E-Purchasing Pioneer Posts Positive Financials

Neoforma Neoforma, one of the first US companies to create an online marketplace for purchasing healthcare supplies has recorded its first positive earnings before interest, dividends, tax, depreciation and amortisation (EBITDA).

In the last quarter of 2001 the company recorded net revenues of $14.5m and EBITDA totalling $2.3m. The result is a milestone in the development of online marketplaces which are key components in the conversion of the healthcare supply chain into an end-to-end electronic process.

In essence, e-marketplaces work by bringing together the catalogues of major healthcare suppliers and providing consolidated electronic ordering facilities for clients in hospitals and other health facilities. They add value in several ways: for example by providing order tracking and accurate information about who is ordering what in a hospital.

The total volume of transactions through the Neoforma marketplace jumped by 31% from $636m to $833.6m in the last quarter of 2001. The company earned its revenue not only by taking a small percentage of the total transactions but also by providing information about activity in the supply chain.

Chairman and chief executive, Bob Zollars, said, “Our customers are moving beyond improving transactional processes. "To enhance the value of e-commerce for these suppliers and hospitals, we have introduced new reporting and analysis solutions that capture and process supply chain information."

In the first quarter of 2002, Neoforma says it continued to build with developments including:

• Bringing the total number of contracted hospitals to 730 as of the end of the quarter;
• Contracting with 43 manufacturers and distributors, including AmerisourceBergen Corporation, Hill-Rom Corporation, Medline Industries, Inc., Smith & Nephew, Inc., Stryker Sales Corporation and SYSCO Corporation. A total of 214 manufacturers and distributors are contracted to participate in Marketplace@Novation;
• Launching new and enhanced applications and features designed to improve business processes and provide cost management capabilities.