HealthGate Stumbles Out of the Starting Gate

HealthGate Data Corp. got a lukewarm greeting in its debut Wednesday as investors seemed to be betting that the company’s medical and health information Web sites aren’t likely to reap returns as high as sites that sell medical products.

The Burlington, Mass.-based company’s stock (ticker symbol: HGAT) closed up just 75 cents on Nasdaq at $11.75, after rising early as high as $15.50.

HealthGate has compiled an online medical library with 27 million pages of health and medical information for users to browse.

But, said Gruntal & Co. analyst Anthony Vendetti: “[Content] is a very crowded area, and I believe it’s the area with the most difficult road ahead. Most public companies are in that space right now, and the market is looking at it with a much more discerning eye.”

HealthGate’s modest gain contrasts with NeoForma.com Inc. (NEOF), whose sites allow doctors and hospitals to buy medical products, tapping the fast-growing business-to-business market. NeoForma.com’s stock quadrupled in its debut Monday, the first big initial public offering of 2000. At $46.50, it’s still well above its $13 IPO price.

Other sites offering medical information for consumers have faced rocky going. Drkoop.com Inc. (KOOP) came out at $9 last year and rose as high as $45.75, but it has since plunged to $13.19.

In other IPO news, life insurer John Hancock Financial Services Inc. (JNH) raised $1.7 billion in the year’s biggest sale so far, and the shares will start trading today on the NYSE. The sale of 102 million shares at the expected price of $17 ends 137 years of ownership by Hancock customers and gives the firm a market value of $5.6 billion. An additional 229.7 million shares will be distributed to policyholders as compensation for giving up company ownership. Morgan Stanley Dean Witter led the offering.