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Drkoop.com Sold for $186,000 to Vitacost.com

Internet: The Florida-based online vitamin retailer gets the name and a list of nearly 1 million subscribers.

July 16, 2002|DAVID COLKER | TIMES STAFF WRITER

Attention shoppers looking for dot-com bargains: It's now possible to snap up an entire up-and-running e-commerce site, complete with nearly 1 million registered subscribers and a celebrity name, for less than a house in Palmdale.

Drkoop.com Inc., once a stock market darling worth more than $1 billion, has been sold in Bankruptcy Court for $186,000 to a Florida e-commerce company, Vitacost.com. Drkoop.com, which filed for bankruptcy protection in December, racked up more than $5.5 million in debt, according to the company's court-appointed trustee.

Vitacost--which has 30 employees and specializes in online sales of vitamins, herbal supplements and homeopathic remedies--got the Drkoop.com domain name, subscriber list and some computer equipment as part of the deal.

"Three years ago, Drkoop.com would not have given us the time of day," Vitacost President Dr. Allen Josephs said Monday. "Now we own them."

Vitacost also paid former Surgeon General C. Everett Koop, who founded the site in 1998, $10,000 to secure the use of his name. "We made that agreement with him in case there was any lawsuit in the future for trademark infringement," Josephs said.

Shortly after going public in 1999, Drkoop.com's stock hit $45 a share. Koop's stock holdings in the company were at one point worth about $56 million. In 2000, he sold at least $850,000 worth of stock.

But the company tanked that year, resulting in layoffs, frantic scrambles for capital and the resignation of top executives. Its business plan was a prescription for disaster. The site depended on advertising revenue and was committed to paying other Web sites for exposure.

Shortly before the bankruptcy filing, Drkoop.com stock was worth less than a penny a share.

But the Koop name is still magic.

"There are still a million people who come to the Drkoop.com site every month," Josephs said. The site was kept alive, said trustee lawyer Doug Kappler, to make it a more attractive property for sale.

"The total number of people now working on the site is one, just to maintain it," Kappler said. "And he will lose his job."

Josephs said the site would keep the 4,500 informational articles it had when the content was frozen at the time of the bankruptcy filing. But he is more interested in the subscriber list.

"It has 900,000 valid e-mail addresses of people who signed up on the site," he said. "We think a lot of those people will buy vitamins, and it takes our weekly newsletter distribution--now at 650,000--to more than 1.5 million. For $186,000, that's a bargain."

Koop's lawyers objected to the sale in Bankruptcy Court, arguing that the site's original licensing agreement allowed him control over which products were sold.

"Specifically, we objected to the fact that Vitacost was selling things like ma huang that have been shown to be dangerous," said attorney Lorraine Loder, who represented Koop's interests in the proceedings.

Eleven formulations of ma huang, an herb advertised as a treatment for respiratory ailments such as asthma, are sold on Vitacost. Ma huang, a natural source of the stimulant ephedrine, is especially popular among student athletes and has been blamed for causing serious health problems, including heart attacks and strokes.

The judge overruled Koop's objections, allowing the sale. But Vitacost's separate agreement with Koop includes a promise that the site will clearly state he is no longer associated with it.

Vitacost also agreed not to sell tobacco products on the site, which Koop railed against when he was surgeon general from 1982 to 1989.

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