Our strategy starts with the fundamental transaction in healthcare’s revenue cycle—the submission of claims from providers to third party payers. We estimate that we process approximately 45% of these electronic healthcare claims in the United States. Our revenue increases as we gain market share and provide advanced edit processing and other value-added products and services to the claims in real-time to add significant customer value. We are able to price incrementally for these additional products and services in addition to the pricing for the base claim. Further, due to an aging population and increasing automation in healthcare, the claims volume grows, also increasing revenue.

From our network, we capture the claim and related transaction information, combine that information with data we purchase, and create valuable information solutions for pharmaceutical manufacturers and providers, such as pharmacies. Our information strategy is to continue to aggregate and integrate data from our processing network to create unique new products which build additional streams of revenue and expand margins. We also have an international expansion strategy to further leverage our proven business model.

Today, we provide products and services to four major areas of the healthcare industry: pharmacies (retail, mail order, Internet based and specialty), hospitals, physicians, and pharmaceutical manufacturers. By aggregating and integrating data from the three provider markets we increasingly create unique business insights for pharmaceutical manufacturers, or pharma. Our goal, as healthcare evolves, is to also expand our customer base to include payers, employers and consumers while reducing the effective cost per unit of data.

We believe we are the only company capable of integrating all three of these pharmacy technology functions to optimize our customers’ business models. In the financial and administrative areas we add value applications as diverse as workflow efficiency, pricing, product substitution, regulatory compliance, and loss prevention. In the area of workflow efficiency for example, our solutions permit the prescription fulfillment process to allow parallel rather than sequential processing. This allows multiple specialists, often at different locations, to contribute to filling the prescription, resulting in a requirement for fewer pharmacists, currently in scarce supply, and greater throughput. Our customers benefit from needing fewer people, reduced hiring and training requirements, and lower inventory levels with more turns.

In fiscal 2003, we also moved into the clinical application area with NDC Rx Safety Advisor, an application we believe will further differentiate us from our competitors. Our pharmacy application solutions directly affect a pharmacy’s cash flow and margins.

The acquisition of TechRx has strengthened our position in the key point-of-service prescription fulfillment area. Our strategy with TechRx’s new line of point-of-sale products is to convert the TechRx revenue model to a transaction based model to create a recurring revenue stream.

The next major building block is claims processing for hospitals, as well as providing claims editing to increase the acceptance rate by payers of hospital claims and assist hospital management in improving cash flow and reducing outstanding accounts receivable. NDC ePREMIS, a new platform for revenue cycle management launched in fiscal 2003, incorporates new technology, expands functional attributes, and creates the base upon which new applications can be built. This expands our opportunity to increase revenue by providing a broader suite of integrated services to customers. This offering, using new application Internet technology, allows us to upgrade our existing base of over 1,500 hospital customers, add new large hospitals and provides the opportunity to penetrate a new market strata, small hospitals under 100 beds. Similar to our pharmacy offerings, the new workflow features of this offering permit multiple people to work with claims simultaneously, yielding greater efficiency and better workload balancing. NDC ePREMIS can also be integrated into hospital information systems provided by various major companies to further extend our market reach.

The third building block is the niche we have created in the physician market space. We have sold our solutions to more than 100,000 physicians primarily in the 1-3 physician practice group market. Physicians’ offices utilize our software and systems to do patient scheduling, billing and manage accounts receivables. Because of the relative lack of automation in small physician offices, we believe these customers represent a unique opportunity for expanded electronic service. This electronic connection also assists our customers in improving their cash flow and provides an important communication channel to the physician. We have already connected systems for 13,000 physicians to an on-line network for electronic claims processing. Additionally, in conjunction with our pharmacy network and services, the predicted growth of e-prescribing provides an important opportunity for us to become a leader in this emerging application area.

These three markets enable us to create access to data to develop applications for the fourth building block—on-line, value-added information products primarily for pharmaceutical manufacturing companies. By capturing claims and related transaction information through our network and combining it with purchased data, we can utilize our data analysis and data warehousing resources to allow our pharma customers to enhance their prescriber targeting capability, optimize sales force assignments, determine sales compensation, and enhance competitiveness and margins. In addition, by providing pharma customers with access to the capabilities of our value-added pharmacy, hospital and physician networks, we are in a position to provide drug tracking to help eliminate counterfeit medicines and timely messages to assist patients and providers in enhancing the efficacy of their drug treatment.

In fiscal 2003, our share of the healthcare pharmaceutical information market was approximately 30% in the United States, based on the number of pharmaceutical sales representatives compensated utilizing our products, and we have a small partnership in the United Kingdom and a presence in Germany. In fiscal 2003, the pharmaceutical industry is faced with a slowing of new drug introductions. Industry analysts anticipate new drug introductions will accelerate in 2005 or 2006. In the interim, there will be pressure on our revenues from this group of customers. In the near term, domestic revenues in this market are likely to remain relatively flat, a result of the cyclical downturn in the pharmaceutical industry. We are committed to the information business and the pharma industry and will continue to invest in and manage the quality and cost effectiveness of our current applications. At the same time we intend to move into new areas of opportunity in which we can leverage our claims transaction processing to be a unique provider of insightful, value-adding applications. We believe these actions will position us well for the future.

In the next eight quarters, our plan calls for: