GoodRx: The Right Prescription?

10/16/2020 5:00 am EST

Focus: HEALTHCARE

Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

The IPOs sector is beginning to reemerge and has many stocks that fit our stock picking criteria, notes Mike Cintolo, editor of Cabot Growth Investor.

We don’t jump on super-new IPOs, but GoodRx (GDRX) is certainly a name to keep an eye on as it has many traits of prior big winners.

The company has a platform that, thanks in part to partnerships across the healthcare system (a big barrier to competition), allows it to run 150 billion pricing data points every day, thus allowing users to often find better deals in their area on prescriptions simply by having the pharmacy scan their GoodRx code on their phone.

That not only saves consumers money but cuts down on the 20% to 30% of prescriptions that are ordered by a doctor but are never picked up by the patient, usually because of cost; more compliance means better outcomes, which lowers healthcare costs overall.

GoodRx gets a cut of the initial and any subsequent refills of that prescription, often leading to a stream of recurring revenue. (Since 2016, over 80% of the firm’s transactions are repeat orders.)

It also offers subscription plans that guarantee very low costs for many prescriptions, and/or offer deals through specific pharmacies, like Kroger (KR).

It’s even gotten into the telehealth market, with a marketplace where users can get a quick, virtual consult and often have a prescription filled.

Right now, though, prescriptions are the big driver, and given the size of the market (5.8 billion 30-day equivalent prescriptions are dispensed in the U.S. each year!), GoodRx has massive potential, and it’s been taking advantage of it.

Revenues were cranking ahead in the 60%-plus range before the virus (up “only” 35% growth in Q2) and earnings have been solidly in the black for many quarters. With around $470 million in revenues during the past four quarters, we see no reason the company can’t grow many-fold from here.

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