Amendment No. 1 to Schedule 13D

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, APppeXeY2jWjCLA+tGhyvSHJJSg6l74ukRWu25i1ISrTx399r2C8QuDs3ZyrlAVe 7q+/gg7iA+nXw3Bi/H9TVQ== 0001193125-05-082179.txt : 20050422 0001193125-05-082179.hdr.sgml : 20050422 20050422085943 ACCESSION NUMBER: 0001193125-05-082179 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20050422 DATE AS OF CHANGE: 20050422 GROUP MEMBERS: QVT FINANCIAL GP LLC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: NEOFORMA INC CENTRAL INDEX KEY: 0001096219 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 770424252 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-58839 FILM NUMBER: 05766051 BUSINESS ADDRESS: STREET 1: 3061 ZANKER ROAD CITY: SAN JOSE STATE: CA ZIP: 95134 BUSINESS PHONE: 4086545700 MAIL ADDRESS: STREET 1: 3061 ZANKER ROAD CITY: SAN JOSE STATE: CA ZIP: 95134 FORMER COMPANY: FORMER CONFORMED NAME: NEOFORMA INC/CA/ DATE OF NAME CHANGE: 20010918 FORMER COMPANY: FORMER CONFORMED NAME: NEOFORMA COM INC DATE OF NAME CHANGE: 19991004 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: QVT Financial LP CENTRAL INDEX KEY: 0001290162 IRS NUMBER: 113694008 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 527 MADISON AVENUE STREET 2: 8TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 212-705-8800 MAIL ADDRESS: STREET 1: 527 MADISON AVENUE STREET 2: 8TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 SC 13D/A 1 dsc13da.htm AMENDMENT NO. 1 TO SCHEDULE 13D Amendment No. 1 to Schedule 13D

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No. 1)*

Neoforma, Inc.

(Name of Issuer)

Common Stock, $0.001 par value per share

(Title of Class of Securities)

640475 10 7

(CUSIP Number)

Fati Sadeghi-Nejad, Esq.

General Counsel

QVT Financial LP

527 Madison Avenue, 8^th Floor, New York, NY 10022

(212) 705-8888

copies to: Knute J. Salhus, Esq.

Wilmer Cutler Pickering Hale and Dorr LLP

399 Park Avenue, New York, NY 10022

(212) 230-8800

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

April 21, 2005

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-l(e), 240.13d-l(f) or 240.13d-1(g), check the following box. ¨

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No. 640475 10 7


1.		Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). QVT Financial LP 11-3694008
2.		Check the Appropriate Box if a Member of a Group (See Instructions) (a) (b) x
3.		SEC Use Only
4.		Source of Funds (See Instructions) OO
5.		Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)
6.		Citizenship or Place of Organization Delaware

Number of

Beneficially

Owned by

Each

Reporting

Person

With

7. Sole Voting Power

8. Shared Voting Power

1,110,083 shares of common stock

9. Sole Dispositive Power

10. Shared Dispositive Power

1,110,083 shares of common stock


11.		Aggregate Amount Beneficially Owned by Each Reporting Person 1,110,083 shares of common stock
12.		Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)
13.		Percent of Class Represented by Amount in Row (11) 5.52%
14.		Type of Reporting Person (See Instructions) PN

Page 2 of 8 pages

CUSIP No. 640475 10 7


1.		Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). QVT Financial GP LLC 11-3694007
2.		Check the Appropriate Box if a Member of a Group (See Instructions) (a) (b) x
3.		SEC Use Only
4.		Source of Funds (See Instructions) OO
5.		Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)
6.		Citizenship or Place of Organization Delaware

Number of

Beneficially Owned by

Each

Reporting

Person

With

7. Sole Voting Power

8. Shared Voting Power

1,110,083 shares of common stock

9. Sole Dispositive Power

10. Shared Dispositive Power

1,110,083 shares of common stock


11.		Aggregate Amount Beneficially Owned by Each Reporting Person 1,110,083 shares of common stock
12.		Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)
13.		Percent of Class Represented by Amount in Row (11) 5.52%
14.		Type of Reporting Person (See Instructions) OO

Page 3 of 8 pages

This Amendment No. 1 to the undersigned’s Schedule 13D, which was originally filed on January 21, 2005 (the “Schedule 13D”) with regard to Neoforma, Inc., is being filed to amend Item 4 and Item 7 of the Schedule 13D. Except as expressly stated herein, there have been no material changes in the information set forth in the Schedule 13D.

