GoodRx Shows Us Its Profitability

For a lot of initial public offerings (IPOs), the company in question not only needs to convince investors and any potential investors that its business is worth the hype but more importantly that it’s worth their investment. One of those major selling points is that the company is actually profitable. And recently, that has been a rare quality for most companies that go public. Instead, it’s about the growth story and how it plans to achieve greatness in the future.

That’s not the case for the drug discount coupon provider GoodRx. It has been profitable since 2016 and on August 28 it filed its IPO prospectus. The company is ready to go public and has a unique IPO characteristic that most IPOs don’t possess. If you haven’t heard of the company, it helps consumers get access to prescription drugs at a discount. It’s based in Santa Monica, California, and was founded by Facebook veteran Doug Hirsch and software entrepreneur Trevor Bezdek in 2011.

Both founders knew the prescription drug industry was expensive and often took advantage of the people who depended on prescription drugs to maintain their everyday lives. I’m sure you’re aware of how expensive some prescription drugs can be. With or without health insurance, it seems a little unfair that a drug you rely on to maintain your health has to cost anything at all, but when it’s extremely overpriced, it seems even crueler. GoodRx created a set of discount cards and coupons for consumers to take to their pharmacies, which would offer them a lower price. 

In its prospectus, the company explained itself by saying:

GoodRx was founded to provide consumers with solutions to the complexity, affordability, and transparency challenges American health care presents. We believe that the benefits we provide to consumers also positively impact the broader health care ecosystem, meaning consumers, health care providers, PBMs [pharmacy benefits managers], pharmacies, pharmaceutical manufacturers, and telehealth providers all win with GoodRx. This in turn can drive beneficial and self-reinforcing network effects.

The American health care system has grown very complicated, and GoodRx has been able to make revenue while also providing a service to the entire health care ecosystem. GoodRx has become a trusted brand for consumers and provides one of the largest platforms that collects pricing for prescriptions.

The company plans to grow its businesses into new areas, including telemedicine. According to a report by Polaris Market Research, the U.S. telemedicine market was valued at $6.61 billion in 2019 and is expected to reach $17.14 billion by 2026 — that’s a forecast CAGR of 14.6% during 2019–2026. With the global coronavirus pandemic, telemedicine has helped with not overburdening hospitals and staff. COVID has also helped normalize telemedicine.

It’s only recently that telemedicine has become an option for most health insurance policies, however. Since it was new, not many people took advantage of not going into a doctor’s office to get something checked out. So this would be an excellent area to expand into for GoodRx, and that’s why the company recently acquired HeyDoctor LLC. The area is fairly new, so GoodRx has the opportunity to become a market leader in the area of telemedicine. 

GoodRx makes its money by charging fees to PBMs. It has about 17 million users that use GoodRx every month. It tracks drug prices and offers coupons and discounts by gathering information from more than 70,000 U.S. pharmacies. According to the company’s prospectus, a July 2020 survey that GoodRx commissioned from Lab42 Research LLC found that 68% of health care providers surveyed recommended GoodRx to its patients. 

The company was valued at $2.8 billion in 2018 when private equity firm Silver Lake invested in it. Other investors in GoodRx include Francisco Partners and Spectrum Equity. GoodRx’s profits are growing faster than its top line. According to GoodRx’s filing, it has earned $55 million in profits for the first half of 2020, which was up from $31 million in the first half of 2019 — a 75% increase. Its revenues for the first half of 2020 were $257 million — a growth of 48% from the first half of 2019. In its prospectus, the company says:

We believe our business model has facilitated the rapid growth and expansion of our platform. We have a track record of generating cash flows, allowing us to reinvest in platform expansion and growth. 

The company has said it’s currently profitable and has been in the past, and it’s created a business model that ensures it’ll continue to be profitable as a publicly traded company. As I mentioned earlier, the company plans to grow into the areas it’s already familiar with and to continue expanding into upcoming areas like telemedicine. 

GoodRx’s prospectus indicates that the company believes that its market opportunity is significant — stating that its total addressable market for its current solutions is around $800 billion. That includes $524 billion in prescriptions, $30 billion in pharmaceutical manufacturer solutions, and $250 billion in telehealth. 

GoodRx filed to list on the Nasdaq under ticker symbol GDRX. The lead underwriters for its IPO are Morgan Stanley, Goldman Sachs, JP Morgan, and Barclays. As of right now, the company hasn’t given an expected IPO date. The company has a strong outlook and holds a characteristic that not many IPOs have — profitability — which could easily pave the way for a successful IPO for GoodRx.

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Until next time,

Monica Savaglia

Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.