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Wolters Kluwer's online move injects life into health business

Nancy McKinstry, CEO of Wolters Kluwer, speaks during a Reuters Media summit in London December 2, 2009. REUTERS/Simon Newman
Nancy McKinstry, CEO of Wolters Kluwer, speaks during a Reuters Media summit in London December 2, 2009. REUTERS/Simon Newman

By Sara Webb

ARNHEM, The Netherlands (Reuters) - Digital doctors like Nicholas Haining and Frank Bosch are changing the face of medicine and the way publishers such as Wolters Kluwer make money in the stagnant or low-growth North American and European markets.

Tablet computers and smartphones are almost as essential as a stethoscope in the modern medic's kit, with doctors calling up medical journals, databases, reference works and patient records on these gadgets as they do their hospital rounds.

As a result, Wolters Kluwer is increasingly selling information in electronic rather than printed form - a change that has allowed the Dutch company to increase margins and retain subscribers.

"Medical students used to have to memorize things like the branches of the trigeminal nerves. Now they would look it up," Dr Haining, a pediatric oncologist working in the United States, told Reuters.

"You are no longer a walking encyclopedia, there is no need to have all the information in your mind, because you can get the best available data and draw on evidence-based medicine."

Boston-based Dr Haining said he uses UpToDate, which Wolters Kluwer bought in 2008, to access clinical evidence that has been reviewed by experts in the field.

Wolters Kluwer competes with Reed Elsevier and Reuters' owner Thomson Reuters, selling specialist publications and software to bankers, lawyers and accountants, as well as to doctors and scientists.

The company last year derived a fifth of total revenue and profit from its health division, which sells more than 100 medical journals as iPad apps.

The division's earnings before interest, tax and amortization (EBITA) jumped 30 percent to 163 million euros in 2012 - the biggest percentage gain of its four businesses - while the EBITA margin rose to 21.9 percent from 19.7 percent in the previous year.

Reed Elsevier's iPad app for doctors, ClinicalKey, has more than 500 leading medical and surgical journals, plus reference books and third-party content.

Thomson Reuters sold its healthcare business last year.

The apps are very different from print versions. Using video and audio, for example, they can demonstrate new advances in surgical procedures which are hard to illustrate on the printed page.

"It's very difficult to describe an operation or surgery" in print, Wolters Kluwer's chief executive Nancy McKinstry said.

Readers used to get in touch with the author of the article and then discuss it or watch the surgeon performing a new technique. Now they can see it on video, she said, which is an easier format and also allows much more targeted advertising.

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Specialist publishers have made the shift from print to online across their various businesses.

Three-quarters of Wolters Kluwer's revenue comes from online or electronic products, up from 71 percent in 2011, and 49 percent when the transition from print was launched at the end of 2008.

At Reed Elsevier, which also has a substantial exhibitions and conference business, electronic publishing accounted for 64 percent of revenue in 2012. Print has dropped to 20 percent, from 50 percent eight years ago.

Some analysts say Wolters Kluwer's transformation has gone largely unnoticed by investors, while earnings growth was lackluster until last year when results beat forecasts.

So even though its stock hit a two-year high this month, the firm is valued at a big discount to peers, according to Thomson Reuters StarMine estimates, both in terms of the price-earnings multiple and the ratio of enterprise value to EBITDA.

The company is sometimes considered a possible takeover target, with a private equity firm seen as a more likely buyer than a rival given potential competition issues.

The shift online is expected to continue, McKinstry said. In the United States, nurses and physicians bring their tablets into hospitals and operating rooms, a trend that is spreading in Europe.

North America and Europe accounted for 70 percent and 14 percent respectively of Wolters Kluwer's health division's sales last year - compared with 54 percent and 40 percent of total group sales - showing room for further growth on the continent.

Dr Bosch, a physician who specializes in internal medicine at Arnhem's Rijnstate hospital in The Netherlands, is an example of that trend in Europe. He listens to podcasts he has downloaded from the New England Journal of Medicine on his smartphone while he jogs or cycles to work, and does his rounds clutching his iPad in its battered bright green cover.

One of his patients had atrial fibrillation, a condition where her heart beats too fast and irregularly. She was on digoxin but Dr Bosch wanted to check how another drug, amiodarone, would interact with it, and found the answer on his iPad using an app from WebMD Health Corp's Medscape.

"Because you can check more easily, you check more often and that improves quality" and time, he said.

(Editing by Erica Billingham)

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