Item 1. Security and Issuer

This Schedule 13D relates to common stock, $0.001 par value per share (the “Common Stock”) of Neoforma, Inc. (the “Issuer”). The Issuer’s principal executive offices are located at 3061 Zanker Road, San Jose, California 95134, United States.

Item 2. Identity and Background

This Schedule 13D is filed by QVT Financial LP, a Delaware limited partnership (“QVT Financial”), and its general partner, QVT Financial GP LLC, a Delaware limited liability company. The principal executive offices of QVT Financial and QVT Financial GP LLC are located at 527 Madison Avenue, 8th Floor, New York, New York 10022. QVT Financial’s principal business is investment management and it acts as the investment manager for QVT Fund LP (the “Fund”). QVT Financial is also the investment manager for a separate discretionary account managed for Deutsche Bank AG (the “Separate Account”). QVT Financial has the power to direct the vote and disposition of the Common Stock held by each of the Fund and the Separate Account.

Daniel Gold, Lars Bader, Nicholas Brumm and Tracy Fu (the “Covered Persons”) are the managing members of QVT Financial GP LLC. The business addresses and principal occupations of each of the Covered Persons are set forth in Appendix A attached hereto, which is incorporated herein by reference. The business address of each Covered Person is also the address of the principal employer of such Covered Person. Each of the Covered Persons is a citizen of the United States.

(d) and (e). During the last five years, none of QVT Financial, QVT Financial GP LLC, or any of the Covered Persons has (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to federal or state securities laws or finding any violations with respect to such laws.

Item 3. Source and Amount of Funds or Other Consideration

The shares of Common Stock covered by this Schedule 13D were purchased by the Fund and the Separate Account between May 3, 2004 and January 18, 2005 for approximately $12.85 million. Prior thereto, the Covered Persons managed a proprietary account for Deutsche Bank AG, which held a portion of such shares of Common Stock. The source of funds for the purchases was cash available for investment held by the Fund and the Separate Account.

Item 4. Purpose of Transaction

The disclosure in Item 4 is hereby amended and restated to read in its entirety as follows:

All of the shares of Common Stock reported herein were acquired for investment purposes. The reporting persons review on a continuing basis the investment in the Issuer. Based on such review and depending on the price and availability of the Issuer’s securities, the reporting persons may acquire, or cause to be acquired, additional securities of the Issuer, in the open market or otherwise, dispose of, or cause to be disposed, such securities, in the open market or otherwise, at any time, or formulate other purposes, plans or proposals regarding the Issuer or any of its securities, to the extent deemed advisable in light of general investment and trading policies of QVT Financial, the Fund, the Separate Account, the Issuer’s business, financial condition and operating results, general market and industry conditions or other factors.

Certain of the Covered Persons, on behalf of QVT Financial, have had preliminary discussions with third parties who QVT Financial believes are not authorized to act on behalf of the Issuer or any of its significant shareholders, which may lead to consideration of transactions of the type described in subparagraphs (a) through (j) of Item 4 of the Instructions to Schedule 13D. In addition, as part of the ongoing evaluation of this investment and investment alternatives, the reporting persons may consider such matters and, subject to applicable law, may formulate a plan with respect to such matters, and, from time to time, may hold discussions with or make formal proposals to management or the board of directors of the Issuer, other stockholders of the Issuer or other third parties regarding such matters. On April 21, 2005, QVT Financial sent a letter to the members of the Board of Directors of the Issuer, a copy of which is attached hereto and incorporated herein.

Page 4 of 8 pages

Item 5. Interest in Securities of the Issuer

(a) and (b). The information contained on the cover pages to this Schedule 13D is incorporated herein by reference. QVT Financial is the investment manager for the Fund, which beneficially owns 913,831 shares of Common Stock. QVT Financial is also the investment manager for the Separate Account, which holds 196,252 shares of Common Stock. QVT Financial has the power to direct the vote and disposition of the Common Stock held by each of the Fund and the Separate Account. Accordingly, QVT Financial may be deemed to be the beneficial owner of an aggregate amount of 1,110,083 shares of Common Stock, consisting of the shares owned by the Fund and the shares held in the Separate Account.

