TriZetto IPO to Boost Health Software Service
TriZetto Group Inc., which runs a service that gives medical groups and insurers access to health care software applications, said Thursday that it hopes to raise as much as $57.5 million through an initial stock sale.
The Newport Beach company operates the computer infrastructure to “host” applications used to manage paperwork such as patient enrollment or insurance forms, and to connect doctors to health care plans. Customers--who totaled 72 as of June 30--may access the software and communicate through TriZetto’s Web portal, dubbed HealthWeb.
“It’s an industry that has been built on paper,” said Chief Executive Jeffrey H. Margolis, 36, who helped found TriZetto. “The issue here is that before any of these systems can be made to be truly efficient on an electronic basis, the underlying core systems that each of these runs with have to work properly.”
Processing transactions over the Internet is seen by many analysts as a big business, as the $1.2 trillion-a-year U.S. health care industry takes advantage of technology to boost efficiency.
What investors will have to decide is whether that market is already dominated by rivals such as Healtheon WebMD Corp., CareInsite Inc. or ProxyMed Inc.
“The market is getting really crowded right now,” said Tom Taulli, an Calabasas analyst who follows the IPO market. “Everyone is saying ‘Look at Healtheon WebMD and how valuable that is.’ The farther you get down on that food chain probably the worse off it is for investors.”
Healtheon, founded by Netscape Communications Corp. co-founder Jim Clark, is planning to merge with WebMD Inc. to create the largest Internet company linking health care providers with patients, suppliers and insurers. Healtheon shares have risen more than fivefold since the company went public at $8 a share in February. Healtheon shares Thursday rose 78 cents, to $42.38.
Still, Healtheon shares have declined more than 50% since reaching a record high of $126.19 on May 20 amid concern that Healtheon doesn’t have a lot of products or services to deliver.
A key goal of TriZetto’s stock sale is to raise money to develop Internet and connectivity technologies and to acquire more software licenses, the company said in its filing with the Securities and Exchange Commission. TriZetto also will use some money for sales and marketing and to expand into more locations.
Margolis was chief information officer at FHP International Corp., a Fountain Valley-based managed-care giant that was acquired in 1997 by rival PacifiCare Health Systems Inc. Margolis holds a 17% stake in TriZetto.
The company’s business is divided into three parts: an application services unit that charges fees for the use of software; a Web portal designed to link doctors, insurers and customers; and a professional services unit aimed at helping customers.
Revenue--generated in equal parts from consulting services and from software subscription fees--totaled $12.7 million in the six months ended June 30, more than double the same year-earlier period. TriZetto lost $1 million through the year’s first half, compared with a $32,000 profit in the same year-earlier period.
TriZetto filed with the SEC to sell common stock. The number of shares to be sold, their expected price and the time of the sale will be included in a future filing. Underwriters will include Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette, and Adams, Harkness & Hill.
