The health-care-company IPO window has cranked wide open over the past few weeks. But investors haven't been all that eager to catch every company jumping through that window.

Company Increase (Decrease) From IPO Price
Endocyte (Nasdaq: ECYT)


AcelRx Pharmaceuticals


Pacira Pharmaceuticals (Nasdaq: PCRX)


Epocrates (Nasdaq: EPOC)




MedQuist (Nasdaq: MEDH)


Source: Capital IQ, a division of Standard & Poor's.

The cheapskate in me wants to think there's something to the broken IPOs -- those for AcelRx, Pacira, and Tornier -- where you can get shares for the same or less than they were funded at. But you have to wonder whether the market, rather than the select group that priced the shares, knows best.

And even if they don't, you'll have to wait around until they realize their mistake. IPOs are one of the places where I think David Gardner's third sign of a Rule Breaker -- strong past price appreciation -- really shines. Sure, there's no discount in the highflier that other investors have already bought up, but if the company is growing, the premium valuation can be worth the price of admission.

Getting it right, eventually
Although technically Endocyte is trading much higher than its IPO price, I wouldn't exactly call it overpriced. The development-stage drugmaker was originally hoping to get $13 to $15 per share during its offering. Instead, the company had to slash its IPO price to $6 and more than double the number of shares it offered to get the capital it needed.

With a market cap of $200 million and a phase 2 ovarian-cancer drug, Endocyte looks to be worth watching.

Seeing green
Everything is going digital, and that includes pushing drugs. Many drugmakers have shunned sales reps, by moving their interactions with doctors to the Internet. Doctors can head to a website to directly order sample drugs from Pfizer (NYSE: PFE), AstraZeneca (NYSE: AZN), and Merck (NYSE: MRK), for instance.

That trend makes Epocrates appealing. The company develops applications to help health-care providers get access to medical information. All those eyeballs in a very specific demographic -- 45% of U.S. doctors use Epocrates' systems -- are worth something to investors.

Deja vu
Like Endocyte, MedQuist had to lower its IPO price to get the offering done. Nevertheless, the fact that the shares increased after the IPO means investors like what they see.

Like Epocrates, MedQuist is a play on the increase in digital health care. The company handles medical transcription, billing, and coding services for doctors and hospitals. Following insurance companies' somewhat convoluted rules is a hassle that many doctors don't want to deal with. Add in the need to do everything electronically when many doctors are still using paper charts, and outsourcing to Epocrates seems like a logical choice.

Watchlist time
I don't see any of the three as being necessary to buy right at this moment. Of the three, I'm most interested in Endocyte, but that's mostly because of my interest in its drug development. Epocrates looks to have a lot of potential, but monetizing the eyeballs may not be as easy as it sounds.

All three are, however, worthy of adding to your watchlist. Keep an eye on them, read up on their business models, listen to a few conference calls, and then make a decision on whether to invest. Good long-term investments have strong price appreciation even after their first double, so there's no rush.

You can use the Fool's My Watchlist feature to keep track of all our Foolish analysis on these companies.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Pfizer is a Motley Fool Inside Value selection. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.