DRKOOP.COM: Financial Woes Land Internet Site in ‘Intensive Care’
Financial woes have put the consumer health Web site drkoop.com in "intensive care," the Wall Street Journal reports. The Internet company that went public just 10 months ago -- at one point hitting a share price of $45 -- is running out of cash. PricewaterhouseCoopers last week issued its first annual report for the company, questioning "whether it can survive as a 'going concern' because of continued losses, which totaled $82.5 million for 1999" (Carrns, 4/6). The audit, filed Thursday with the SEC, revealed that drkoop.com "has sustained losses and negative cash flows from operations since its inception," raising "substantial doubt" about its ability to remain in business ( Bloomberg News/Los Angeles Times, 3/31). As of yesterday at 4 p.m., shares were trading at $2.6875 on Nasdaq, and the company recently reported a fourth quarter loss of $19.9 million on revenue of $5.1 million. "[S]kittish" investors, who more than a year ago ignored warnings about the company's viability, have "stampeded for the doors." The for-profit venture also has encountered other problems from its inception, including criticism of former Surgeon General C. Everett Koop's contract that would have given him a percentage of revenues derived from the site's referral of patients to clinical drug trials. After medical ethicists complained, the contract was altered, but some believe the controversy hurt Koop's reputation -- a suggestion he dismisses. "I don't cross lines and I can't be bought," he said adding that he "remains confident that the company has a future." He noted, "The public doesn't understand the kinds of things auditors write in letters. When you get a 'going concern' letter, the average investor says that's a terrible thing. It doesn't mean that at all. The Internet is a brand new thing, and we don't know the rules yet." Despite the troubles, company officials point out that drkoop.com remains one of the Internet's most popular consumer health Web site, with 2.8 million visitors in February, and say they continue to sign deals with long term sponsors. According to officials, they are looking into "a host of strategic financial options that [they] will announce as soon as is appropriate" (Wall Street Journal, 4/6).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.