When C. Everett Koop, the former U.S. Surgeon General, first met Richard M. Rosenblatt, the new CEO of struggling Drkoop.com (KOOP
), he took one look at him and asked: "Does your mother know you're out this late?" It was a joke, but the question wasn't totally off-base. Boyish and busting with energy, the 32-year-old Rosenblatt doesn't appear to be a day over 21. During this first meeting with Koop, in an Austin (Tex.) hotel lobby in September, 2000, he seemed awfully cheerful for a guy trying to turn around a company that was on track to lose $146 million that year on a paltry $11 million in sales.
In fact, Koop's question wasn't the one Rosenblatt had become accustomed to hearing. "Most people asked me if I'd lost my mind," Rosenblatt says. No wonder. At that time, Drkoop.com was a Web-content business, selling ads and licensing health articles to hospitals. But the Web ad business was slowing, and hospitals were not interested in paying for content. What's more, the company had overspent wildly on everything from an in-house masseuse to $15,000 worth of fridge goodies each month. Still, Rosenblatt's investment firm, Prime Ventures, ponied up $6 million of the $27.5 million raised to save Drkoop from bankruptcy last summer, and he agreed to be CEO.
THE NEXT MARTHA? Why does Rosenblatt think he has the elixir to save DrKoop? He believes the branding power of one of the most recognizable names in health care can sell products. "Dr. Koop is one of our most trusted medical figures," Rosenblatt says. "I think I can turn him into something similar to Martha Stewart or Walt Disney--but for health."
His turnaround plan is as bold as it is unorthodox. While thousands of bricks-and-mortar companies are moving online, Rosenblatt is heading in the opposite direction. After laying off most of the Web site staff and moving the company from Austin to Santa Monica, Calif., he has set out to transform the company into an offline provider of home health care and nutrition products. In August, he bought IVonyx Group Services Inc., a small provider of in-home intravenous therapy.
Late this year, he'll launch a line of nutritional supplements to be sold primarily in drugstores. The Web site will still offer health information, but its key role is to provides sales and marketing for the offline businesses. That's why he changed the company's name to DrKoop LifeCare in August.
Even with the most famous doctor in America on his side, Rosenblatt will struggle to get his company off the critical list. He faces fierce competition from larger players, including Apria Healthcare Group (AHG
) in home infusion and Pharmavite Corp. in supplements. And Rosenblatt has no money to promote DrKoop's new products. He's hoping he can whip the company into shape and persuade a health or consumer-products company to acquire it before his one-year supply of cash runs out. "They can't do this on their own," says Gartner Inc. analyst Michael Davis. "They just don't have the capital."
BORN DEALMAKER. With these odds against him, it's a good thing Rosenblatt is a quick study. As a grade-schooler in Woodland Hills, Calif., he became so skilled at cerebral board games like chess that his college professor mother and nuclear physicist father were afraid to play with him. "He had this amazing ability to see the next move," recalls his mother, Jane. A natural-born dealmaker, Rosenblatt spent hours trading baseball cards with his classmates. He carried his collection to school in a locked blue case. "The best card I got was from Hank Aaron's rookie year," he recalls, beaming.
After graduating from the University of Southern California Law School in 1994, he lasted only six months at a prominent Los Angeles law firm. "Sitting at a desk isn't for me," he says. The Web was in its infancy then, but Rosenblatt immediately recognized its potential in commerce and launched iMall Inc., which originally sold training seminars to small businesses that were going online. The strategy didn't work. So in 1997--with the stock trading at $.40 and iMall three weeks from running out of cash--Rosenblatt raised $20 million and quickly transformed the company into a supplier of Web software tools to help small businesses put up their sites. That clicked, and in 1999 he sold iMall to Excite for $565 million in stock.
Immediately after selling out, he launched Prime Ventures, a $17 million fund for ailing dot-coms, and scored some impressive wins. One example: He sold GreatDomains, a reseller of domain names, to VeriSign Inc. for $100 million--10 times Prime's original investment.
In today's hostile market, keeping DrKoop afloat may be his toughest job yet. IVonyx posted revenues of $28.5 million last year, but it barely managed to turn a profit of $1.1 million. To increase IVonyx' 1% stake of the $4 billion market, Rosenblatt hopes to bulk up its salesforce and use the Koop name to grab attention from bigger players. But analysts bet he'll come up short. "This is a business that relies on local connections," says Michael D. Turcotte, managing partner of Results LLC, a health-care consulting firm. "Will physicians refer patients to IVonyx because of Dr. Koop's name? I doubt it."
SUPPLEMENTING BUSINESS. The Koop brand has better prospects in the supplements business. The $16.8 billion industry has been rocked by safety concerns, resulting from widely publicized deaths related to ephedra and other herbs. Dr. Koop's name on the four supplements, including Dr.Koop Women's Menopause Health Formula, could carry weight on pharmacy shelves.
Yet, even there, skeptics say the Koop name won't be enough. "The name will get their foot in the door," says Brent Bailey, president of rival Pharmavite, the maker of Nature's Resource supplements. "But they need to continue to generate awareness to get repeat purchases." And the Web site won't be much help for selling the products. Its traffic, now 500,000 a month, has fallen 70% in the last year, says Jupiter Media Metrix Inc.
Koop himself is confident Rosenblatt is up for the challenge. "I know he's committed to keeping this company on the highest road, and he's on his way to making us a brick-and-mortar health-care leader," Koop says.
With cash running low and doubters all around, the good doctor's encouragement is about all Rosenblatt can count on.
By Arlene Weintraub
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Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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His turnaround plan is as bold as it is unorthodox. While thousands of bricks-and-mortar companies are moving online, Rosenblatt is heading in the opposite direction. After laying off most of the Web site staff and moving the company from Austin to Santa Monica, Calif., he has set out to transform the company into an offline provider of home health care and nutrition products. In August, he bought IVonyx Group Services Inc., a small provider of in-home intravenous therapy.
