By Lewis Krauskopf
(Reuters) - Health information website WebMD Health Corp
Shares of WebMD, in which activist investor Carl Icahn owns a nearly 10 percent stake, tumbled 29.8 percent on the news.
WebMD, which had a market value of just over $2 billion as of Monday, also said on Tuesday that its chief executive, Wayne Gattinella, had resigned. Anthony Vuolo, currently chief financial officer and chief operating officer, will serve as interim CEO.
WebMD is one of the best known websites for consumers seeking health information on everything from allergies to cancer to better eating habits.
But the company relies on advertising from drugmakers, which are trying to hold down expenses as they lose revenue on top medicines whose patents are expiring, allowing competition from lower-priced generic rivals. WebMD said large advertisers are also facing more competition on their portfolios of consumer products.
While a number of new medicines have received regulatory approval for sale in the United States, WebMD said it does not expect advertising behind those drugs to pick up significantly this year.
WebMD also must grapple with competition from myriad other websites that offer information on health conditions and maladies.
WebMD Chairman Martin Wygod said he expects drugmakers, who have been among the biggest advertisers on more expensive media like television, will eventually recognize the value of using WebMD.
"I believe that the pressures facing the pharmaceutical industry will ultimately prove to be the strong catalyst for a meaningful shift by them to digital marketing solutions," Wygod said in a statement. "WebMD offers a cost-effective, efficient and highly measurable alternative to traditional detailing to physicians and mass media to consumers."
For 2012, the company expects revenue to fall between 2 percent and 8 percent, and it expects increased competition in its consumer products market.
The company also expects expenses to rise by 5 percent to 8 percent in 2012 due to longer- term investments in mobile and international platforms, as well as new advertiser products.
With the higher expenses and lower revenue, WebMD said it expects net income will be "significantly lower" compared with 2011.
The company said it started a process to consider strategic alternatives late last year that resulted in talks with several potential acquirers. But a special committee of the board has now ended those discussions and has halted the process of reviewing a potential sale, WebMD said on Tuesday.
Credit Suisse had been advising the company in its sale process, according to a source close to the matter.
Shares of the company fell 29.8 percent to $25.78 in opening Nasdaq trading on Tuesday.
(Additional reporting by Nadia Damouni in New York and Esha Dey in Bangalore; Editing by Michele Gershberg and John Wallace)
