drkoop: A Stock in Rehabilitation?

After a surging IPO in June, drKoop (KOOP)
caught a flu, as the stock is now trading at a sickly 14-11/16.

Yet, the markets may have mis-diagnosed the stock. In its latest quarter,
drkoop.com showed strong vital signs. There was sequential quarterly sales
growth of 186 percent to $2.4 million. Looking behind these numbers, we see the

  1. Unique visitors surged 35 percent to 8.7 million
  2. Page views climbed 46 percent to 40.4 million
  3. Registered users doubled to 580,000
  4. Revenue per page view went from $26.31 to $62.22

The growth is likely to continue, driven by a recent mega deal with
(struck in July), in which drkoop.com provides content and services on
AOL.com, Netscape Netcenter, Digital City, AOL and Compuserve.

To capitalize on the user growth, drkoop.com has been signing up new
advertisers (now 32). There has also been a complete redesign to the
site, allowing for better navigation and monetization of user traffic.

Besides portal deals, drkoop.com has been signing contracts with healthcare
companies, such as Inova Health System of Virginia, Lifeguard, Inc. of San
Jose, California, McLaren Health Care Corporation of Lansing, and so on.
Drkoop.com has a reach of over 300 healthcare facilities, covering 71.2
million consumers.

In quick fashion, drkoop.com has been showing results for sponsors. Both
lifescape.com (which specializes in behavioral health) and DrugEmporium.com
renewed and expanded their prior relationships. The lifescape.com deal
involves $11 million over four years (the terms of the DrugEmporium were
not disclosed).

So far, about 86 percent of revenues are from advertising and sponsorships.
However, this percentage should fall over time, as drkoop.com derives more
business from subscriptions and e-commerce.

No doubt, there is still lots of risk with this company, even at its
current valuation. drKoop lost over $20 million last quarter. With
such a burn rate, the company could be in jeopardy of running out of cash.
But drkoop.com has quickly taken steps to monetize its reach and the
revenues are starting to ramp, which can be enough to get the company’s
stock breathing again.

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