GoodRx, the prescription drug pricing tracker app, raised over $1 billion in its IPO at the end of September. The app is widely popular for helping consumers identify cheaper prices on prescription drugs and offering telemedicine services. GoodRx’s total valuation is now around $20 billion.
The Santa Monica, California-based company sold about 35 million shares at its $33 IPO price. On its opening day on the NASDAQ stock exchange, the shares surged by more than 50%. It closed at a price of $50.50. There is a lot of buzz surrounding the future of this healthcare startup. It helps Americans save up to 70% on their prescription drug costs.
In addition to offering cost-comparison tools on prescription drugs, GoodRx also offers drug coupons for discounts on medications. The company doesn’t sell medications itself. Rather, it merely informs customers of the drugstores that offer the most affordable drug pricing for their prescriptions. Today, GoodRx is the most downloaded medical app in the United States.
The main way the company makes money is by earning commissions. It earns a commission every time a prescription order is filled using its coupons. Nearly all pharmacies in the United States accept GoodRx’s drug pricing coupons. It also has a membership subscription service. That service allows users to pay a monthly fee of $5.99 to access a more expansive list of drugs. Members also receive even steeper price discounts than available on the free version of the app. The company has had strong financial results, with its net income having increased every year since 2017. In the first half of the year, GoodRx reported approximately $257 million in revenue. The healthcare company also is profitable, distinguishing it from the flood of profit-losing tech companies that have IPOed in 2020.
HeyDoctor Now Part of GoodRx
GoodRx acquired the telemedicine platform HeyDoctor in 2019. HeyDoctor offers online visits with board-certified medical professionals, with consultations starting at only $20. Doctors and other healthcare professionals are equipped to consult and provide prescriptions and lab tests for a range of common issues. They include HIV testing, smoking problems, acne treatment, birth control, and urinary tract infections. The company rebranded as GoodRx Care following the acquisition of the virtual medical services app.
In describing the rationale behind the HeyDoctor acquisition, co-founder and co-CEO Doug Hirsch stated: “Over the years, we’ve helped millions of Americans find affordable solutions for their prescription medications, but we’ve also learned that many people struggle to get to the doctor. GoodRx Care aims to help fill in the gaps in care to improve access, adherence, and affordability of medical care for all Americans.”
Many Americans lack timely access to a primary care physician in their region. This problem will worsen in the coming years. According to recent reports, an estimated 27 million Americans are uninsured. Even more Americans are underinsured, lacking the ability to pay medical bills and facing high out-of-pocket costs. This problem is being amplified by a growing physician shortage in the United States. Studies indicate the U.S. could face a shortage of up to 139,000 physicians by 2033.
Kroger / GoodRx Partnership
Kroger, the largest supermarket chain in the U.S., has had a partnership with GoodRx since 2018. This relationship provides exclusive customer discounts on generic prescriptions used to treat widespread conditions such as diabetes, asthma and gastrointestinal issues. By signing up for Kroger’s affordable membership service called the Rx Savings Club, customers can get over 100 common generic medications for $6 or less.
The technology-focused private equity firm Silver Lake Management took a major stake in GoodRx in 2018, pushing its valuation up to $2.8 billion. GoodRx filed an S-1 registration statement with the Securities and Exchange Commission (SEC) in the fall of 2020 to initiate the IPO process. In the SEC paperwork, GoodRx reported that Silver Lake currently owned 35.3% of the company. Further, the private equity firm would buy an additional $100 million stake via a private placement set to the IPO price. Such private sales of large blocks of shares prior to listing on a public exchange are sometimes referred to as “beat-the-IPO-buzzer” private placements.
The S-1 registration statement also revealed that the company’s two founders, Doug Hirsch and Trevor Bezdek, owned around 25 million shares of the stock. This translates to approximately $500 million. Although many startups attempt to incentivize founders with stock grants, this represents a relatively high equity reward.
The company’s long-term growth prospects remain strong. It faces competition from other telehealth players such as AmWell and online pharmacy services such as Hims and Hers. One factor that could dramatically impact GoodRx’s future momentum is a shift in national healthcare policy that severely restricts drug prices. Absent a dramatic regulatory change, GoodRx has a strong business model that addresses important economic and medical needs.