Is drkoop.com Out of Sick Bay for Good?

For a business that seemed to be on its deathbed in August, drkoop.com Inc.
showed signs of making a full recovery Thursday by scooping up community
site drDrew.com for about $1.4 million in stock and cash.


drkoop.com acquired all drDrew.com assets from Sherwood Partners Inc., a
corporate restructuring firm, for 1.58 million shares of common stock and
$150,000 in cash. The acquisition boosts the drkoop.com registered user base
to more than two million.


“Some will say this was a risky business-to-consumer move in a battered
segment of the industry,” said Ed Cespedes, the confident president of
drkoop.com largely credited for the firm’s turnaround.


“They’re wrong. It opens the door to additional licensing revenues and
provides solutions for our healthcare provider partners in their efforts to
reach teens and young adults.”


Dr. C. Everett Koop, former U.S. Surgeon General and chairman of drkoop.com,
said the company that was named after him will now be able to cater to a
seldom-addressed sector of the medical market — 14 to 24-year-olds.


Dr. Drew Pinsky, founder for whom drDrew.com was named, will work with and
take a seat on the drkoop.com medical advisory board.


Dr. Drew’s radio program “Loveline” is currently in its 18th year of
production. The television version aired for four years on MTV with a strong
emphasis on sex and relationship issues. Launched in Novem
ber
of 1999 drDrew.com features content and Webcasts, chat rooms,
forums, exclusive celebrity interviews and pop culture reviews.


drkoop.com’s stock, which reached a high of $24.50 at
one point in 2000, wasn’t doing much of anything on the news as it hovered
around 90 cents per share in morning trading. But perhaps more importantly,
the play signals a triumphant victory in the battle many Internet content
companies are waging to stay above water.


Last March, auditors said the firm was running out of cash and in July, both
MilleniumHealth and Undertherapy.com offered to merge with the firm to save the brand.


drkoop.com managed to maneuver around such offers and survive in August when
it secured $20
million
in funding from Prime Ventures, JF Shea Ventures, Cramer
Rosenthal McGlynn and RMC Capital. It also restructured its management team,
signing on former [email protected] executive Richard Rosenblatt as CEO, Cespedes
as its new president and Stephen Plutsky as chief financial officer.


The firm is also battling several lawsuits filed by shareholders who claim
the company misled them by delaying a report of the firm’s viability. The
company also streamlined a bit by laying off a third of its staff, or 42 of 79 employees.


Despite all of the turmoil Cespedes told InternetNews.com Thursday that when
he arrived at drkoop.com almost two months ago at the urging of a board
member of venture capitalist firm Prime Ventures, he encountered a “dot-com
disaster.”


“The company was in big trouble,” Cespedes said. “They were borrowing money
to keep running their business. We saw there were a lot of assets that
weren’t being valued. It’s a great brand built on integrity and trust.”


Cespedes said part of the reason investors turned its back on the firm was
the industry’s perception that B2C was all but dead. In fact, he said, when
he looked at drkoop.com’s second quarter financials, he saw that about 30
percent of its business was actually B2B driven.


He said a part of the firm’s success will have to be to leverage its
position in that space — to grow out the B2

B side.


“The truth is, we could have raised $100 million once we got involved,”
Cespedes said. “But there were some venture capital restrictions.”

He said that now that the company is stabilized, the firm will look to make
additional acquisitions. But that’s the easy part. The challenge, Cespedes
said, is in bringing back good customers and partners who left when the
going got tough.

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