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Healtheon refiles for IPO

The online health care company takes another run at an IPO. Does the move mark the beginning of a new rush to the public trough by technology companies?

Taking another run at an initial public offering, online health care company Healtheon today refiled for an IPO.

Internet stocks have surged of late, and the IPO market for such issues has reignited.

Healtheon did not disclose the number of shares or pricing range in documents filed with the Securities and Exchange Commission today. But based on the company's registration fee calculation, its preliminary estimate for the offering is $35 million.

Last October, when the company canceled its initial IPO plans, it had a pricing range of between 6 and 8 per share, and hoped to raise as much as $78 million.

When the company pulled its IPO plans last fall, it cited poor market conditions. Sources at the time, however, noted that Healtheon was not able to attract enough institutional investors, such as pension fund managers. Instead it had attracted international and retail investors, who would tend to be short-term stockholders.

With the IPO plans canceled, the company raised about $40 million through a private placement. Investors included Healtheon founder and chairman James Clark--who is also cofounder of Netscape--and venture capital firms Kleiner Perkins Caufield & Byers and New Enterprise Associates.

With this renewed effort to take Healtheon public, Clark has increased his stake in the company to 11.3 million shares (an 18.2 percent stake), from 8.5 million shares (a 16.4 percent stake). These shares represent his holdings prior to the proposed IPO.

According to the SEC filing, Healtheon generated $33.2 million in revenues during the first nine months ended September 30, 1998, up from $7 million a year ago. For the third quarter that ended September 30, 1998, the company's revenues rose 15.4 percent sequentially, to $12.6 million.

Nearly all of Healtheon's revenues--90 percent--for the first nine months of 1998 came from four customers: United HealthCare Corporation, SmithKline Beecham Clinical Laboratories, Brown & Toland Physician Services Organization, and Beech Street Corporation.

Healthcare and SmithKline also are significant investors in the company.

The company generated an operational loss of $35.2 million for the first nine months of 1998, up from a loss of $19 million reported for the previous year. As of its third quarter, the company had a deficit of $85 million.

Healtheon operates an Internet-based platform designed to allow healthcare companies to exchange information and conduct transactions, such as enrollment and eligibility determinations.

But the challenges it faces include convincing health care companies to use an electronic system as opposed to a paper-based system.

In its SEC filing, the company notes that its SBCL SCAN and ProviderLink systems, which accounted for roughly 43 percent of Healtheon's revenues during the first nine months of 1998, are not yet Y2K compliant. However the company is planning to release year 2000 upgrades during the early part of this year.

"Conditions now are more favorable now than when Healtheon pulled its IPO in October," said Paul Bard, an analyst with Renaissance Capital IPO Fund.

He added that the broader markets regained their strength toward the end of November, and that nearly 50 percent of the IPO filings during the last two months of 1998 were for Internet or Internet-related companies.

And the first two weeks of January have seen the technology-laden Nasdaq repeatedly hit new highs.

One company that may ride that tide is, which is scheduled to set a target price later today for its IPO, which is scheduled to launch tomorrow.

Bard added that he expects above-average demand for Internet IPOs to continue through the rest of the year.