MedicaLogic Receives Growth Prescription

While information technology has contributed to numerous biomedical advances, less than 5% of ambulatory physicians use even the most basic electronic communication tools to record the physical status of their patients.

MedicaLogic Inc. of Hillsboro, Ore., plans to use the Internet to attract these physicians who continue to take patient notes with a pen and paper.

“Physicians can capture information as quickly with our product as if they were writing a note,” said Chief Operating Officer Dave Moffenbeier. “A doctor just needs a browser to download and do work out of.”

Late last month, the company raised $35 million in its fifth round of venture financing. Two affiliates of Soros Fund Management LLC-Quantum Industrial Fund and SFM Domestic-led the round with a combined $30 million investment. Existing investor Sequoia Capital contributed the balance.

To date, MedicaLogic has raised nearly $100 million in private equity financing.

Proceeds from the investment will serve to hire 80 to 100 additional employees to build MedicaLogic’s Internet applications, and to increase its sales and marketing efforts. MedicaLogic will also build an Internet development and data center in San Francisco.

Prior to the financing, the company hired five senior level executives from Netscape Communications.

MedicaLogic was created 15 years ago in order to document electronic medical records for the private practice of Mark Leavitt, the company’s chief executive. Since joining MedicaLogic in 1994, Moffenbeier has helped grow the company’s client server base and establish a presence on the Internet.

MedicaLogic currently holds electronic medical records for more than 6 million patients. The company expects to add an additional 4 million patients by the end of the year, as more physicians embrace its Internet offerings.

“Clearly the Internet and health-care are on a collision course,” said Sequoia General Partner Mark Stevens. “MedicaLogic is at the nexus of those two crossroads.”

Sequoia invested out of The Sequoia Capital Franchise Fund, a $350 million fund aimed at later stage portfolio companies of the firm’s other funds. The fund has invested approximately $50 million.

“We have a tremendous amount of confidence in the management to execute the Internet strategy,” said Soros Partner Neil Moszkowski. As part of the deal, Moszkowski will join MedicaLogic’s board.

Moffenbeier said his company will engage in an additional round of financing in the next nine to 12 months.

“An IPO is the most likely scenario, although we still have access to some serious mezzanine financing if we want more money.”