QVT Financial GP LLC, as General Partner of QVT Financial, may be deemed to beneficially own the same number of shares of Common Stock reported by QVT Financial. The Covered Persons, as managing members of QVT Financial GP LLC, may be deemed to beneficially own the same number of shares of Common Stock reported by QVT Financial.

Each of QVT Financial, QVT Financial GP LLC and the Covered Persons disclaim beneficial ownership of the 913,831 shares of Common Stock owned by the Fund and the 196,252 shares of Common Stock held in the Separate Account.

(c) The reported share amounts for QVT Financial and QVT Financial GP LLC reflect amounts as of January 18, 2005. The Fund and Separate Account effected the following transactions in the Common Stock during the past 60 days:

•

The Fund purchased 7,207 shares of Common Stock, and the Separate Account purchased 1,698 shares of Common Stock in the open market on November 23, 2004 at a price of $7.01 per share.

•

The Fund purchased 8,335 shares of Common Stock, and the Separate Account purchased 1,965 shares of Common Stock in the open market on December 17, 2004 at a price of $7.82 per share.

•

The Fund purchased 4,930 shares of Common Stock, and the Separate Account purchased 1,162 shares of Common Stock in the open market on December 22, 2004 at a price of $7.82 per share.

•

The Fund purchased 5,208 shares of Common Stock in the open market on January 6, 2005 at a price of $7.02 per share.

•

The Fund purchased 4,046 shares of Common Stock, and the Separate Account purchased 954 shares of Common Stock in the open market on January 10, 2005 at a price of $6.99 per share.

•

The Fund purchased 140,110 shares of Common Stock in the open market on January 12, 2005 at a price of $7.69 per share.

•

The Fund purchased 19,919 shares of Common Stock, and the Separate Account purchased 4,697 shares of Common Stock in the open market on January 14, 2005 at a price of $9.60 per share.

•

The Fund purchased 8,092 shares of Common Stock, and the Separate Account purchased 1,908 shares of Common Stock in the open market on January 18, 2005 at a price of $9.73 per share.

Except for the information set forth herein, none of the reporting persons has effected any transaction relating to the Common Stock during the past 60 days.

(d) Not applicable.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer

Not applicable.

Item 7. Material to Be Filed as Exhibits

Item 7 is hereby amended and restated to read in its entirety as follows:

Exhibit 1 - Agreement regarding Joint Filing of Schedule 13D

Exhibit 2 - Letter from QVT Financial LP to the Board of Directors of Neoforma, Inc., dated April 21, 2005

Page 5 of 8 pages

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Dated: April 21, 2005


QVT FINANCIAL LP

By QVT Financial GP LLC,
its General Partner

By:		/s/ Daniel Gold
Name:		Daniel Gold
Title:		Managing Member

By:		/s/ Nicholas Brumm
Name:		Nicholas Brumm
Title:		Managing Member

QVT FINANCIAL GP LLC

By:		/s/ Daniel Gold
Name:		Daniel Gold
Title:		Managing Member

By:		/s/ Nicholas Brumm
Name:		Nicholas Brumm
Title:		Managing Member

Page 6 of 8 pages

EX-1 2 dex1.htm AGREEMENT REGARDING JOINT FILING OF SCHEDULE 13D Agreement regarding Joint Filing of Schedule 13D

Exhibit 1

Agreement of Joint Filing

Pursuant to 13d-1(k)(1) promulgated under the Securities Exchange Act of 1934, the undersigned persons hereby agree to file with the Securities and Exchange Commission the Statement on Schedule 13D/A (the “Statement”) to which this Agreement is attached as an exhibit, and agree that such Statement, as so filed, is filed on behalf of each of them.

IN WITNESS WHEREOF, the undersigned have executed this Agreement.


