientific background. We can’t wait to see the results of combining these two global leaders and the positive effect these will have on women’s healthcare.”

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends VOLPARA FPO NZ. The Motley Fool Australia owns shares of and has recommended VOLPARA FPO NZ. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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