As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

 5/12/05  WebMD Health Corp                 S-1                    3:192                                    950123

Document/Exhibit                   Description                      Pages   Size 

 1: S-1         Registration Statement (General Form)               HTML  1,305K 
 2: EX-23.1     Ex-23.1: Consent of Ernst & Young Llp               HTML      5K 
 3: EX-23.2     Ex-23.2: Consent of J.H. Cohn Llp                   HTML      6K 

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CALCULATION OF REGISTRATION FEE

PROSPECTUS

      This is our initial public offering of our Class A common stock. We are selling all of the Class A common stock in this offering.

      We are a wholly owned subsidiary of WebMD Corporation, which we refer to in this prospectus as our Parent. We intend to change our corporate name, prior to completion of this offering, to a new name that has not yet been chosen, but that will include “WebMD,” which will also continue to be the primary brand name for our products and services. Our Parent intends to take the steps, over the next several months, needed to change its corporate name to one that does not include “WebMD” and to cease using “WebMD” as a brand name for the products and services of its other business segments.

      We have two classes of authorized common stock — Class A common stock, which is offered hereby, and Class B common stock, all of which will be owned by our Parent. Holders of our Class A common stock generally will have identical rights to holders of our Class B common stock, except that holders of our Class A common stock will be entitled to one vote per share on all matters to be voted on by stockholders, while holders of our Class B common stock will be entitled to ten votes per share on all matters to be voted on by stockholders. The holders of our Class A common stock and Class B common stock generally will vote together as a single class. Upon the completion of this offering, without giving effect to any exercise of the underwriters’ option to purchase additional shares, our Parent will own all of our outstanding Class B common stock, which will represent approximately           % of our outstanding common stock, and approximately           % of the combined voting power of our outstanding common stock. As a result, after this offering, our Parent will continue to control us.

      We expect the public offering price of our Class A common stock to be between $          and $           per share. Currently, no public market exists for our shares. We intend to apply to have our Class A common stock quoted on The Nasdaq National Market under the symbol “WBMD.”

      The underwriters may also purchase up to an additional                      shares of our Class A common stock from us, at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover overallotments.

      Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

      The shares of Class A common stock will be ready for delivery on or about                     , 2005.

The date of this prospectus is                     , 2005.

      You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

      This prospectus contains market and industry data and forecasts that we obtained from third-party industry publications and research firms, including Manhattan Research LLC, a leading Internet marketing research firm. Unless we indicate otherwise, all Manhattan Research studies referred to in this prospectus were initiated and paid for by us. We refer to each of those studies initiated by Manhattan Research, without our participation, as a “subscription study,” since these studies are available to the public on a subscription basis. Industry publications and studies generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy and completeness of such information. We have not independently verified any of the publications or studies prepared by third parties. The information contained in such publications or studies may prove to be inaccurate because of the way they were prepared and other limitations and uncertainties inherent in data gathering processes. As a result, you should be aware that market, ranking and other similar information included in this prospectus, and estimates and beliefs based on such information, may be incorrect. Neither we nor the underwriters can guarantee the accuracy of such information contained in this prospectus.

      Any investment in our Class A common stock involves a high degree of risk. This section describes circumstances or events that could have a negative effect on our business. You should consider carefully the following information about these risks, together with the other information contained in this prospectus, before you decide whether to buy our Class A common stock. The occurrence of one or more of the circumstances or events described below could have a material adverse effect on our financial condition, results of operations and cash flows or on the trading prices of our Class A common stock, and you could lose all or part of your investment. The risks and uncertainties described below are not exhaustive, and additional risks and uncertainties that are not currently known to us or that we currently believe are immaterial may also adversely affect our business and operations. Our Risk Factors are organized into the following broad categories: “Risks Related to Our Operations and Financial Performance,” “Risks Related to Our Relationships with Clients,” “Risks Related to Our Technological Infrastructure,” “Risks Related to the Legal and Regulatory Environment in Which We Operate,” “Risks Related to Our Relationship With Our Parent” and “Risks Related to Ownership of the Class A Common Stock and this Offering.”

      Our online businesses have a limited operating history and participate in relatively new and rapidly evolving markets. As a result, our primary businesses have undergone significant changes during their short history and are continuing to change as a result of acquisitions, investments and market conditions. We cannot assure you that our current business strategy will be successful in the long term.

      Many companies with business plans based on providing healthcare information through the Internet have failed to be profitable and some have filed for bankruptcy and/or ceased operations. Even if demand from users exists, we cannot assure you that our business will continue to be profitable.

      Our advertising and sponsorship revenues may vary significantly from quarter to quarter due to a number of factors, not all of which are in our control, and any of which may be difficult to forecast accurately. The majority of our sponsorship contracts are for terms of approximately four to 12 months. We have relatively few longer term contracts. We cannot assure you that our current sponsors will continue to participate in our existing programs beyond the terms of their existing contracts or that they will enter into any additional contracts for new programs that we offer.

      In addition, the time between the date of initial contact with a potential advertiser or sponsor regarding a specific program and the execution of a contract with the advertiser or sponsor for that program may be lengthy, especially for larger contracts, and may be subject to delays over which we have little or no control, including as a result of budgetary constraints of the advertiser or sponsor or their need for internal approvals.