QVT FINANCIAL LP

By QVT Financial GP LLC,
its General Partner

By:		/s/ Daniel Gold
Name:		Daniel Gold
Title:		Managing Member

By:		/s/ Nicholas Brumm
Name:		Nicholas Brumm
Title:		Managing Member

QVT FINANCIAL GP LLC

By:		/s/ Daniel Gold
Name:		Daniel Gold
Title:		Managing Member

By:		/s/ Nicholas Brumm
Name:		Nicholas Brumm
Title:		Managing Member

Page 7 of 8 pages

Appendix A

Covered Persons


Name of Covered Person	Principal Business Address	Principal Occupation
Daniel Gold	QVT Financial LP 527 Madison Avenue, 8^th Floor New York, New York 10022	Investment Management

Lars Bader	QVT Financial LP 527 Madison Avenue, 8^th Floor New York, New York 10022	Investment Management

Nicholas Brumm	QVT Financial LP 527 Madison Avenue, 8^th Floor New York, New York 10022	Investment Management

Tracy Fu	QVT Financial LP 527 Madison Avenue, 8^th Floor New York, New York 10022	Investment Management

Page 8 of 8 pages

EX-2 3 dex2.htm LETTER FROM QVT FINANCIAL LP TO THE BOARD OF DIRECTORS OF NEOFORMA, INC. Letter from QVT Financial LP to the Board of Directors of Neoforma, Inc.

EXHIBIT 2: Letter to Board of Directors of Neoforma, Inc.

Robert J. Zollars, Chairman

Edward A. Blechschmidt, Director

Jeffrey H. Hillebrand, Director

Wayne B. Lowell, Director

Michael J. Murray, Director

C. Thomas Smith, Director

c/o Stephen K. Phillips, Esq., General Counsel

Neoforma, Inc.

3061 Zanker Road

San Jose, CA 95134

April 21, 2005

Dear Sirs:

As a Managing Partner of QVT Financial LP (“QVT Financial”), I previously wrote to you on March 29, 2005 to express our concerns relating to recent events and the future direction of Neoforma, Inc. (the “Company”), and to request a meeting to discuss those concerns. A copy of that letter is attached. Since you have not agreed to meet with us, I am now writing to reiterate those concerns. As you will recall from our prior letter and our Schedule 13D filing, QVT Financial is the investment manager for QVT Fund LP and for a separate discretionary account managed for Deutsche Bank AG, which together currently own 1,110,083 shares, or approximately 5.52%, of the Company’s outstanding common stock. We intend to include this letter as an exhibit to an amended Schedule 13D that we will be filing with the Securities and Exchange Commission concurrently with our sending this letter to you.

Consistent with QVT Financial’s process of ongoing evaluation of its investment in the Company and investment alternatives, we feel this letter is necessary to reiterate our concerns relating to the Company’s recent actions with respect to its majority shareholders and its announced exploration of strategic alternatives. Particularly in light of recent public disclosures by the Company and by its majority shareholders, we continue to believe that our interests, and the interests of all of the Company’s minority shareholders, differ significantly from the interests of, and may have been damaged by the actions of, the majority shareholders, VHA, Inc. (“VHA”) and University HealthSystem Consortium (“UHC”), both directly and indirectly through their wholly-owned affiliate, Novation L.L.C. (“Novation”).

As with any company whose securities we own, QVT Financial supports the Company’s efforts to maximize value to shareholders. In this regard, we took note of the Company’s public announcement in January 2005 that it had retained a financial advisor to assist the Company in evaluating strategic alternatives, including a possible sale or merger of the Company, in order to achieve greater shareholder value. However, as noted in our prior letter, certain other public disclosure raises concerns that the Company may not be sufficiently protecting the interests of the Company’s minority shareholders, and that such interests may be inconsistent with the interests of VHA and UHC.

Board of Directors

Neoforma, Inc.

April 21, 2005

Accordingly, we once again urge the Board of Directors to act in accordance with your duties as directors under Delaware law to defend the rights of the Company’s minority shareholders and, consistent with such duties, to take the following actions:

•

We note the Company’s public disclosure regarding the appointment of a special committee to provide oversight and support to the Company’s evaluation of its strategic alternatives. We ask that you provide public disclosure affirming that the special committee is comprised solely of directors that have no current or past affiliation with VHA, UHC or Novation, and that the special committee has been granted full authority to retain their own counsel and financial advisors to consider any matters relating to strategic alternatives for the Company, VHA, UHC or Novation. In this regard, we note that one of the members of the special committee, Jeffrey Hillebrand, is the chief operating officer of Evanston Northwestern Healthcare, which is a member of VHA.

