01/24/2000

Neoforma Quadruples In First Big IPO of 2000

Shares in Neoforma.com, whose Web sites connect medical equipment companies to hospitals and doctors, quadrupled during the first major initial stock sale of 2000.

The Santa Clara, Calif.-based company rose $39.38 to $52.38, giving the company a market value of $2.95 billion. About 13.9 million shares changed hands.

Neoforma.com's surge even as U.S. stocks tumbled suggests investors' enthusiasm for initial stock sales by online companies is just as strong as last year, when IPOs rose an average of 90 percent in their first day.

"There is very good demand for Internet companies with good business models and with some barriers to entry and brand," said Lawrence York, manager of the $115 million www.Internet Fund in Lexington, Ky.

Neoforma.com sold 7 million shares at $13 each earlier today, raising $91 million. The sale of the 12 percent stake was the first U.S. initial stock sale greater than $10 million since Dec. 16, more than five weeks ago. Last week, battery-maker Talisman Enterprises raised $4.5 million.

Neoforma's Shop service, introduced in August, allows suppliers to offer products ranging from syringes and gloves to sophisticated diagnostic equipment. The 'Auction' service, introduced in May, lets users list used and refurbished equipment and surplus medical products.

Ordering medical supplies is "a very costly process," said Robert Zollars, Neoforma.com's chief executive. He cited estimates that health-care buyers spend $23 billion procuring products, and that $11 billion of the amount is "waste." Neoforma helps reduce supply-chain waste because it can bring together the 1 million buyers and 20,000 suppliers in the fragmented health-care industry, he said. NeoForma.com recorded sales of $464,000 for the nine months ended Sept. 30 compared with none for the same period a year ago. The company's loss rose to $25.6 million from $2.3 million for these periods.

Neoforma.com plans to make money mainly from transaction fees paid by sellers of medical products using the Shop and auction services. So far, the Auction service is the biggest fee-generator, but Shop is projected to pull ahead, Zollars said.

Neoforma.com has strategic alliances with companies such as VerticalNet, a manager of Internet sites where businesses buy and sell goods, and Healtheon WebMD, an online provider of health-care services and information.

That "positions them well," York said. Neoforma.com "is right on target with the whole procurement wave."

Neoforma.com trades with the symbol ''NEOF'' on the Nasdaq Stock Market.

Copyright 2000, Bloomberg L.P. All Rights Reserved.

By Bloomberg News
Special to CNET News.com