PlanetRx.com: A Strong Dose of E-Commerce

When looking e-commerce companies, one question always comes up: What about
the barriers to entry? Let’s face it, it is not difficult to sell stuff
online.

But there is an e-commerce segment with strong barriers. The industry is
online phamacies. The simple fact is that most prescription drugs are not
actually purchased by consumers; rather, the purchase is via insurance policies.
Moreover, these insurance policies are concentrated in a few hands. These
companies are known as pharmacy benefit managers (PBMs).

Smart online drugstores have partnered with these PBMs by making them
investors. One example is PlanetRx.com (PLRX), which aligned itself with Express
Scripts. In this deal, PlanetRx.com got exclusive access to 36 million
consumers.

PlanetRx.com has been a so-so stock since its IPO. But that doesn’t mean
the company’s growth has faltered. In its last quarterly report, PLRX
had sales of $3.1 million, representing a tidy 308 percent sequential growth
rate from the prior quarter. Of these, $2.7 million were from commerce
transactions. Interestingly enough, these sales did not involve the Express
Scripts relationship (this will happen in the next quarter).

The losses are large, close to $23 million in the last quarter. But the
company has been aggressively acquiring customers. Total membership
increased 287 percent from the prior quarter to 310,000, while customers rose by
115,000 to 150,000. About 27 percent of the total orders were from repeat
customers.

The site is an example of an effective melding of content and commerce.
Users have access to 24-hours access to pharmacists, as well as extensive
articles, chats and FAQs.

Part of the strategy is verticalization. The healthcare industry is huge,
with many specialties. So PlanetRx.com has acquired 29 key domain names,
which will become key sites, such as diabetes.com, arthritis.com,
cancer.com, etc. This should lead to more effective e-commerce
opportunities, as well as targeted advertising.

Actually, eMarketer named PlanetRx the No. 1 online drugstore based on a
myriad of factors, such as price, service, features, and selection. In each
category, PlanetRx.com got perfect scores.

PlanetRx also signed an important deal with IBM to provide an online
shopping service for the popular Palm platform (IBM will provide the
complex technology back-end). No other online pharmacy has such a program.

Finally, another lucrative revenue source is from physicians. PlanetRx
recently signed a deal with AHT Corporation, which will enable physicians
and other healthcare providers to transmit prescriptions electronically to
PlanetRx.com. — thereby creating a complete doctor-to-insurance company-to-consumer solution
for prescription drug management using the Web.

No doubt, PlanetRx.com does have the prescription for success and has been
executing on it. In quick fashion, the company is seeing impressive results.
This should eventually translate into a healthy cure for an aching stock
price.


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