      Factors that could affect the timing of our revenues from advertisers and sponsors include:

      The period from our initial contact with a potential client for a private online portal and the first purchase of our solution by the client is difficult to predict. In the past, it has generally ranged from six to 12 months, but in some cases has extended much longer. These sales may be subject to delays due to a clients’ internal procedures for approving large expenditures and other factors beyond our control. The time it takes to implement a private online portal is also difficult to predict and has lasted as long as six months from contract execution to the commencement of live operation. Implementation may be subject to delays based on the availability of the internal resources of the client that are needed and other factors outside of our control. As a result, we have limited ability to forecast the timing of revenue from new clients. This, in turn, makes it more difficult to predict our financial performance from quarter to quarter.

      During the sales cycle and the implementation period, we may expend substantial time, effort and money preparing contract proposals, negotiating contracts and implementing the private online portal without receiving any related revenue. In addition, many of the expenses related to providing private online portals are relatively fixed in the short term, including personnel costs and technology and infrastructure costs. Even if our revenue is lower than expected, we may not be able to reduce our short-term spending in response. Any shortfall in revenue would have a direct impact on our results of operations.

      As a result, we may be unable to adjust spending quickly enough to offset any unexpected revenue shortfall or delay, in which case our results of operations would suffer. In addition, in an attempt to enhance our long-term competitive position, we may from time to time make decisions regarding pricing, marketing, services and technology that could have a near-term adverse effect on our operating results.

      Interest in our public portals for consumers, physicians and healthcare professionals is based upon our ability to make available high quality health content, decision-support tools and other services that meet the needs of our users. Our ability to do so depends, in turn, on:

      We cannot assure you that we will be able to continue to get needed content at a reasonable cost. If we are unable to provide content that attracts and retains users at a level that is attractive to advertisers and sponsors, our revenues will be reduced. In addition, our ability to deploy new interactive tools and other features will require us to continue to improve the technology underlying our Web sites. The required changes may be significant and expensive, and we cannot assure you that we will be able to execute them quickly and efficiently.

      The markets in which we operate are intensely competitive, continually evolving and, in some cases, subject to rapid change. Our competitors include:

      Many of our competitors have greater financial, technical, product development, marketing and other resources than we do. These organizations may be better known than we are and have more customers or

      There are currently numerous federal, state and private initiatives and studies seeking ways to increase the use of information technology in healthcare as a means of improving care and reducing costs. For example, the Department of Health and Human Services issued a report in 2004 entitled “The Decade of Health Information Technology: Delivering Consumer-centric and Information-rich Health Care.” These initiatives may encourage more companies to develop applications and services that compete with us, especially with our private online portals. The effect that these initiatives may have on our business is difficult to predict and we cannot assure you that we will adequately address the risks created by these initiatives or that we will be able to take advantage of any resulting opportunities.

      Our combined consolidated financial information included in this prospectus assumes that, for the periods presented, we had existed as a separate legal entity, and has been derived from the consolidated financial statements of our Parent. Some costs have been reflected in the combined consolidated financial statements that are not necessarily indicative of the costs that we would have incurred had we operated as an independent, stand-alone entity for all periods presented. These costs include allocated portions of our Parent’s corporate overhead, interest expense and income taxes. Our combined consolidated financial information included in this prospectus may not be indicative of our future financial performance, because these statements do not necessarily reflect our historical financial condition, results of operations and cash flows as they would have been had we been operated during the periods presented as a separate, stand-alone entity.

      In December 2004, FASB issued SFAS 123R, which requires all share-based payments to employees, including grants of stock options by us and our Parent to our employees, to be recognized in the financial statements based on their fair values, beginning with the fiscal year that begins after June 15, 2005. As permitted by SFAS No. 123, we currently account for share-based payments to employees using the intrinsic value method prescribed in APB Opinion No. 25. Accordingly, the adoption of SFAS No. 123R’s fair value method will have a material impact on the combined consolidated results of operations and earnings per share. We cannot predict what effect the reduction in our net income may have on our stock price.

      As a separately traded public company, we will incur legal, accounting and other expenses that we did not incur as a wholly owned subsidiary of our Parent, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Securities Exchange Act of 1934, or the Exchange Act, recently adopted corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002, and other rules implemented relatively recently by the Securities and Exchange Commission, or the SEC, and The Nasdaq National Market. We expect these rules and regulations to increase substantially our legal and financial compliance costs and to make some activities more time-consuming and costly. We also expect that these rules and regulations will make it more difficult and more expensive for us to obtain directors and officers’ liability insurance.

      Beginning with our Annual Report for the year ending December 31, 2006, Section 404 of the Sarbanes-Oxley Act of 2002 will require us to include an internal control report with our Annual Report on Form 10-K. That report must include management’s assessment of the effectiveness of our internal control over financial reporting as of the end of the fiscal year. Additionally, our independent registered public accounting firm will be required to issue a report on management’s assessment of our internal control over financial reporting and a report on their evaluation of the operating effectiveness of our internal control over financial reporting. Our Parent is an “accelerated filer” and was required to include an internal control report in its most recent and in its future Annual Reports on Form 10-K.

