Are Net Deals Better Than Viagra?

SAN FRANCISCO (01/26/2000) - Monday was a fine day if you were part of the Net health business. Despite a lousy session for the markets as a whole, some companies moving to the forefront of Web-based medicine (or, in the case of Drugstore.com, the forefront of Web-based Q-Tip and cotton-ball sales) scored impressively. Amazon.com increased its investment in Drugstore.com, throwing in another $30 million to gain 28 percent of the online pharmacy, although the money will flow both ways: Drugstore.com will pay $105 million to Amazon during the next three years to get better placement on the e-commerce giant's site.

Perhaps Jeff Bezos wants to be balanced and have cash in both his front pockets.

Most outlets were content to report the Amazon-Drugstore pact without any actual quotes; they paid closer attention to the $2.5 billion purchase of Envoy by Healtheon-WebMD. The deal to acquire Envoy, the leading electronic health-insurance claims processor, will cost Healtheon-WebMD $400 million in cash and $2.1 billion in stock. Carolyn Koo at the New York Times noted that Quintiles Transnational, which is selling Envoy, paid a mere $1.3 billion in stock for the unit just last year. But again, the money moves both ways.

Quintiles will pay Healtheon-WebMD $100 million to develop its Web-based medical-related services, so reporters and analysts couldn't agree on how much profit Quintiles had actually made.

Investors smiled on all these stocks, but at the end of the day no one had a wider grin than the folks at the health care e-commerce provider Neoforma, which saw its IPO price shoot up 288 percent (a rise that several outlets referred to as "quadrupling"). Old-economy health businesses were less fortunate. Procter & Gamble gave up on its attempt to merge with drug companies Warner-Lambert and American Home Products after investors voted on the proposed deal by awarding P&G its worst stock-price decline since the market crash of 1987. Perhaps there's a dot-com out there that would like to buy P&G? Steve Case used to work there, after all.

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