This Week's IPOs: athanahealth, ZARS Pharma

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Includes: ATHN, ZARS
by: Abbi Adest

Another light week for IPOs. Companies going public this week include athenahealth (NASDAQ:ATHN), an internet-based provider of revenue management software and back-office support services for physician practices, and ZARS Pharma (ZARS), a specialty pharmaceutical company that focuses on topically administered pain management drugs.

All quotations are from the companies' most recent S-1 filings with links provided.

athenahealth (ATHN) Business Overview (from prospectus)

athenahealth is a provider of internet-based business services for physician practices. Our service offerings are based on three integrated components: our proprietary internet-based software, our continually updated database of payer reimbursement process rules and our back-office service operations that perform administrative aspects of billing and clinical data management for physician practices. Our principal offering, athenaCollector, automates and manages billing-related functions for physician practices and includes a medical practice management platform. We have also developed a service offering, athenaClinicals, that automates and manages medical record-related functions for physician practices and includes an electronic medical record, or EMR, platform. We refer to athenaCollector as our revenue cycle management service and athenaClinicals as our clinical cycle management service. Our services are designed to help our clients achieve faster reimbursement from payers, reduce error rates, increase collections, lower operating costs, improve operational workflow controls and more efficiently manage clinical and billing information.

Offering: 6.3 million shares at $14.00 - $16.00 per share. Net proceeds of approximately $67.8 million will be used primarily to repay debt.

Lead Underwriters: Goldman Sachs, Merrill Lynch

Financial Highlights:

Total revenue for 2006 was $75.8 million, an increase of $22.3 million, or 42%, over revenue of $53.5 million for 2005... Direct operating expense for 2006 was $36.5 million, an increase of $9.0 million, or 33%, over direct operating expense of $27.5 million for 2005... Selling and marketing expense for 2006 was $15.6 million, an increase of $4.0 million, or 34%, over sales and marketing expense of $11.7 million for 2005... Research and development expense for 2006 was $6.9 million, an increase of $4.0 million, or 136%, over research and development expense of $2.9 million for 2005.

ZARS PHARMA, INC. (ZARS) Business Overview (from prospectus)

We are a specialty pharmaceutical company focused on the development and commercialization of topically administered drugs using our proprietary drug delivery technologies, primarily in the area of pain management. We have developed a portfolio of proprietary products and product candidates based on our Controlled Heat-Assisted Drug Delivery [CHADD] technology and our cream technologies (Peel and DuraPeel) that transform, or phase-change, from an initial liquid phase to a solid phase during application. Our products and product candidates include two products that have been approved for marketing (Pliaglis, and Synera which is marketed as Rapydan in Sweden) and one product candidate for which we commenced Phase 3 clinical trials in June 2007 (ThermoProfen). We also have begun human clinical trials for two additional product candidates and plan to file two investigational new drug [IND] applications in 2007. We have not generated any revenues from commercial sales of our products and have not been profitable.

Offering: 5.0 million shares at $14.00 - $16.00 per share. Net proceeds of approximately $67.6 million will be used clinical testing of the company's existing products and for working capital and general corporate purposes.

Lead Underwriters: Cowen & Company, CIBC World Markets

Financial Highlights:

Our revenue increased 163% to $7.6 million in 2006 from $2.9 million in 2005 and decreased 56% from $6.5 million in 2004 to $2.9 million in 2005. In 2006, we recognized revenue of $6.7 million relating to payments of $11.0 million received in 2006 upon signing a license agreement for Synera in North America and $8.0 million received in 2006 upon the product launch of Synera... Research and development expenses were $12.2 million in 2006 compared to $10.7 million in 2005 or an increase of 13%... Since inception, we have financed our operations through private placements of equity securities and cash received through collaborative research and development and product licensing agreements. As of June 30, 2007, we have received net proceeds through the private placement of our equity securities totaling $36.3 million and received cash from collaborative research and development and product licensing agreements totaling $65.3 million.