News from earlier today.
Mike
J&J, GE, Medtronic, Others Form Internet Marketplace
New Brunswick, New Jersey, March 29 (Bloomberg) -- Johnson & Johnson, Baxter International Inc., Abbott Laboratories, Medtronic Inc. and General Electric Co. have agreed to form an Internet- based marketplace for health-care providers.
The exchange will allow hospitals and others to link up to suppliers to buy and sell directly online, track orders and find information on products and services, cutting transaction costs and speeding orders.
The venture, controlled by five of the world's biggest suppliers of medical goods and services, will compete with specialized Internet companies that run online marketplaces. With this site, health-care providers can avoid paying fees to existing business-to-business companies such as Neoforma.com Inc., closely held medibuy.com Inc. and Ventro Corp., analysts said.
``Now the vendors are saying, `We don't need you. We're going to put together our own network,' said Robert Chapman managing member of Chapman Capital, an investment company that specializes in shares of companies involved in takeovers and turnarounds. ``The vendors are basically going to cut the B-to-B guys out unless they are adding technology.'
GE Medical Chief Executive Jeffrey Immelt said the venture will save his company $50 million to $100 million a year. The other companies declined to provide specific estimates, though some said the savings would be in the ``tens of millions.' The companies serve about 90 percent of hospitals worldwide, they said.
Health-care companies spend about $100 billion a year in the U.S. on products and services. Analysts estimate this exchange will tap about 10 percent of that market.
The exchange, which the companies hope will be up and running in the third quarter of this year, ``has the potential of dramatically reducing the number of technology systems that we currently need to procure and purchase products,' said William Donelan, executive vice president of Duke University Health System, in a statement.
GE, based in Fairfield, Connecticut, rose 4 7/8 to 160 7/8 in afternoon trading. Ventro, which is based in Mountain View, California, fell 6 15/16, or 8.8 percent, to 72 1/16.
Santa Clara, California-based Neoforma fell 4 1/8, or 13 percent, to 28 3/4. Neoforma said today that it was in merger talks with health-care software company Eclipsys Corp. and Internet health-care company Healthvision Inc., and also in talks with Novation LLC, which negotiates bulk purchases of medical supplies for hospitals and clinics.
The site offers customers greater security, breadth of products and order-tracking abilities than existing exchanges, Immelt and others said.
The companies declined to say how much they invested in the venture, though the partners said they contributed equal amounts.
There are no plans to sell shares in the new company to the public, the companies said. A management team is expected to be named in about 30 days.
For J&J, Baxter and Abbott, the Internet venture seems to be more about serving customers better than cutting the companies' operating costs significantly, said Michael Weinstein, an analyst with J.P. Morgan. ``It's not like (J&J and others) really are going to benefit from it,' he said.
Use of the Internet can reduce prices manufacturers receive for their goods because it creates a more efficient, transparent market, said Mike Krensavage, an analyst with Brown Brothers Harriman, who covers J&J. Still, the concept of Internet sales ventures sounds good ``until you try to figure out how participants are going to make money from it,' he said.
Still, by making it easier to order, track supplies and provide information, the companies should free up their sales forces to spend more time selling and less time on paperwork, the companies said.
Another General Electric division, called GE Global Exchange Services, will provide support for this venture, along with Ariba Inc., International Business Machines Corp. and i2 Technologies Inc.
The health care industry is following others in setting up such exchanges. For example, defense companies including Boeing Co., Raytheon Co. and Lockheed Martin Corp. unveiled their own exchange yesterday for that industry. Carmakers have also announced an exchange. Fifteen utility companies announced their own procurement exchange today.
Unlike other exchanges, however, this one will be a private company and will focus not on profit but on cutting costs and providing ease of use for customers, the executives announcing the exchange said today. It won't include an auction business.
GE Medical is the world's biggest maker of computed tomography machines and magnetic-resonance-imaging machines, commonly known as CT and MRI machines.
Johnson & Johnson shares fell 3/8 to 71 5/8. Abbott rose 1 5/16 to 35 3/16. Baxter was unchanged at 60 5/16, and Medtronic fell 1/2 to 55 5/16.
Mar/29/2000 15:06
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