August 3, 2005
Mail Stop 4561
Douglas W. Wamsley
Executive Vice President
WebMD Health Holdings, Inc.
224 West 30th Street
New York, NY 10001
Re: WebMD Health Holdings, Inc.
Amendment No. 1 to Registration Statement on Form S-1
Filed July 14, 2005
File No. 333-124832
Dear Mr. Wamsley:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
All page numbers refer to the marked courtesy copy that you
provided to us.
Form S-1
General
1. We note your response to prior comment 17, that the Class A
common
shares underlying the Class B shares to be issued to your parent
should not be integrated with the public offering of Class A
common
shares. However, the anticipated recapitalization and conversion
of
existing share capital to Class B common appears to be linked to
the
contribution of assets by your parent to the company and both
transactions are clearly being undertaken in anticipation of this
offering. With regard to the five factor test, the shares
underlying
Class B are in the same class of shares being registered here and
the
two offerings appear to be part of a single plan of financing
(since
the public sale of Class A shares could not take place without a
contribution of assets by your parent). Please provide us with
additional analysis as to why the offerings should not be
integrated.
2. We note your response to prior comment 8, that Manhattan
Research
does not have to file a written consent for the use of its reports
pursuant to Section 7 of the Securities Act. However, Section 7
requires consent from any person named as having prepared a non-
public report used in connection with the registration statement,
even if that person did not prepare the report specifically for
use
in the registration statement. Please provide the required
consent
or tell us why compliance would be impracticable.
3. We note your response to prior comments 8, 12 and 16 and have
the
following additional comments:
* Please omit repeated references to your brand or website
"environment" as "trusted" and to information on your website as
"high quality" or "innovative." In general, we find the
disclosure
in your summary to be overly reliant on marketing language and the
additional material provided to us does not directly support your
assertions. Please revise your summary disclosure to focus on the
material facts of the offering. Refer to the instruction to Item
503(a) of Reg. S-K.
* In your business section, please explain differences between the
comScore Media Metrix report and the information on page 26 of
Manhattan Research`s Health Forum 2004 report, both appearing in
Tab
B-7. Explain why the Manhattan Research report breaks out traffic
information for Yahoo! Health but not for other providers, which
appear to represent significant alternative consumer health
destinations. Also, explain why AOL Health is broken out
separately
in the comScore report yet, from page 1 of your prospectus,
appears
to be a part of your WebMD Health Network.
* On page 2, in the first reference to Manhattan Research, please
identify the studies you are referring to, make it clear that you
are
a client of the firm and that you pay for access to the studies
and
indicate which studies you initiated and how you used them.
* We note from pages 2, 3 and 4 your assertion that the WebMD
Health
Network provides advertisers with an "efficient and effective"
means
of advertising. We further note from page 3 your assertion
regarding
your "track record" of providing advertisers with a "more
efficient
use" of advertising dollars. Please omit or provide direct and
tangible support for these statements.
* On page 2, please omit the assertion that Medscape from WebMD is
the information source most recommended by physicians to their
peers.
Supplemental information contained in Tab B-6 does not appear to
provide direct support for this assertion.
* We were unable to locate support in Tab B-10 for your claim on
page
2 regarding the money spent by "consumer products companies" on
advertising in 2004. Please direct us to this support or revise
accordingly. Also, the information in Tab B-14 suggests spending
in
excess of $18 billion, as opposed to $10 billion. Please explain
the
discrepancy.
* On page 2, please eliminate the assertion that you have been a
"leader" in enabling the transition to the Internet in the
healthcare
industry. Supplemental information provided in Tab B-9 does not
appear to provide direct support for this assertion.
* On page 2, where you assert that the WebMD Health Network is
"the leading" online health destination, please explain briefly
what
measure your are using.
* On pages 3 and 4, please omit the references to "good" working
relationships with a "significant" number of advertisers or
provide
direct and tangible support, including balancing disclosure of the
number of relationships you do not consider to be "good" and why.
* On page 3, please omit the assertions regarding the increasing
use
of online services to provide healthcare information.
Supplemental
information contained in Tab B-11 does not appear to provide
direct
support for this assertion. Moreover, the information in Tab B-15
does not appear to address the use of online decision aids, per
se.
