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Vital Signs Poor For drkoop.com

Already seriously ill, drkoop.com (KOOP) has been dealt a potentially fatal blow by a report from independent auditors who doubt the Internet health-care network will be able to survive much longer.

The impact of the auditors' statements, contained in the company's annual report released Thursday, made an already bad situation worse for KOOP shareholders. The stock fell more than 40 percent in early trading Friday after closing Thursday at 6 1/4. By late morning, KOOP shares were selling at 3 7/16.

That's 62 percent below the $9 offer price from last June's IPO. And if you bought KOOP at its high price of $45 per share last July, you'd be down 92 percent as of Friday morning.

The auditors cited the heavy losses and negative cash flows drkoop.com has sustained since its inception in 1997. Last year alone, drkoop.com had a net loss of $56.1 million, against only $9.4 million in revenue. And with $35.7 million in cash as of Dec. 31 and no infusion since then, drkoop.com could run out of money by this summer.

Now, everyone who one year ago thought the name of former Surgeon General C. Everett Koop would drive enough traffic to the drkoop.com site to generate substantial advertising and e-commerce revenue, raise your hand. What, just me?

Actually, I did think there was a good chance the company could effectively leverage the Koop name, though I left some hedge room when I first wrote about drkoop.com in March 1999, after it filed to go public.

I will utilize that hedge room now to point out that I also wrote, "Drkoop.com, with no track record and no proven model of success, is asking investors to make a large leap of faith."

Well, the company still has no proven model of success, and most of those investors who did make the leap have had a hard landing.

And with a market cap of $108 million and falling, the prospects for recovery are slim and none.

The problem is stiff competition and flawed strategy. Health sites have been flooding the Internet in the past two years, and many of these other sites have offered interactive features and services that drkoop.com has only recently added. Also, other medical sites generate more e-commerce revenue. In other words, drkoop.com has not effectively "monetized" its traffic.

Which, in the current investor climate, is punishable bywell, you know.

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