•

We reiterate our request that you consider seeking approval by the Company’s disinterested shareholders for any strategic alternatives involving the Company, VHA, UHC or Novation, or for amendments, changes or revisions to the Revised Amended Outsourcing Agreement among the Company, VHA, UHC, Novation and Healthcare Purchasing Partners International, L.L.C. dated August 2003 (the “Outsourcing Agreement”).

•

We ask that you consider all viable strategic alternatives in the interest of maximizing shareholder value and avoid actions that may have the effect of discouraging competing bids or proposals. For example, subsequent to the filing of our Schedule 13D, we had preliminary discussions with Global Healthcare Exchange, LLC (“GHX”) in late January 2005 in which GHX expressed an interest in pursuing a strategic transaction with the Company. Based on those discussions, we understand that GHX, as a revenue neutral entity, thought that it would be in a better position to maximize shareholder value than possible competing entities and was considering a transaction proposal at a substantial premium to the then market price of the Company’s common stock. We are not aware of whether GHX proceeded to consider this transaction or continues to have any interest in the Company but we would urge you to contact them and give serious consideration to any proposal they may be prepared to make that would maximize shareholder value.

•

The key relationship agreement with Novation is the Outsourcing Agreement. While noting that you have publicly disclosed certain information that had previously been redacted in your public filing of the Outsourcing Agreement, we continue to urge you to disclose with the Company’s public filings the full text of the Outsourcing Agreement, including the remaining provisions for which confidential treatment was sought, so that all investors have access to all material information regarding this significant document. We believe that the additional information that you recently publicly disclosed is not sufficient on its own to permit investors to understand the benchmarking arbitration procedure under which Novation could seek a reduction in payments required to be made under the Outsourcing Agreement.

Board of Directors

Neoforma, Inc.

April 21, 2005

•

We ask that you continue to resist Novation’s efforts to reduce the payment amounts under the Outsourcing Agreement.

•

We request that you grant to QVT Financial the right to nominate on behalf of all minority shareholders an independent candidate for the Company’s Board of Directors, and, if necessary, a waiver of any applicable advance notice provision of the Company’s bylaws in order to facilitate such a nomination in connection with the Company’s next annual meeting of shareholders.

•

We repeat our request that you adopt a disclosure policy of transparency regarding the Company’s consideration of strategic alternatives, repricing of the Outsourcing Agreement and any other related party matters.

We hope that the Board of Directors will seriously consider responding to our requests in a timely manner as we believe that the Company’s public silence on these matters continues to undermine the shareholders’ and other interested parties’ confidence in the Company’s prospects and current management.

Sincerely,

/s/ Lars E. Bader

Lars E. Bader

Managing Partner

Encl.


cc:		Stephen K. Phillips, Esq.
		General Counsel
		Neoforma, Inc.
		3061 Zanker Road
		San Jose, CA 95134

Attachment: Letter to Board of Directors, March 29, 2005

Robert J. Zollars, Chairman

Edward A. Blechschmidt, Director

Jeffrey H. Hillebrand, Director

Wayne B. Lowell, Director

Michael J. Murray, Director

C. Thomas Smith, Director

c/o Neoforma, Inc.

3061 Zanker Road

San Jose, CA 95134

March 29, 2005

Dear Sirs:

As a Managing Partner of QVT Financial LP (“QVT Financial”), I am writing to express our concerns relating to recent events and the future direction of Neoforma, Inc. (the “Company”). As you may know from our Schedule 13D filing, QVT Financial is the investment manager for QVT Fund LP and for a separate discretionary account managed for Deutsche Bank AG, which together currently own 1,110,083 shares, or approximately 5.52%, of the Company’s outstanding common stock.

