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Wednesday December 1, 6:57 pm Eastern Time
IPO Healthcentral.com - fit for success?
By Angela Moore
NEW YORK, Dec 1 (Reuters) - Online health and fitness network HealthCentral.com (http://www.healthcentral.com), is preparing to go public next week and muscle into what analysts say is an already crowded sector.
The Emeryville, Calif-based company plans to offer 7.5 million shares at $9 to $11 each, through lead underwriter Lehman Brothers. The stock is expected to start trading Tuesday, and the prospective trading symbol is ``HCEN' on Nasdaq (NasdaqNM:HCEN - news).
The site offers health news and advice, and an online drug store, HealthCentralRx.com, which has a relationship with Bergen Brunswig for health and beauty aids, over-the-counter products and prescription drugs.
But the market is full of healthcare networks, and analysts say HealthCentral.com may not stand out.
``It's hard to determine now because their site is pretty young and they target the same group other Web health networks do,' said Peony Kao, an analyst with Renaissance Capital's IPO Plus Aftermarket Fund (Nasdaq:IPOSX - news). ``It does have a lot of competition at every angle'
HealthCentral.com competes with better-established Internet health companies like drkoop.com Inc. (NasdaqNM:KOOP - news), drugstore.com Inc. (NasdaqNM:DSCM - news) and PlanetRx.com Inc. (NasdaqNM:PLRX - news), as well as pharmacy benefit managers who sell drugs directly, brick and mortar drug stores, many of whom have made alliances with online competitors and hospitals and HMOs who offer products and services over the Internet, the prospectus said.
The cornerstone of the site, the prospectus said, is its relationship with radio and television personality Dr. Dean Edell who writes a column for HealthCentral.com.
The company relys heavily on Edell to provide content for and to drive traffic to the site, and said that the loss of Edell's contribution or any damage to Edell's reputation would damage the company. While the prospectus says Edell is not compensated for his contribution, he is a director of the company and holds a 5 percent stake in the company.
Although the company is relatively young - it was launched in November 1998 - it has forged deals with several high-profile Internet companies. Its online drug store is one of five ``anchor tenants' on America Online Inc.'s (NYSE:AOL - news) HealthOnline pharmacy channel, and it is the exclusive healthcare content provider for the AltaVista, the Web search engine owned by CMGI Inc. (NasdaqNM:CMGI - news), health channel.
Additionally, the company said it has relationships with Ask Jeeves Inc. (NasdaqNM:ASKJ - news), Yahoo! Inc. (NasdaqNM:YHOO - news), Netpulse Communications Inc. and Snap.com, which is jointly held by General Electric Co. (NYSE:GE - news) and CNET Inc. (NasdaqNM:CNET - news)
Revenues are generated through advertising fees, e-commerce revenue from the drugstore, and licensing fees from products and services provided to institutional clients, the prospectus said.
Investment risks include the impersonal nature of the Internet and the fact that some customers are looking for face to face interaction from their pharmacist, and HealthCentral.com's customers will only be able to receive advice or counseling over the telephone.
And though the company stresses that all of its customers personal information is encrypted, people may feel uncomfortable sharing health information via the Internet.
For the nine months ended Sept. 30, HealthCentral.com posted revenues of $488,646 and net losses of $9.1 million.
``I think (profitability) is a long way off and they're working to ramp up marketing to build their brand and that will cause them to be in the red for a long time,' Kao said.
Proceeds from the deal will be used for working capital, sales and marketing, Web site development, infrastructure improvements, funding potential operating losses and potential acquisitions, the prospectus said.
Some analysts are simply bearish on the sector.
``The markets are definitely 'dot com' conscious and infrastructure savvy,' said David Menlow, president of IPO Financial, based in Millburn, N.J. ``Investors certainly know all the risks that are involved, but (the Internet and health) doesn't seem to be a good mix.' |
