'It's health's turn at the plate.'

by Gerald Burstyn

      WebMD, a consumer health portal, and Healtheon Corp., a provider of business services to doctors and hospitals, have agreed to merge in a deal valued at $5.5 billion.
      The combination will create a behemoth of online health information, commerce, and services in a rapidly growing internet sector.
      Visitors to WebMD can find information on pharmaceuticals, chat with other health-conscious users, or research particular ailments. Healtheon provides an electronic commerce service that links doctors and consumers with healthcare institutions.
      ''Healtheon/WebMD will be a leader in internet healthcare services and e-commerce, with the technology, brand name, and financial resources to transform the delivery of care by connecting all participants in the healthcare industry,'' James Clark, chairman of Santa Clara, California-based Healtheon, said yesterday when the merger was announced.
      Internet research firm Jupiter Communications estimates that 64 percent of all internet visitors at some point access healthcare information on the web, and Jupiter projects that health-related online advertising spending will rise from $12.3 million in 1998 to $265 million in 2002.
      That's a small fraction of the $1 trillion U.S. healthcare market, observes David Restrepo, a healthcare analyst at Jupiter. ''It's still a wide-open market,'' he says. ''It's health's turn at the (internet) plate.''
      ''What these two companies have done well is establish themselves as leaders in their fields,'' says Restrepo, but at this stage he says the merger is high on promise and low on guarantees. ''It's an investment in a concept, an idea.''
      Though the WebMD/Healtheon deal is valued in the billions, neither company has ever turned a profit. Healtheon, founded in 1996, reported revenues of $48.8 million and losses of $54 million in 1998. The company reported a net loss of $18.6 million in the first quarter of this year.
      Atlanta-based WebMD, established last year, lost $7.8 million on $75,000 in revenues in 1998.
      In addition to the merger, the two companies also announced partnerships with some of the internet's largest players, including Microsoft and Excite. Microsoft will make a $250 million investment in WebMD and will make it the premier healthcare content provider for MSN and other Microsoft properties. Excite invested $25 million in the partnership and will provide a library of healthcare resources.

- Gerald Burstyn is a staff writer for Media Life.