Neoforma in Talks with 2 Others

Neoforma.com Inc., which operates an Internet marketplace that connects buyers and sellers of medical goods, said it is in merger talks with health-care software company Eclipsys Corp. and Healthvision Inc., an Internet health-care company.

The three are also discussing giving Novation LLC, the world’s biggest bulk purchaser of medical supplies, a stake in the merged company in exchange for Novation agreeing to conduct a certain amount of business through the combined entity, according to people familiar with the negotiations.

The battle is heating up for the lead in online business-to-business, or “B-to-B,” trading of medical supplies and equipment. The U.S. market is estimated to be worth more than $60 billion a year. Johnson & Johnson, Baxter Healthcare, Abbott Laboratories, Medtronic Inc. and General Electric Co.’s GE Medical Systems unit--five of the world’s biggest suppliers of health care goods--said Wednesday that they would form an Internet-based marketplace for health-care providers.

Now the vendors are saying they don’t need companies like Neoforma, and they will put together their 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,” Chapman said.

Neoforma shares fell $2.50 to $30.38 in trading on the Nasdaq Stock Market. Eclipsys shares fell 56 cents to $25.81.

Neoforma faces mounting competition from other specialized Internet companies that hope to generate profits by trading commercial health care products.

Closely held Medibuy.com Inc. said this month that it would buy Premier Health Exchange LLC, one of the biggest purchasers of health-care products. Last month, Ventro Corp. acquired Neoforma rival Promedix.

Neoforma is hoping that a link to Novation, which buys more than $12 billion in medical goods a year, will help it stay ahead of rivals such as Medibuy.com and Ventro.

“If this Neoforma thing works out, that could be a very significant chunk of their business that could go their way, rather than to Ventro,” said James Kumpel, an analyst at Raymond James Financial with a “strong buy” rating on Ventro.

While the talks could collapse before a final agreement, the parties are hoping for a deal within a week, the people said. Financial terms weren’t immediately available. Neoforma and Eclipsys have a combined market value of about $2.8 billion.

Santa Clara-based Neoforma said in a statement that it wouldn’t comment further until talks are concluded.

The Healthcare Industry Manufacturers’ Association estimates that the market for medical goods was worth $60 billion in 1998, according to regulatory filings from Neoforma. Neoforma, Medibuy.com and Ventro offer products that let buyers and sellers trade goods over the Internet while cutting down on transaction costs.

Eclipsys sells software that helps large hospitals and other big health care providers maintain medical, administrative and financial records.

The company, founded in 1995, is in litigation over its $2-billion hostile offer to acquire struggling rival Shared Medical Systems Corp.