Neoforma.com Inc (Proposed ticker: NEOF) will be the first real IPO to test January's waters. The business-to-business company for the medical supplies industry intends to price 7 million shares between $10 and $12 each for trading Monday, delaying its original debut date of Friday.
The company increased its price range to $10 to $12 from $8 to $10 a share in a sign of strong demand.
"There are B2B sites popping up everywhere, and this one is coming out at a good time -- after PurchasePro (Nasdaq: PPRO), Ariba (Nasdaq: ARBA), Commerce Once (Nasdaq: CMRC), and Freemarkets (Nasdaq: FMKT)," which were all successful in their debuts, said Kenan Pollock, money editor for Hoovers.com.
"The healthcare market presents a big opportunity now," said Mary Lupo, an analyst for Renaissance Capital. Neoforma's partnership with VerticalNet (Nasdaq: VERT), Healtheon (Nasdaq: HLTH), Dell (NYSE: DELL), and General Electric Medical Systems should also put it in good standing with investors, she said. The company has a registered user base, which is a good starting point, though it's still small, Lupo added.
Neoforma had revenue of just $464 000 for the nine months ended Sept. 30 and lost $25.6 million, compared to $2.3 million in the same period in 1998.
According to Efficient Healthcare Consumer Response, a 1996 independent study, the supply-chain costs of distributing medical products total about $23 billion per year, of which an estimated $11 billion could be eliminated by more efficient sharing of information, Neoforma said in their regulatory filings. As healthcare providers seek to make their supply chain more efficient, Neforma plans to establish the dominant online market.
In order to do so, Neoforma still needs to attract large healthcare organizations, such as hospitals, integrated delivery networks and members of large purchasing organizations, the company said. Its current customer base of small healthcare providers such as physicians offices won't be sufficient, especially if the large healthcare organization establish websites to sell products directly to consumers
Folowing the IPO there will be about 57.8 million shares outstanding in the company, putting its initial market capitalization at about $520 million based on a $9 per share initial price. The deal is being underwritten by Merrill Lynch, Bear Stearns, Robertson Stephens, Volpe Brown Whelan and William Blair.
Neforma's competition includes e-commerce providers with online such as Medibuy, Promedix and Cimtek Medical. Though the market for medical supplies is still in ints infancy, the competition in moving swiftly. Medibuy provides an auction site for the sale of used, refurbished and surplus products, and has announced plans to introduce e-commerce services for new products. Cimtek Medical and Promedix have websites for the sale of new products. Promedix just entered into an agreement to be acquired by Chemdex (Nasdaq: CMDX).