      We continue to evaluate our existing internal controls over financial reporting against the standards adopted by the Public Company Accounting Oversight Board (PCAOB). During the course of our ongoing evaluation of the internal controls, we may identify areas requiring improvement, and may have to design enhanced processes and controls to address issues identified through this review. Remedying any deficiencies, significant deficiencies or material weaknesses that we or our independent registered public accounting firm may identify, may require us to incur significant costs and expend significant time and management resources. We cannot assure you that any of the measures we implement to remedy any such deficiencies will effectively mitigate or remedy such deficiencies. In addition, we cannot assure you that we will be able to complete the work necessary for our management to issue its management report in a timely manner, or that we will be able to complete any work required for our management to be able to conclude that our internal control over financial reporting is operating effectively. If we are not able to complete the assessment under Section 404 in a timely manner, we and our independent registered public accounting firm would be unable to conclude that our internal control over financial reporting is effective as of December 31, 2006. Investors could lose confidence in our financial reports, and our stock price may be adversely affected, if our internal controls over financial reporting are found not to be effective by management or by an independent registered public accounting firm or if we make disclosure of existing or potential significant deficiencies or material weaknesses in those controls.

      A determination that there is a significant deficiency or material weakness in the effectiveness of our internal controls over financial reporting could also reduce our ability to obtain financing or could increase the cost of any financing we obtain and require additional expenditures to comply with applicable requirements.

      In addition, investors could lose confidence in our financial reports, if our Parent’s internal controls over financial reporting are found not to be effective by management or by an independent registered public accounting firm or if our Parent makes disclosure of existing or potential significant deficiencies or material weaknesses in those controls, particularly if the reasons are relevant or related to our internal controls.

      We have been built, in part, through a series of acquisitions. We intend to continue to seek to acquire or to engage in business combinations with companies engaged in complementary businesses. In addition, we may enter into joint ventures, strategic alliances or similar arrangements with third parties. These transactions may result in changes in the nature and scope of our operations and changes in our financial condition. Our success in completing these types of transactions will depend on, among other things, our ability to locate suitable candidates, negotiate mutually acceptable terms with them and to obtain adequate financing. Significant competition for these opportunities exists, which may increase the cost of and

      The issuance of additional equity or debt securities could:

We do not intend to seek securityholder approval for any such acquisition or security issuance unless required by applicable law, regulation or by the terms of then existing securities.

      We have in the past acquired, and may in the future acquire, businesses, technologies, services, product lines and other assets. The successful integration of the acquired businesses and assets into our operations, on a cost-effective basis, can be critical to our future performance. The amount and timing of the expected benefits of any acquisition, including potential synergies between our company and the acquired business, are subject to significant risks and uncertainties. These risks and uncertainties include, but are not limited to, those relating to:

      We cannot guarantee that any acquired businesses will be successfully integrated with our operations in a timely or cost-effective manner, or at all. Failure to successfully integrate acquired businesses or to achieve anticipated operating synergies, revenue enhancements or cost savings could have a material adverse effect on our business, financial condition and results of operations.

      Although our management attempts to evaluate the risks inherent in each transaction and to value acquisition candidates appropriately, we cannot assure you that we will properly ascertain all such risks or that acquired businesses and assets will perform as we expect or enhance the value of our company as a whole. In addition, acquired companies or businesses may have larger than expected liabilities that are not covered by the indemnification, if any, we are able to obtain from the sellers.

      Our success depends largely on the skills, experience and performance of key members of our senior management team. Roger C. Holstein, who served as our chief executive officer since October 2004, resigned, effective April 27, 2005, from all his positions with our Parent and its subsidiaries. Wayne Gattinella, who has served as President of our Parent’s WebMD Health segment since August 2001, will become our President and Co-Chief Executive Officer, and David Gang, who previously served as Executive Vice President of AOL Products at America Online, Inc., will be joining us as Co-Chief Executive Officer and Chief Operating Officer prior to the consummation of this offering. We cannot assure you that the transition in leadership will occur without disruption to our businesses.

      We also depend, in part, on our ability to attract and retain qualified writers and editors, software developers and other technical personnel and sales and marketing personnel. We anticipate the need to hire and retain qualified employees in these areas from time to time. We cannot assure you that we will be able to hire or retain a sufficient number of qualified personnel to meet our requirements, or that we will be able to do so at the salary and benefit costs that are acceptable to us. Failure to do so may have an adverse effect on our business.

      Most of our revenue is derived from the healthcare industry and could be affected by changes affecting healthcare spending. General reductions in expenditures by healthcare industry participants could result from, among other things:

      We are particularly dependent on pharmaceutical, biotechnology and medical device companies for our advertising and sponsorship revenues. Our business will be adversely impacted if business or economic conditions result in the reduction of purchases by our customers if they decide not to renew their commitments or decide to renew their commitments at lower levels. Even if general expenditures by industry participants remain the same or increase, developments in the healthcare industry may result in reduced spending in some or all of the specific segments of that market we serve or are planning to serve. For example, use of our products and services could be affected by: