Online drugstore PlanetRx.com Inc. (Nasdaq: PLRX) gained 62.5 percent in its debut Thursday. Shares rose 10 to 26 after the company priced its 6 million shares at $16 each Wednesday, above its $12 to 14 range.
Most analysts expect PlanetRx.com to make a big splash considering Drugstore.com Inc.'s (Nasdaq: DSCM) recent success, but some are skeptical about how it will fare in the aftermarket, especially since the CVS Corp. (NYSE:CVS) and Merck & Co.'s pharmacy benefits unit just said they will hook up to cross-promote their Internet sites.
Customers of Merck-Medco, the pharmacy benefit management (PBM) unit, will be able to purchase over-the-counter products on its Web site exclusively from CVS, the companies said, and CVS will become the only pharmacy to accept prescription orders from Merck-Medco's nearly 51 million members over the Internet.
As for the PlanetRx prospects, the company had a whopping loss $19.4 million on a mere $622 000 in revenue for the six months ended June 30, 1999.
"It's tiny and has less than $1 million in revenues in the first half," said Steve Tekirian, an analyst at Standard & Poor's. "But we think it will do well early because it is a hot name and Drugstore.com has done well. It is an easy sell to the public. It makes sense to sell prescription drugs over the Internet"
The company faces competition from drugstore.com, as well as traditional drug retailers such as Walgreen Co. (NYSE: WAG) and CVS.
Third party payers for drugs complicate business for online pharmacies, which have to set up relationships with insurance plans. Drugstore.com has a 10-year deal with Rite Aid Corp. and General Nutrition Cos. Inc. signed prior to its offering.
In late August, PlanetRx.com signed a deal with independent U.S. pharmacy benefit manager Express Scripts Inc. (Nasdaq: ESRX), which received a 19.9 percent stake in the online drugstore, and payments of $11 million as part of the deal.
-- Reuters contributed to this report.