This letter to the Company’s Board of Directors is consistent with QVT Financial’s process of ongoing evaluation of its investment in the Company and investment alternatives, which includes holding discussions with the Company’s management or Board of Directors as needed. We do not want the Company’s management or Board of Directors to provide us with any material non-public information. We feel it is necessary to state our concerns relating to the Company’s recent actions with respect to its majority shareholders and its announced exploration of strategic alternatives. In addition, we believe that our interests, and the interests of all of the Company’s minority shareholders, differ significantly from the interests of, and may have been damaged by the actions of, the majority shareholders, VHA, Inc. (“VHA”) and University HealthSystem Consortium (“UHC”), both directly and indirectly through their wholly-owned affiliate, Novation L.L.C. (“Novation”).

As with any company whose securities we own, QVT Financial supports the Company’s efforts to maximize value to shareholders. In this regard, we took note of the Company’s public announcement in January 2005 that it had retained a financial advisor to assist the Company in evaluating strategic alternatives, including a possible sale or merger of the Company, in order to achieve greater shareholder value. Certain other publicly disclosed events, however, raise concerns that the Company may not be sufficiently protecting the differing interests of the Company’s minority shareholders, and that such interests may be inconsistent with the interests of VHA and UHC. In particular, we note the following:

Board of Directors

Neoforma, Inc.

March 29, 2005

•

The overlapping relationships among the Company, VHA, UHC and Novation create conflicts of interests that, if not addressed, may adversely affect the Company’s shareholders and the market value of the Company’s common stock. For example, Novation is the Company’s largest customer, accounting for a very significant percentage of the Company’s revenue and cash flow. Any reduction in amounts charged to Novation by the Company may materially adversely affect the Company and, we believe, the market value of its common stock, while economically benefiting Novation. While VHA and UHC as shareholders would be adversely affected by any decrease in the market value of their holdings of the Company’s common stock, unlike other shareholders they would obtain all of the economic benefit to Novation. Depending on the amounts involved, VHA’s and UHC’s indirect benefit resulting from a repricing in favor of Novation may outweigh any decrease in the market value of their common stock holdings in the Company, especially since they would share all of the economic benefit while only bearing a percentage of any market value decrease. Clearly in such circumstances, VHA’s and UHC’s interests would not be aligned with those of the Company’s other shareholders.

•

The key relationship agreement with Novation is the Revised Amended Outsourcing Agreement among the Company, VHA, UHC, Novation and Healthcare Purchasing Partners International, L.L.C. dated August 2003 (the “Outsourcing Agreement”). The announcement in January 2005 that both the Company and Novation retained independent advisors to assess the terms of the Outsourcing Agreement have caused concern to us and the marketplace in general. The content and timing of Novation’s assertions that it may request to reduce the quarterly maximum payment under the Outsourcing Agreement cause serious concern in light of the Company’s recent announcements regarding its future plans and consideration of strategic alternatives. We do not know if the timing of these statements was an attempt to discourage potential bidders or to facilitate a bargain sale of the Company, but it would not be a surprise if that is the result of such statements. In this regard, we note the decrease in the market price of the Company’s shares following Novation’s assertions.

•

The foregoing is all the more troubling given the disclosure in the Company’s public filings regarding the Outsourcing Agreement. Among the changes to the agreement when it was amended and restated in August 2003 was the establishment of quarterly maximum payments through expiration of the initial term on March 30, 2010. The portions of the amended agreement that would have provided pertinent pricing information to the marketplace were redacted from the version of the agreement filed with the Securities and Exchange Commission (“SEC”) as an exhibit to the Form 10-Q for the quarter ended September 30, 2003, with confidential treatment requested for the redacted portions. While SEC rules allow for confidential treatment requests regarding some limited information, in general such rules require the disclosure of all information that is material to investors. The lack of information regarding the ability of Novation to require future price renegotiations under the agreement may have contributed to the rise in the market price of the Company’s shares following the announcement of the amended agreement. Certainly the reaction of the market and certain analyst statements support

Board of Directors

Neoforma, Inc.

March 29, 2005

this view. In particular, we note an August 15, 2003 report by analyst P. Sean Jackson of Avondale Partners, LLC, in which the amendment of the Outsourcing Agreement is discussed as a positive event: “[T]he certainty of the payment agreements is meaningful given many investors’ concerns that Novation would wield its power to drastically reduce payments in future periods.”

