Headquartered in Newtown, Pennsylvania, Forian Inc. (Nasdaq: FORA) delivers cutting-edge technology, analytic and data science-driven solutions for the healthcare and cannabis industries, as well as state governments regulating the cannabis industry via the company’s track-and-trace software, BioTrack, an all-in-one technology that provides seed-to-sale tracking, point-of-sale inventory management, processing and manufacturing, cultivation, and of course government traceability.
Forian, which began trading on the Nasdaq March 3, 2021, is the product of a merger between Medical Outcomes Research Analytics (MOR), a Newtown, PA-based healthcare data provider, and Helix Technologies, a Colorado-based provider of technology, compliance, and security solutions for the legal cannabis industry. The new company’s mission, as stated on its website, is “to support the healthcare and cannabis industries in improving health outcomes and business performance through informed, evidence-based decisions and deep insights — powered by innovative data, technology, and analytics.” During a recent call with CBE, CEO Dan Barton patiently explained the key features that comprise what the company calls “a new standard of analytics in life sciences and beyond.”
“When we talk about health care and cannabis, government is part of the cannabis segment, so those are the two segment I’ll address,” Barton clarified in response to a question about the company’s expectations for growth in the near term. “On growth strategy for 2022, I’ll start with our healthcare business. We continue to see excellent growth in our healthcare business driven by our information products, and we’re going to continue to invest in that business, grow our portfolio of offering to our healthcare client, and I expect to see good growth out of healthcare for 2022.
“On the cannabis side,” he continued, “we expect that business to be flat as we continue to invest in the next generation of our point-of-sale system. We will be investing in software on the cannabis side through the balance of this quarter, and then we’ll be looking to leverage the benefits of those investments moving forward for the balance of the year. We also have recently launched our Cannalytics product, which is our SAAS-based [business intelligence] platform, primarily for retailers to better understand what’s going on with their products, their customers, and in their market. So, we see data and analytics as a driver for our business in the cannabis segment in 2022, and those are our primary areas of focus moving forward this year.”
The company’s Q1 2022 financial results reinforced that assessment, reporting quarterly revenue at $6.4 million, an increase of $4.8 million over the prior year, and reaffirmed 2022 revenue guidance of $25.5 to $27.0 million, with most of it coming from the healthcare sector. That in turn was reinforced by Forian CFO Michael Vesey during the company’s May 12 earnings call in response to a question from Lake Street analyst Eric Martinuzzi. “The mix in Q1 … looks like about 55 percent healthcare and 45 percent on the cannabis side,” noted the analyst. “Is that representative of how you think the year flushes out?” Vesey agreed, “That’s right. Substantially all the growth in Q1 has come from our healthcare business, that was the trend in the prior year as well, and we expect it to continue throughout this year.”
Despite that imbalance, the company anticipates that the investments it is making will pay off far into the future. As explained by Board Executive Chair Max Wygood on the same earnings call, “Emerging markets in our view need to adopt the analytics and intelligence solutions that have been long-established in the healthcare market to effectively plan, run and market their products. This is why Forian is positioned at the intersection of healthcare and emerging markets, like the legal cannabis and psychedelic markets. Our growth strategy is to continue to penetrate the respective spaces, but also be uniquely positioned long-term to enable industries to merge or compete effectively. We are in the early stages of seeing this thesis come to fruition.”
From Seed to Sale
Per the company, BioTrack has one of the largest client footprints in the industry, with 10 state government contracts and over 1,700 locations utilizing its software solutions, including more than half of the top 20 MSOs in the country. The company is building on that momentum by introducing new products, like Cannalytics, that directly address the needs of retail operators.
“The Cannalytics product is designed to help retailers improve their overall commercial effectiveness, whether that’s through budtender management, whether that’s through very specific targeting and segmentation, or the power of marketing campaigns to attract and retain customers and patients,” Barton elaborated. “Those are the types of commercial analytics that are powered by Cannalytics that will help retailers improve their overall business performance.
