PlanetRx Shuttles in 36 Million New Users

Online pharmacy PlanetRx.com announced today that it will acquire the e-commerce operations of Express Scripts, Inc.’s yourPharmacy.com. The deal will bring yourPharmacy’s 36 million users to the site.

Terms of the Deal

Under the terms of the agreement, Express Scripts agrees to promote PlanetRx.com as its exclusive Internet pharmacy for the next five years. There is also the possibility of a five-year extension of the deal.

In return, Express Scripts obtains a 19.9 percent ownership in PlanetRx.com’s post-IPO, which was announced on July 8th. Company officials declined to put a value on the transaction. In addition, PlanetRx.com will pay Express Scripts more than $11 million (US$) annually and will also provide financial support for the further development of Express Scripts’ other Internet capabilities.

“PlanetRx.com’s excellent brand awareness, technology and distribution infrastructure allow Express Scripts to accelerate our Internet pharmacy initiative,” Express Scripts president Barrett Toan said. “This relationship enables us to focus on delivering excellent pharmacy benefit services and health information to our clients and their members.”

Ample Competition

Another key benefit for PlanetRx.com is the elimination of yourPharmacy.com from the field of competitors. Express Scripts will retain ownership of the domain name yourPharmacy.com and will link the two sites together to promote sales on PlanetRx.com. Nearly two dozen other Internet merchants and mail order companies sell prescription drugs online, generating $11 million in total annual revenues last year. That figure is expected to skyrocket to $890 million by 2002.

PlanetRx.com also competes with major national brick-and-mortar chains such as CVS and Walgreen’s, both of which have recently launched online prescription sales operations. According to Web research firm Media Metrix, PlanetRx.com is ranked among the top 500 Internet sites. Drugstore.com also made the Media Metrix 500 list.

A Crowded Field

Despite these developments, the field remains wide open. Amazon-backed drugstore.com — which just signed on Bill Gates’ wife as a member of the board — and Soma.com — which was purchased recently by CVS for $30 million — have both been pushing hard since the beginning of the year.

Additionally, Arrow Pharmacy and Nutrition Centers — a chain of 71 stores located mainly in the Northeast — announced the launch of familymeds.com, an online pharmacy funded in part with a recent $25 million capital infusion from a group of private investors.

About Express Scripts

Unlike other large PBMs, Express Scripts (Nasdaq: ESRX) is not owned by a drug company, making it the largest independent company of its kind. It has facilities in seven states and Canada, and employs about 3,354 workers.

In fiscal 1998, Express Scripts pumped out earnings of $43 million on revenue of $2.8 billion.

About PlanetRx.com

Launched this year, PlanetRx.com operates a distribution center in Memphis, Tennessee and uses Federal Express for next-day home delivery of its prescriptions. Benchmark Capital and Sequoia Capital each have a 16 percent stake in PlanetRx.com.

The company, which employs about 150 workers, has no earnings but has accumulated losses of $4.1 million.

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