Summary, page 1
4. Please remove the cross reference from the italicized portion
of
your summary. Information necessary to understand industry terms
used in the summary, including "unique user," "page view" and
"aggregate page views," should be included in the body of the
summary
or the terms should be omitted. Refer to Rule 421 of Reg. C.
Our Strengths, page 3
5. Much of the information in this section (including numerous
references to cost-efficiency and trust) merely repeats
information
contained in the first three pages of your summary. Please
eliminate
these redundancies. Also, the first and second bullet points
contain
too much detail for the summary. Please restrict discussion of
the
Consumer Health WebWatch and comScore Media Metrix reports to your
business section.
Our Strategy, page 4
6. On page 5, please explain what you mean by "successfully
integrating" companies you acquired. Disclose the criteria you
use
to gauge the success of an integration and whether you have ever
failed to satisfy them.
Risks and Challenges That We Face, page 5
7. Please explain why you might not be able to retain users of
your
websites. In the second bullet point, please explain the kinds of
regulatory changes that would not be good for your business. In
the
third bullet point, please be more specific about your
competitors.
Are you referring to other portals, to healthcare providers or
some
other kind of business? Also, please discuss risk associated with
your reliance on competitors, including AOL, and the risk of the
increased cost of driving users to your public portals. These
risks
should also be covered in more detail in your risk factors
section,
to the extent you have not already done so.
8. Please revise to eliminate the cross reference at the bottom of
the page. Instead, please include a thorough discussion of risks
(both here and, to the extent you have not already done so, in
your
risk factors section) related to conflicts of interest involving
your
parent. We note your response to prior comments 9 and 17, that no
conflicts of interest are associated with these pre-offering
transactions between you and your parent. However, all of these
transactions clearly contemplate the public offering and the mere
timing of a transaction to close before the offering does not
insulate it from potential conflicts. Accordingly:
* Please discuss conflicts of interest relating to the fact that
you
did not obtain independent appraisals of the assets contributed by
your parent, which may be worth less than historical cost. Please
note, lack of an appraisal raises a risk factor regardless of
whether
the transfer of assets by your parent and issuance of Class B
common
stock to your parent are considered to be a sale for accounting or
legal purposes. The risk involves the transparency of an asset`s
value, not the nature of the transfer.
* Please discuss conflicts of interest resulting from the fact
that
your key service provider (your parent) will also be your majority
shareholder and the fact that some of your directors and senior
executives will, apparently, hold interests in both you and your
parent.
* Please relocate your discussion of the non-arm`s-length nature
of
the service and other agreements, and the concomitant risk of
overpayment or other disadvantageous terms, from page 7 to this
section on conflicts of interest and be more specific about the
risks
to investors.
* Please discuss risk related to your parent`s control over and
ability to sell its stake in your company, including the risk of a
change in control and pricing pressure as a result of future stock
sales by your parent.
Risk Factors, page 10
We face significant competition for our products..., page 12
9. We note your response to prior comment 25. Please revise to
discuss with more specificity the risk related to your reliance on
actual or potential competitors, such as AOL, for sales or
marketing
purposes.
If we are unable to provide high quality healthcare content...,
page
13
10. We note your reliance on rights to utilize the ACP and ACS
names
in the titles of two of your publications. Please be sure to
discuss
these rights in your section on Intellectual Property on page 78.
We expect that accounting for employee stock options..., page 14
11. Please revise the title to make it clear that the impact would
be
negative.
The ongoing Department of Justice Investigation..., page 24
12. We note your response to prior comment 32, that your parent
intends to indemnify you against liabilities related to the
investigation and, as a result, you have not included risk factor
analysis if the investigation were to implicate your business.
The
existence of an indemnification agreement does not eliminate risk.
As you note on page 28, in discussing risk related to your prior
relationship with your parent, you are exposed to risk where your
"Parent cannot or will not make the required payment" under an
indemnification agreement. Moreover, as your majority
shareholder,
claims against your parent could lead your parent to sell off some
or
all of its stake in you, which could have a negative impact on
your
share price. Please revise this risk factor to remove mitigating
discussion of your parent`s cooperation with investigators (this
repeats information found elsewhere) and to include discussion of
risk in the event the investigation implicates you or your
managers.
