Resignations, Money Woes Signal End for Drkoop.com

Ailing Internet health site Drkoop.com released new evidence Monday that it is closing in on its final days, reporting the sudden resignations of two top executives and quarterly losses that will far exceed analysts’ estimates.

The company, named after former Surgeon General C. Everett Koop, reported that it will lose $1.15 to $1.18 a share, or about $40 million, for the quarter that ended June 30. Analysts had estimated Drkoop.com would lose about 30 cents a share.

Even more serious is the company’s continuing decline in revenue, from $4.7 million in the first quarter of the year to an estimated $2.5 million to $3 million last quarter.

“I’ve pretty much thrown in the towel on this company,” said Josh Fisher, a research analyst with WR Hambrecht & Co. in San Francisco. “They peaked at Christmas and its been downhill ever since.”

Besides its growing money woes, Drkoop.com also has begun to bleed people, losing its chief operating officer, Dennis Upah, and chief financial officer, Susan Georgen-Saad.

The Austin, Texas-based company gave no reason for the departures, but analysts took it as yet another sign that Drkoop.com is in its final tailspin.

The one bright spot in the company’s filing Monday was that it had secured a line of credit worth $3 million, which could keep the company alive for several more weeks.

But for a company that last year raised $90 million, the new line of credit was seen by some analysts as a stopgap that would do little besides delay the inevitable.

“They’re in the hospice and on their deathbed,” Fisher said. “It’s really sad. They raised $90 million and burned through it in a year.”

Fisher said the company’s best hope is to be sold, a likely prospect given Drkoop.com’s powerful brand name and respectable Web traffic.

According to PC Data Online, Drkoop.com is the fifth-ranked health site on the Web, drawing about 800,000 individual visitors a week.

“For the last three months I’ve just been waiting for the announcement that they have a buyer,” Fisher said. “The thing is, their Web site is actually pretty good.”

Elizabeth Boehm, an analyst with Forrester Research in Cambridge, Mass., said Drkoop.com has one of the best brands on the Internet. The problem it and other health portals have faced is figuring out how to turn Web traffic into money.

“There are just a lot of people struggling in this space,” she said. “Drkoop definitely has the basics right and on the consumer side, they’re doing well, but how do you monetize that traffic?”

Drkoop.com was once one of the darlings of the “dot-com” world, a start-up that had what most Internet companies are still grasping for--a real-world brand.

The 83-year-old Koop, stern but grandfatherly, was surgeon general through the 1980s and encouraged the masses to practice safe sex and to stop smoking. He became chairman of the Internet company’s board of directors and played an active role in selecting and editing information that appeared on the Web site.

Koop had an 11% share of the company when it went public last year, giving him a stake worth about $56 million.

But after the company’s initial stock offering last June, its stock began to drift downward almost immediately. Its gradual drop became a near free fall after March, when the pessimism mounted about the prospects of unprofitable dot-coms aimed at consumers.

The company’s shares, which dropped as low as $1 in May, closed Monday at $1.28, down 31 cents.

Koop still owns about 1.9 million shares of the company, which were worth $2.4 million based on Monday’s closing price, according to Bob Gabele, director of insider research for First Call/Thomson Financial.

Koop has sold shares only once, 91,000 in February, at prices ranging from $9.38 to $10.95, garnering at least $853,000.