GoodRx, which operates an online marketplace for prescription drugs and healthcare services, has landed on CNBC’s Disruptor 50 list. The company is ranked No. 20. And yes, in light of all the success, there is buzz that GoodRx stock will hit the markets in an initial public offering (IPO).
Doug Hirsch came up with the idea for the company. While searching on the internet, he wondered why it was so difficult to get information on prescription drugs. So he researched and realized the complexities and the fragmentation of the healthcare industry.
He also realized that his deep experience in the tech industry could be a big help. Keep in mind that Hirsch was one of the first employees at Yahoo, where he leveraged Big Data to help create apps like Mail, Personals, Photos and Groups. He would then go over to Facebook (NASDAQ:FB) in the company’s early days and become the vice president of product (he reported directly to Mark Zuckerberg). Hirsch helped develop photo tagging, among other key features.
In 2011, he set out to launch GoodRx and recruited other co-founders Trevor Bezdek (the co-CEO) and Scott Marlette. Before this, Bezdek had co-founded Tryarc, which was sold to NTT DATA, and Biowire. As for Marlette, he was an early employee at Facebook and helped to create the first version of the company’s Photos systems.
How GoodRx Works
Through a web site and mobile apps – for both Apple’s (NASDAQ:AAPL) iOS and Alphabet’s (NASDAQ:GOOGL, NASDAQ:GOOG) Android – a person can easily use GoodRx to look up information about thousands of drugs. By using coupon codes and discount cards, its possible to realize savings of up to 80%. GoodRx also provides information on the nearest pharmacies as well as alerts and reminders. The company claims that is has saved its users more than $20 billion since its inception.
The primary focus is on those people who are not insured or who have high-deductible plans. This category actually got much larger this year because of the impact of the novel coronavirus.
Note that more than 17 million people use GoodRx per month. A major part of the distribution has been through partnerships with companies like CVS Health (NYSE:CVS), Walgreens Boots Alliance (NASDAQ:WBA), Walmart (NYSE:WMT) and Target (NYSE:TGT).
What about the business model? A key part of this is to get part of the revenue pool from pharmacy benefits managers, or PBMs. These are powerful middlemen in the drug distribution system. GoodRx also makes money from advertising and a subscription service, which is $5.99 per month.
Yet the company still faces some challenges. First of all, there remains uncertainty about whether there will be a move to a single-payer system. If so, this would probably be an existential threat to GoodRx.
Then there are the problems with the pharmacies.
“A key threat facing GoodRx is pharmacies refusing to honor their coupons,” said Nishank Khanna, who is the chief marketing officer at Clarify Capital. “Consumers primarily use GoodRx to save money on their prescriptions. So if the key value prop isn’t consistently met, customer churn will be a serious issue the company will have to address. Current customer reviews for the company reflect that sentiment.”
GoodRx Stock: IPO in the Cards?
The company has been leveraging its large user base to create new offerings. In September 2019, GoodRx launched its HeyDoctor platform, which is a marketplace for telehealth services for more than 100 conditions. Then the company launched GoodRx Covid-19. This is an assessment based on CDC guidelines.
In light of all the success, when might we see an IPO for the company? It’s really speculation right now. But with the IPOs heating up lately, it would not be a surprise to see GoodRx stock hit the market soon.
Tom Taulli (@ttaulli) is an advisor and author of various books and online courses about technology, including Artificial Intelligence Basics, The Robotic Process Automation Handbook and Learn Python Super Fast. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s. As of this writing, he did not hold a position in any of the aforementioned securities.
