Fully expecting it will burn through the $95.4 million raised one year ago in its initial public offering-and in spite of the chilly climate for dot-coms-Neoforma.com is hunting for more big-time investors.
Officials at the San Jose, Calif.-based e-commerce company indicate they are close to announcing a second round of financing to see them through the fourth quarter of this year and well into 2002 when the fledgling healthcare marketplace hopes to start turning a profit.
The $30 million question-the amount Neoforma hopes to raise this time around-is whether its key partner, Irving, Texas-based Novation, plans to sink any money into the virtual mall that is being built to accommodate the group purchasing needs of its 1,559 hospital members.
"We think that's certainly a possibility," said Anthony Vendetti, senior vice president of equity research at Gruntal & Co., a New York brokerage. "Being a very large shareholder, we believe Novation is committed to the partnership."
Officials at Novation, the joint purchasing company of VHA and University HealthSystem Consortium, declined to comment on Neoforma's next round of financing. So did officials at Neoforma, who cited ongoing discussions.
But in December, Robert Zollars, Neoforma's chief executive officer and chairman of the board, said the funding would be completed within 90 days. The company had roughly $53 million of its initial bankroll remaining last October, Zollars said. He said another $30 million would carry the company to profitability.
It remains to be seen whether Neoforma can survive the cold as a viable stand-alone business, said Patrick Hojlo, a research analyst for New York-based Banc of America Securities.
It's common for upstarts to run out of money-"especially the way companies like Neoforma have burned through cash in the last 18 months," Hojlo said. "A lot of these companies were able to raise capital freely, so they were willing to spend capital freely as well. Unfortunately, the capital market is tight. Investors don't want much to do with (Internet or business-to-business companies) right now."
At least one second-round investor that Neoforma has identified is Dallas-based i2 Technologies. Early this month, the two companies announced a three-year, revenue-sharing agreement to collaborate on product development, marketing, sales and service. The Dallas company also agreed to make a minority investment in Neoforma's proposed round of financing.