From the Star-Ledger, Beth Fitzgerald
A new Internet wrinkle excites investors
CareInsite Inc. is building an Internet health-care network but hasn't launched it yet; the company has $68 million in deficit spending from its start-up, and it doesn't even have a Web site.
But CareInsite hit a home run yesterday on Wall Street.
The Elmwood Park company's 5.65 million-share issue was priced at $18 a share late Tuesday – and by the close of trading yesterday, the stock had soared 72 percent to close at 30 15/16, a gain of 12 15/16.
The company's revenues since 1996 total just $213,000, and the company warned that it will lose money for the next two years – buy yesterday it had a market capitalization of a major player: $2.15 billion.
CareInsite may be the new baby on the block, but its seasoned management grew up in the healthcare neighborhood.
Chairman Martin Wygod, 59, founded the pharmacy benefits powerhouse Medco Containment Services Inc. of Montvale and solt it in 1993 for $6.6 billion to Merck & Co., the biggest U.S. drug maker. Chief Executive Officer Paul Suthern, 47, is a former president of Medco.
CareInsite hopes to become a big player in a new industry considered tailor-made for the Internet – bringing doctors, health insurers, hospitals and prescription plans together on-line, to exchange information and transact business faster and cheaper.
CareInsite expects to go live on the Internet later this summer, according to spokesman David Schlanger. On Monday, CareInsite signed up Horizon Blue Cross and Blue shield of New Jersey as a customer – and gave the Newark-based health insurance company more than 811,824 in warrants as an inducement to get the contract, said Fred Hillmann, spokesman for Horizon. The warrants give Horizon the right to buy 800,000 shares of CareInsite stock at the initial public offering price of $18; but Horizon must wait two and a half years before it can exercise the warrants and buy the stock.
CareInsite's strong IPO reflects the market's strong reception for competitor Healtheon Corp. of Santa Clara, Calif. Healtheon went public Feb. 11 at 8 and closed yesterday at 80 13/16.
Hillmann said CareInsite will provide electronic claims submission, and enable patients to get pre-certification for treatment via the Internet.
Why did CareInsite provide Horizon with warrants? “Because there are any number of companies out there that provide this service, and they have to sweeten the contract,” Hillmann said. “This is a very competitive business.”
Hillmann said Horizon is exploring ways to use the Internet to provide services directly to its clients as well as dealing with companies such as CareInsite. “It's just an indication of how this industry is migrating to the Internet,” he said. “The Internet is growing in every facet of our business, and in everything we do.”
The IPO of CareInsite represents the spin-off of the e-commerce subsidiary of Synetic Inc., which will continue to own a 72.9 percent take in CareInsite. Synetic's shares rose 3 5/16 to 81.
Schlanger of CareInsite said the company has also signed up several other major managed-care health plans, including Empire Blue Cross and HIP of New York and the Greater New York Hospital Association – and expects to sign up more companies in the future. |
