Modernizing Medicine and its largest investor, Warburg Pincus, are evaluating a partial-stake sale of the specialty electronic health records giant, sources familiar with the matter tell Sarah.

Why it matters: ModMed, along with Blackstone's HealthEdge Software, will represent a good test case for the new valuation reality in health tech investing if a deal gets done. It's been several months since we've seen scaled, growth-oriented SaaS companies test the market.

What's happening: The Boca Raton, Florida-based company formally hit the market in October, with first-round bids from sponsors due around mid-November, sources say.

• Evercore is providing financial advice to Warburg and ModMed.
• Sources caution that Warburg and the company may choose not to transact, depending on where interest levels and valuation appetite land.

By the numbers: ModMed, which has been investing heavily in R&D to fuel future growth, generates around $400 million of ARR, sources say.

• Warburg's current stake lies at roughly 40%, sources say.
• Other small minority investors that invested early in ModMed's evolution include Pentland Group, Summit Partners and Sands Capital.

Flashback: A year ago, sources pegged ModMed as a likely IPO candidate, but that was a much different market.

How it works: ModMed designs cloud-based and data-driven EHR software products tailored to a vast range of medical specialties, including dermatology, gastroenterology, plastic surgery and orthopedics.

• Warburg invested an initial $231 million into the company in 2017.

The bottom line: ModMed is a bellwether for other growth-focused SaaS investors, who will be watching closely to see if the company overcomes market woes to attract a 2021-like valuation — or lands something much more conservative.

Warburg declined to comment. ModMed did not immediately respond to a request for comment.