As a start-up dedicated to reducing prescription medication costs for consumers, GoodRx is uniquely well-suited for the bizarre American healthcare market. With more than 17 million unique monthly users, GoodRx has helped its users save more than $5 billion in prescription costs in 2019 alone thanks to its pharmacy-coupon aggregation service and its pharmacy-price comparison tool.
Given the often exorbitant drug prices at the pharmacy, it's not shocking that people are eager to pay less for their prescriptions. But how does GoodRx make any money when it seems to be in the business of handing out coupons for other companies' products? Will it go public or be acquired? And what else should healthcare investors know about the company's place in the healthcare sector's competitive landscape?
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What's good about GoodRx?
More than 325,000 healthcare providers in the U.S. refer their patients to GoodRx to help cut down on prescription costs. GoodRx can help consumers compare prices for veterinary medications just as easily as it can for human medications, and all major U.S. pharmacies accept its coupons, including Walgreens Boots Alliance (WBA -0.23%), CVS Health (CVS 1.15%), and Walmart (WMT -0.65%). This means a large population is eligible to benefit from using the service. The prospect of these benefits in the form of cost savings is how the company attracts users to visit its website and install its mobile application for couponing.
Once users are hooked on GoodRx's services, the company then makes money from advertisements and referrals. However, the majority of the company's revenues likely stem from fees that it collects from pharmacy-benefits managers that work on behalf of insurance companies to negotiate drug-purchasing prices with pharmaceutical manufacturers.
GoodRx also offers a subscription-based discount card called GoodRx Gold, which claims to offer even deeper discounts than its free service, but the card isn't accepted at all pharmacies.
GoodRx sets its healthcare ambitions into motion
Because GoodRx is private, its financials are not transparent. With an estimated $100 million in gross earnings, GoodRx was valued at around $2.8 billion as of 2018, making it by far the largest company of its kind. GoodRx claims that its revenues have grown around 50% year over year since inception, though its profitability is unclear, as are the sources of revenue growth. Nonetheless, the company is taking action to position itself for further expansion by launching new consumer-facing paid subscription services.
In 2019, GoodRx acquired HeyDoctor, a telemedicine company. Subsequently, GoodRx launched its GoodRx Care telehealth service, which allows consumers to pay $20 for a same-day telemedicine appointment even if they don't have insurance. At present, the GoodRx Care service is limited in scope, as it can only field telehealth visits around 18 common health conditions. But the company will likely expand the service given the continued surge in telemedicine.
This means that in several years, GoodRx may start to capture telemedicine market share from public companies like Teladoc (TDOC 0.30%). Don't be surprised if GoodRx decides to expand into another market where it can put its digital healthcare acumen to use, like healthcare-appointment booking similar to services offered by Zocdoc or pharmacy-consultation informatics.
What's next for GoodRx?
Despite the promising signs with its revenue growth and new services, the GoodRx founders may be looking for an exit, as in 2018 they were reportedly in talks with several larger healthcare companies including McKesson (MCK -1.35%) to be purchased for around $3 billion.
If it isn't ultimately acquired, GoodRx could very well issue an initial public offering (IPO) to raise funds for further growth and join the ranks of public companies. Until then, GoodRx continues to expand, with intense hiring activity increasing the company's headcount by 22% since March to reach 350 employees in total. Look for the company to announce whether it's aiming for an IPO or whether it's still trying to be acquired through the end of this year. But don't be surprised if it keeps growing in the meantime, and since you can't buy its stock yet, consider using its services to save at the pharmacy.
