Shares of drkoop.com Inc. (Nasdaq: KOOP) soared as high as 50 percent Tuesday after the company inked a distribution and marketing pact with America Online Inc. (NYSE: AOL).
Investors flocked to drkoop following the news, raising shares over 50 percent. Shares were trading up 9 11/16 to 33 5/16, or 40 percent, Tuesday morning. AOL shares were also rising, up 7 7/8 to 123 1/8.
In addition, Bear Stearns, an underwriter for the drkoop IPO, started coverage of the company with a "buy" rating.
Under the AOL agreement, drkoop.com, an online public health care directory, will pay AOL $89 million over the next four years, to make its services available over AOL's sites.
AOL said the pact, expected to roll out across the five AOL brands this fall, will bring drkoop.com's specially programmed health information, services and other resources to AOL and CompuServe's combined membership of 19 million members.
The deal likely will greatly expand traffic for Drkoop.com - a site promoted using the name of former U.S. Surgeon General C. Everett Koop. The site attracted 1.4 million unique visitors in May, according to Media Metrix.
As part of the alliance, AOL will receive fully vested and performance-based warrants to purchase shares in the recently public drkoop.
The partnership will use AOL's sales force of over 600 to build advertising and e-commerce opportunities across all drkoop.com sites and those of its affiliates as well as supporting new product and service launches.
In the deal with AOL, Drkoop.com also agreed to buy computing software from the alliance of AOL's Netscape unit with Sun Microsystems, illustrating a tactic that AOL may use increasingly to use its existing audience to help boost sales of its software offerings.
Interactive Week contributed to this report.