“In terms of the investment in point-of-sale and the point-of-sale market,” he added, “the environment is much different than it was a couple of years ago. There are more players, and the POS environment is more competitive and more fragmented. Couple that with the number of licenses that are being approved by the state, it’s not really a BioTrack issue as much as it is a macro market issue. But we do expect to see growth this year. You saw the Illinois suit; those licenses are opening up. You’re going to see licensed growth in New Jersey, you’re going to see licensed growth in New York, you’re going to see licensed growth in Florida, and as those licenses become available, we feel that with our current BioTrack software, and the investment we’re making in the next generation of point-of-sale software, we’re well positioned with both to win in those markets.”
I asked Barton how receptive in general the cannabis industry has been to adopt this level of analytics, and if it is improving. “I would say that it’s a mixed bag, if you will, the level of sophistication or the maturity of the types of analytics that different customers are looking to leverage,” he replied. “Some folks are at square one and some folks are at square 10, and I don’t think that’s a bad thing. It’s just the evolution of the adoption of the types of analytic practices that have been used in other markets as this cannabis segment matures. To answer your second question, we are seeing better adoption of these types of analytic practices to help folks run their businesses and have their businesses be more successful. But for sure, we are seeing signs that the adoption will come, and I think the cannabis industry will be better off for it.
“Generally speaking,” he added, “as a market becomes more competitive, the use of data and analytics to ensure the best chance within a competitive market is [something] we’ve seen in other industries. The marketplace also is becoming more competitive, and it is seeing a shift from retailers to more of a brand-focused industry, and as brands want to differentiate themselves within multiple markets across the U.S., the use of data and analytics is critical.”
I wondered if there is a difference between the healthcare industry and the cannabis industry in terms of the quality of research or data required to meet the company’s standards for analysis.
“Let me answer your question this way,” said Barton. “First, the healthcare industry has more standardized foundational data. For example, in life sciences, a pharmaceutical brand is a pharmaceutical brand. There’s a thing called the NDC (National Drug Code), which is a national standard. So, in all the data, when you see an NDC code, you know it’s this brand. In the cannabis industry, the level of standardization of product, or brand, is messy. You can’t look at one data file and say product A is the same as looking at another data file and saying it’s the same product A.
“It’s one of the reasons Forian created our ontology or product master product and are able to do things such as data-as-a-service. We can take our Forian product standard and clean up the data so that when we integrate different data sets, we are assured that we’re looking at the same product consistently and accurately, because the first part of analytics is ensuring that you have clean data. Again, the standards on the healthcare side gives the life sciences organizations a leg up, and there is this amount of standardization, normalization, integration, and aggregation that has to be done on the cannabis side to ensure that you have rich clean data in which to perform your analytics on.
“And then, if you think about analytics in two ways,” he added. “One, commercial analytics: there are established practices and methodologies in healthcare that can be applied to cannabis. I would use the example of the patient journey. I was a brand manager in pharmaceuticals, and it’s one of the foundational data analytics that is used for multi-purposes by pharmaceutical brands. In a patient journey, essentially, by having integrated, deidentified, HIPPA-compliant patient data, you’re able to see all of the healthcare events over time for a patient, and then understand what the outcome of those interactions would be.
“You went to a doctor’s office,” he continued, “received a diagnosis, you went to the pharmacy, received this ethical pharmaceutical, you went to this type of physical therapy, and this is how you responded from a health outcomes perspective. That is the type of analytics that has been established over the decades in pharmaceuticals, and in fact, some of the methodology around real-world evidence and understanding the data, the costs of quality, the outcome, the adverse events, are now used as supplemental information in drug applications. So, to your point, to be able to get the type of patient analytical real-world evidence in a highly regulated industry, or something as critical as getting a new product approved, there are tried and true and accepted scientific methodologies which can be applied confidently into the cannabis segment.”
It sounded as though Forian is not only developing the necessary tools and registries but also is helping to establish the required standards as well. “That’s correct,” said Barton, “and we’re very excited about that. We think it’s something that the cannabis industry would benefit from and we’re glad to be making the investment and rolling these types of standards out.”