If certain transactions occur with respect to our common..., page
28
13. Please describe the transactions with specificity.
If our Parent has taxable income, a portion of our net..., page 28
14. Please quantify the portion of your tax loss carry forwards
that
your parent may use before it uses it own and clarify whether this
is
something your parent must do or simply may do, at it discretion.
Also, please clarify whether you may utilize those carry forwards
before your parent, in the event that your parent is unable or
chooses not to use them itself.
Our Use of Certain Measures of Usage of the WebMD Health Network,
page 33
15. We note your reliance on an internal technology tool to
calculate
your unique user base. We further note, from Tab B-3, your use of
third-party sources of user information. Please discuss any
discrepancies between your internal traffic figures and those
calculated by third-parties. In this regard, we note that your
"key
measures report" indicates total unique May 2005 visitors of 15
million. This is significantly less than the "average" 2005
visitors
of 23 million indicated on page 1.
MD&A, page 39
Introduction, page 39
Acquisitions, page 41
16. We note your response to prior comment 39. Please describe
the
revenue thresholds for HealthShare and the page view thresholds
for
MedicineNet and RxList. Please indicate whether any of your
acquisitions have failed to meet a contingent payment threshold
and,
if so, why.
Transactions with Our Parent, page 43
17. Please discuss whether your parent anticipates profiting from
fees paid to it by you. Also, please estimate what these fees
would
have amounted to in past periods, based on your historical
financials
and the structure of your services agreement, in order to give
investors some idea of what they will be going forward.
Three months ended March 31, 2005 and March 31, 2004, page 47
18. Please include a discussion of your total costs and expenses
as a
percentage of revenue, as you have on pages 49 and 50, and please
quantify those percentages in each instance to increase the
transparency of your discussion. It appears that this ratio has
gone
up significantly from 2004. Discuss what this suggests about the
cost of incremental revenue in the current period and discuss the
trend going forward.
Sales and Marketing, page 48
19. We note that most of the decrease in sales and marketing
expenses
in this period was attributable to the fact that you have fully
amortized costs associated with your AOL agreement. As this is a
one-time adjustment, please discuss whether you expect sales and
marketing expenses to increase in future periods.
Liquidity and Capital Resources, page 53
20. On page 55, please be more specific about the sufficiency of
your
cash resources than simply stating that they are adequate for the
"foreseeable future."
21. We note from Section 1.5 of Exhibit 10.35 and Sections 1 and 3
of
Exhibit 10.37 that you have made commitments to AOL to purchase
in-
kind advertising for its use. Please revise you discussion of
liquidity to discuss these commitments and tell us whether they
are
reflected in your table of contractual commitments.
Business, page 57
Our Strategy, page 61
Acquiring complementary online and offline services, page 62
22. We note that you gauge the success of an acquisition by
increases
in its revenue. Please explain how this comports with your
disclosure on page 48, where you state that you only track revenue
related to individual acquisitions for 12 months from the closing
date.
Strategic Relationships, page 75
AOL Relationship, page 75
23. Please explain briefly why you believe revenues under the
agreement are not meeting the minimum guarantee and by how much
they
have fallen short in past periods.
Fidelity Human Resources Services Company, LLC, page 75
24. Please attach the relevant agreements as exhibits to your
registration statement.
Management, page 88
Directors and Executive Officers, page 88
Anthony Vuolo, page 88
25. Please indicate who each of your directors are. Also, please
indicate what portion of time you expect Mr. Vuolo to devote to
your
parent and in what capacity.
As appropriate, please amend your registration statement in
response to our comments. You may wish to provide us with marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendments that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Rachel Zablow at 202-551-3428 or Steven
Jacobs,
Accounting Branch Chief, at 202-551-3403 if you have questions
regarding comments on the financial statements and related
matters.
Please contact Geoffrey Ossias at 202-551-3404 or the undersigned
at
202-551-3780 with any other questions.
Sincerely,
Elaine Wolff
Branch Chief
cc: Stephen T. Giove (via facsimile)
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Douglas W. Wamsley
WebMD Health Holdings, Inc.
August 3, 2005
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