•

We further note that the redacted version of the Outsourcing Agreement contained in the Company’s public filings created an information inbalance between the parties to the Outsourcing Agreement and public investors. The parties to the Outsourcing Agreement, including individuals at such entities familiar with the terms, had access to the entire agreement while the version in the Company’s public filings was incomplete. Following the disclosure of the amended Outsourcing Agreement and subsequent rise in the price of the Company’s shares, we note that VHA and UHC filed forms with the SEC indicating that they sold over 350,000 of the Company’s shares in the time period from September 10, 2003 through November 3, 2003, at prices ranging from $15.77 to $17.01 per share. We further note that some of the Company’s officers and directors also filed forms with the SEC indicating sales of the Company’s shares during the time period following the amendment of the Outsourcing Agreement. The prices of some of these sales were significantly higher than the average price for the Company’s shares over the preceding 12 months. We do not see any subsequent public filings by either VHA or UHC indicating any sales of the Company’s shares since November 12, 2003.

•

In January 2005, VHA and UHC announced that the Company had granted them a waiver of certain provisions of Delaware law and of standstill agreements that will allow VHA and UHC to work together to evaluate strategic alternatives for the Company. We do not know why the waivers were granted, and do not know whether the Company’s grant of these waivers was the result of pressure by the majority shareholders, or whether the waivers will facilitate a buyout of the minority shareholders by VHA and UHC. We do question, however, whether these actions may create such a perception and therefore discourage potential bidders who may be able to offer better terms to the Company’s minority shareholders. We further note that the Company has not filed a Current Report on Form 8-K with the SEC relating to its granting of such waivers.

We realize that you may have already considered all of these events and are in the process of addressing them in an appropriate manner. Nonetheless, we respectfully urge the Board of Directors to consider the events enumerated above and their potential effect in the marketplace, and expect that you will act in accordance with your duties as directors under Delaware law to defend the rights of the Company’s minority shareholders. Consistent with such duties, we urge you to take the following actions:

•

Appoint a special committee comprised solely of directors that have no current or past affiliation with VHA, UHC or Novation, with full authority to retain their own counsel and financial advisors to consider any matters relating to strategic alternatives for the Company, VHA, UHC or Novation.

Board of Directors

Neoforma, Inc.

March 29, 2005

•

Consider seeking approval by the Company’s disinterested shareholders for any strategic alternatives involving the Company, VHA, UHC or Novation, or for amendments, changes or revisions to the Outsourcing Agreement.

•

Confirm the pricing terms of the Outsourcing Agreement and resist Novation’s efforts to reduce the payment amounts.

•

Disclose with the Company’s public filings the full text of the Outsourcing Agreement, including the provisions for which confidential treatment was sought, so that all investors have access to all material information regarding this significant document.

•

Involve the minority shareholders in the process regarding the Company’s consideration of strategic alternatives and repricing of the Outsourcing Agreement, and adopt a disclosure policy of transparency regarding such matters and any other related party transactions.

We want to schedule a meeting to discuss with the Company and the Board of Directors the issues raised in this letter, and ask that you contact either me at 212-705-8800, or our counsel Knute Salhus of Wilmer Cutler Pickering Hale and Dorr LLP at 212-230-8805, regarding your availability.

Sincerely,

/s/ Lars E. Bader

Lars E. Bader

Managing Partner

cc:	Nancy A. Lieberman, Esq.

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, NY 10036-6522

Karen Lindren, Esq.

General Counsel

University HealthSystem Consortium

2001 Spring Road, Suite 700

Oak Brook, IL 60523

Marcea B. Lloyd, Esq.

Senior Vice President and General Counsel

VHA Inc.

220 East Las Colinas Boulevard

Irving, TX 75039

Board of Directors

Neoforma, Inc.

March 29, 2005

Stephen K. Phillips, Esq.

General Counsel

Neoforma, Inc.

3061 Zanker Road

San Jose, CA 95134

Knute J. Salhus, Esq.

Wilmer Cutler Pickering Hale and Dorr LLP

399 Park Avenue

New York, NY 10022

-----END PRIVACY-ENHANCED MESSAGE-----