How far along are we in the process to develop and integrate analytic tools for the cannabis industry? What inning are we in? “I would put it to you this way,” said Barton. “Life sciences, pharmaceuticals, went through this same evolution back in the ‘90s in terms of the right data, the right standards, the right analytic techniques, the right types of studies, the insights that can be gleaned from those studies, and importantly, reactions that those companies could take and the measurement of those actions. That didn’t happen overnight. Then, medical devices and diagnostics went through the same evolution, but they were able to get through it a little bit faster because of the work that had been done in the pharma industry. I see the same thing happening here. If you take a look at the cannabis industry, it’s going to be able to go through that evolution even faster because of the work that’s been done in multiple industries before it. I would say maybe we’re entering the middle innings, if we use your baseball analogy, and a lot of that is because of being able to borrow what you can from other industries that can be repurposed for our industry.”
Is the process complicated by the fact that each cannabis-legal state has its own compliance regime for managing the industry? “Every state is its own market, and that does create a level of complexity that isn’t at the same level in some other industries,” said Barton. “Just the different compliance regulations that the states put into place places a layer of complexity that needs to be managed, and it’s something that we do with our BioTrack compliance software. We work with many states to manage the complexities of those different regulations by state, but yes, the market-by-market, state-by-state dynamic does create a level of complexity that isn’t seen in other analogous markets.”
A Singular Solution
I asked Barton if consolidation is the main driver for opening new markets or is it a combination of consolidation and new licenses. “I think that is the nature of this business right now, and we benefit from new licenses obviously,” he replied. “In some cases, we benefit from consolidation, and in other cases, there is a downside to consolidation when it comes to a pure point-of-sale perspective. But the one thing about consolidation, back to the use of data and analytics, is that we are able to provide insight to clients who want to take an advantage based upon consolidation.
“There are also times when, if two companies are coming together and they may have to divest some asset, we can do some pretty interesting analysis and provide insights to help with that decision making,” he added. “If folks want to consolidate and then open up a new store in a location they haven’t been in before, we’re able to provide insights into where they might want to do that. So, as far as the entire competitive environment of the cannabis industry and the consolidation going on, if folks want to – and they should – they can really leverage some of our insights to help them make better decisions.”
In light of these dynamics, could Forian’s point-of-sale business stay the same or even contract while its analytics business grows? “We think all of our businesses will grow,” said Barton, “but specific to 2022, yes, as we launch more analytic products, they are a growth driver for us.”
That said, Forian is committed to expanding its relationship with existing customers through upgrades to services and making new products available. “That’s evidenced by the Cannalytics product,” said Barton. “We feel that our current clients can really benefit from that new product in combination with what we’re working with them on with BioTrack. If you think about the states using our compliance software as well as business licensing portals and patient registration portals, what we are talking to states about right now is complementing that software with the types of things that we really believe the state should be considering right now.
“Think about a patient registry, understanding not only cannabis utilization but the medical events for a person and being able to track adverse events,” he added. “Something like the vaping crisis a few years ago could have been caught much earlier if there was a patient registry and surveillance studies tracking adverse events. There are signals in the data that help identify those types of issues much earlier, and we believe that with the things we do around compliance coupled with the things we can do around consumer and patient safety, that’s a very nice package that the states could employ to ensure the compliant and safe use of cannabis-based products for their constituents.”
How are those conversations with states going? “We’re talking to several states and there is receptivity,” said Barton. “And I do believe that in time, you will see these types of registries and surveillance studies come to pass.”
Regarding Forian’s competition in the cannabis industry, Barton said it exists but only in part. “On the compliance software, it’s Metrc,” he said. “On the point-of-sale side, you’re seeing Leaflogix, Blaze, Treez, and those types of companies. On the analytics side, from a sales and unit-tracking perspective, there are companies like Headset. But I don’t think there is any company that is offering the full portfolio of services that we are, and I don’t think that there is any company that has the type of health insights we have by being able to leverage our linked data assets, which is a combination of healthcare claims data and retail cannabis transactional data, as well as customer information that we have. I think we’re pretty unique in the types of data that we have and the types of insights that we’ve talked about.”
