The Poison Pill

Every good entrepreneur knows that a successful business venture requires a mix of personalities that work well together. The eccentric but brilliant software designer can be teamed with an experienced manager, then money is raised, contracts are signed, sales flourish. The right combination of talent can work marketplace magic.

Then there's the alternative.
A man comes up with a fabulous idea, a way for doctors to send prescriptions to pharmacies over the Internet. He signs on a man with extensive marketing experience, and together they recruit a veteran health-care CEO who possesses a golden Rolodex filled with some of the best-known business names in Colorado. More than two dozen of them agree to invest in the new venture.

Then everything goes wrong. The new CEO decides the inventor "rubs him the wrong way" and ousts him from the firm. The inventor, in turn, claims his erstwhile partners conspired to steal his software and sends letters to the firm's investors alleging a conspiracy to defraud him. Meanwhile, the CEO frets about his former colleague's extensive gun collection and his boast that he's a man "not to be messed with." Allegations of double dealing and corporate sabotage fly. So do the lawsuits.

As the court files grow, the company is unable to raise crucial financing and eventually shuts its doors in the Denver West office park.

That's the short version of Jefferson County District Court civil case number 1685. For over a year, several of the most prominent names in corporate Colorado have been mired in a pair of nasty lawsuits involving a failed business venture that once held enough promise to win the 1996 Innovation of the Year award from the Denver Business Journal.

But today Randy Prefer, a Littleton software designer and inventor, is suing his former business partners in Pharmnetrx Inc. for $4.3 million. Those partners filed a suit against Prefer the same day, asking for an unspecified amount in punitive damages. The resulting legal mess already spills over three huge files at the Jefferson County courthouse, even though a jury trial won't take place until early next year.

Shortly after the dueling lawsuits were filed on June 11, 1997, Jefferson County District Court Judge Leland Anderson issued a restraining order preventing Prefer from talking to "any third party" about the case. Others involved in the suits also decline to discuss the specifics.

But one Denver business veteran who worked closely with Pharmnetrx says it's clear there's no love lost between the former partners and Prefer. "He's sort of like a sociopath," says the source, who asks not to be named. "He has no conscience, but he's very believable, and people will give him their money. Now everybody is cleaning up Randy's messes."

Back in 1994, Randy Prefer was looking for a new project. He hooked up with Mitch Schwartz, a fellow Littleton resident with an extensive background in marketing, and surveyed some doctors, asking them what their biggest day-to-day problems were. After the physicians told them that writing and obtaining prescriptions burned up huge amounts of time, Prefer and Schwartz decided that finding a way to automate that process could be a tremendous business opportunity. In the spring of 1995, Prefer began developing the software that would become Pharmnetrx's chief asset.

A year later his fledgling company was tapped for an innovation award. "Prescriptions are something that doctors eat and breathe, but they are ten years behind the times," Prefer told the Denver Business Journal.

While Prefer worked on Intelli-Script, his software that could propel doctors into the Nineties, Schwartz focused on the sales and marketing of the proposed product. In September 1996 they filed articles of incorporation for their new company, Pharmnetrx. Their first big break came the next month, when King Soopers signed a letter of intent with Pharmnetrx; the grocery chain would be a test site.

After that, things moved quickly. Investment banker Paul Baker joined Pharmnetrx, as did Denver businessman Barry Curtiss-Lusher, and they began talking to potential investors. At the end of 1996 the company contracted with a Kansas City firm, DRT Systems International, to work with Prefer and make his software program "industrial-strength."

In February 1997, Philip Kalin, the former CEO and president of Rose Medical Center, signed on as Pharmnetrx's CEO. Kalin, who'd been working as a consultant since Rose's sale to the Columbia health-care corporation, joined the new venture full-time.

Having Kalin on board gave the company instant credibility as a serious venture, and Pharmnetrx began collecting investment dollars from many doctors and executives connected with Rose. Soon the company had a stellar list of more than two dozen investors, including well-known figures in Colorado health care such as Richard Abrams, now chairman of Precedent Health Partners, and Jeff Dorsey, the regional director for the Columbia chain. Larry Atler, a prominent Denver attorney and former chairman of the Denver Metro Chamber of Commerce, also anted up. Within the first few months of 1997, Pharmnetrx had raised more than $358,750 to launch its product.