I asked Barton if he could describe what the Forian Data Factory does. “I think the simplest way to put it is that we have the ability to access, process, normalize, standardize, and integrate in aggregate disparate data sources,” he said. “This is especially important in the cannabis segment as some of the data is a little dirty. We bring the different cannabis datasets, clean them up and integrate them through our Data Factory, and then combine them with the healthcare claims data that I talked about – medical claims, prescription claims, remittance claims, hospital claims, as well as the consumer information. We have information on over 300 million Americans or so as well as interesting demographic and psychographic attributes, and by marrying all that data through our Data Factory, we can create the analytic files we need to either power Cannalytics, power customer studies, or do real-world evidence studies, and that’s the primary reason that we’ve invested in the Data Factory.
“The way that our clients can take advantage of that is they can use our data-as-a-service and our ability to clean their own data, and then they’re able to leverage the types of integrated data that we can provide,” he added. “We can provide analytics and they can use that data internally for their own analytics team, so they don’t have to do the heavy lifting, and it is a heavy lift to take all of this data and put it all together. So, it can be used for analytic purposes – clients don’t have to make that investment; they can leverage us to do that heavy lift to accelerate their own needs for data internally – or use our analytic services.”
I asked Barton for an example of dirty data. “It could be incomplete data,” he said. “We’re able to use our data and our data services to fill in missing data. It’s the product master issue I talked about earlier. Product A is differently named in different data sources, and you have to ensure that when you’re joining disparate data sources, you’re making sure that you’re identifying the same product across disparate data sources, so you have confidence that any product analytics you’re doing are accurate.”
Is it a process of cleaning as well as educating people to know the difference between tainted and accurate data? “It’s both and it’s both in many industries,” said Barton. “It’s just a relative degree. Clients will get better at managing and ensuring the completeness and accuracy of their own data, but the nature of the data business is that there is always going to be data cleanup and in cannabis, relative to other industries, it’s early, so there’s more data cleanup required than what we’ve seen in other industries.”
Are there regulatory changes at the federal level that Forian would like to see enacted? “For the benefit of our clients, and it’s been talked about quite a bit, there needs to be federal banking legislation so that access to capital for our customers is in a better place than it is today, and ease the burden on cost of capital,” said Barton. “One thing I’d like to see is the IRS change its position on 280E. I just think that it would benefit our clients in the industry quite a bit as well. After those, we’d all like to see the appropriate scheduling, and then, ultimately, we would all like to see some type of federal regulation of cannabis. This is my opinion, and we don’t know how this is going to go down necessarily, but I think the horse is out of the barn in terms of state regulations. So, while there will be federal regulation ultimately, and the timing for that is probably still pretty far off, I do think that [states] are going to continue to play a lead role, perhaps much like alcohol.”
As our conversation wound down, I asked Barton whether Forian would be impacted by current economic pressures experienced by its clients, which include several MSOs. “We haven’t seen an impact,” he said. “Our healthcare business is growing. As we showed in our public filings, our healthcare revenue outpaced our cannabis revenue for the first time last quarter, and I think that our products and services can help clients in both healthcare and cannabis in times when the competitive environment and market pressures become tough, because the use of our products, specifically data and analytics, can help folks make smarter investments, and smarter, faster decisions when they’re facing these types of pressures.”
To that point, did Barton see his products as being particularly relevant for businesses that need to improve their margins? “I do,” he said. “When we talk about clinical performance and commercial performance, that could be operational effectiveness, which could directly lead to margin performance, or it could be increasing revenue through attracting and retaining patients and consumers. For us, business performance is both helping clients with their top line and their bottom line.
“The cannabis industry, even with all its pressures, is a healthy growing industry,” he stressed. “There are unique market pressures in the industry, but even with those pressures, the need for our types of services is there and we haven’t seen any impact on our business from the unique pressures facing the cannabis industry.”
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