Stock market indices are often differentiated by sector, two of the most common being consumer staples (or necessities) and consumer cyclicals (or leisure goods). As evidenced by the COVID-19 pandemic, prescription medications are undeniable essentials. That doesn’t mean the sector doesn’t fluctuate, but it’s something you can count on to grow with the economy. With GoodRX a prescription drug comparison tool making the move to go public, we’re here to share what you should know about the GoodRX IPO.
TL;DR
- GoodRX was founded by three former tech executives in 2011. Today, Doug Hirsch and Trevor Bezdek are Co-CEOs.
- The company’s revenue is increasing year over year, and so is their profit. In 2019, they saw a $66 million profit.
- GoodRX has only raised $1.5 million from fundraising, meaning most of their growth and expansion comes from within.
- Their latest venture is a telehealth platform. With a projected $100 million from GoodRX IPO capital, the company expects to expand this service.
- GoodRX looks good on paper, but it isn’t without controversy or competition.
- The GoodRX IPO could launch at the end of 2020 or beginning of 2021. You’ll be able to find it on the Nasdaq Global Select Market under the ticker symbol “GDRX”.
- You can learn more about IPOs here.
A brief history of GoodRX
Back in 2011, a company named GoodRX Holdings Inc. launched in Santa Monica, California. In response to the high prices of goods within America’s pharmaceutical industry, the company was an effort to bring some semblance of equity to consumers seeking a fair deal at their local pharmacy. Perhaps the most noteworthy perk of GoodRX is that it’s free for consumers to use. GoodRX also works to compare costs on veterinary-prescribed medications, too.
Co-founder Doug Hirsch is still the company’s Co-CEO today, but he didn’t start out in the prescription business. In fact, he came from Facebook, where he served as an executive on the insurance side of things. It was personal experience that got GoodRX off the ground, namely a $450 bill at the pharmacy counter that shrunk down to $250 after he shopped around for another store.
In partnership with Trevor Bezdek, GoodRX’s co-founder and current Co-CEO who came from the tech world, Hirsch managed to build GoodRX as a valuable consumer asset. Scott Marlette, one of Facebook’s original 20 employees and developer for the social media platform’s photo application, was another co-founder for the business.
Today, users can search GoodRX to compare prescription drug prices at a staggering 70,000 pharmacies across America.
So where does their profit come from? GoodRX charges transaction fees primarily from pharmacy benefit managers seeking to increase pharmaceutical sales. This helps keep their platform free for consumers, who are the ones looking to save money in the first place.
According to the company itself, GoodRX had 4.4 million monthly active users in the second quarter of 2020 (you might see other monthly user metrics that are higher, but the key word here is “active”). Within 2019 alone, they claim to have helped consumers save $5 billion in pharmaceutical costs.
In an impressive feat, GoodRX had reached $99 million in revenue after just five years in business. Three years later in 2019, that number skyrocketed to $388 million (up by 55% from the year prior, when revenue was at $250 million). For the first half of 2020, their revenue was $256.7 million, making it highly plausible they’ll beat their best by year’s end.
It’s not just revenue that GoodRX has going for them. They have profit, too. In 2018, their profit number was at $43 million. A year later, they hit $66 million.
If these numbers show anything, it’s that GoodRX is (seemingly) on the right track as far as finances go, especially for being a startup a world where profit can be tough to find.
In recent times, GoodRX has capitalized on the telehealth trend. They acquired a company called HeyDoctor (an online medical visit platform with roots in San Francisco) and even added telehealth comparison to their own platform. With the pandemic keeping people at home whenever possible, telehealth has seen a 50% increase in usage, so it seems obvious GoodRX would want to move in on this. But their acquisition of HeyDoctor actually occurred toward the end of 2019, so the move may very well have been market forethought more than crisis reaction.
GoodRX fundraising
Unlike companies like Snowflake or even Palantir, both of whom have storied fundraising histories, GoodRX fundraising has been pretty low key. In their nine years in business, they’ve received a total of $1.5 million in fundraising, with the most recent round coming from Silver Lake (a prominent investment firm with stakes in companies like Twitter and Airbnb). In 2018, Silver Lake valued GoodRX at $2.8 billion.
Prior to that valuation, Spectrum Equity and Francisco Partners invested in GoodRX in 2015. In the early days, a seed round got them a total of $1 million from Founders Fund (led by Peter Thiel of Palantir) and a number of other prime venture capitalists.
Overall, it seems that fundraising is not something that GoodRX relies on too much. That could potentially be a good sign when it comes to IPO fundraising, seeing as they’re more likely to use whatever capital they get for growth and expansion not just ongoing expenses.
Path to the GoodRX IPO
The company ultimately filed their form S-1 or registration statement with the Securities and Exchange Commission (SEC) on August 28, 2020. Based on GoodRX’s extension into the world of telehealth comparison and providing, any funding raised from their IPO will help them mature this additional offering.
What’s next for the GoodRX IPO
With the submission of their form S-1, the GoodRX IPO is on track for completion. But it’s still just the first step. Primary underwriters for the GoodRX IPO process include Morgan Stanley, Goldman Sachs, JP Morgan Chase and Barclays (in other words, a good chunk of the major players).
With all its forthcoming shares, experts expect the GoodRX IPO to be worth upwards of $100 million. Talk about raising capital.
In June 2020, just a couple of months prior to their SEC filing, GoodRX hired a new chief financial officer and healthcare president. But it looks like Hirsch and Bezdek are the biggest shareholders.
When the GoodRX IPO does go through, you’ll see the company as a Class A common stock on the Nasdaq Global Select Market as “GDRX”.
When is the GoodRX IPO date?
At the time of its arrival, GoodRX’s submission of their registration statement to the SEC was a break in an IPO drought for Los Angeles County. Many are coming from San Francisco County, which makes sense considering it’s home to the ever-ambitious Silicon Valley.
As for its launch into the market, the GoodRX IPO date could come toward the end of 2020 or beginning of 2021. The company’s executives will base their final decision on market conditions, a move that’s common with IPOs.
What investors should know
When it comes to what investors should know about the GoodRX IPO, we have three words: competition, controversy and chance.
Competition: GoodRX is a fast-growing startup with a bold approach to the pharmaceutical industry. But regardless of their steadfastness in the industry, they’re not without their competitors. Most notably, we’re dealing with companies like NowRX, Capsule Pharmacy, RxSaver (by RetailMeNot) and SingleCare, none of whom have revenues to be shy about.
Even in the consumer staples sector and the health sector the presence of competition makes the GoodRX IPO one worth looking into. It may sound tedious, but reading their registration statement in full can provide you with adequate knowledge about their current financial health. Here are a few things to look out for in any form S-1, including GoodRX’s:
- The company’s prospectus: This is basically a letter from the company executives spilling the details on how the company is currently faring. This is important because they’re not yet public and you don’t have detailed documents about their financial standing.
- Selected consolidated financial data: This section shows you the most recent yearly income statements.
- Footnotes: Believe it or not, some of the most riveting parts of the S-1 lie in the footnotes. You can skim them from page to page to see if something catches your eye.
Controversy: In February 2020 (the same month we saw record stock market declines), Consumer Reports came out with an article detailing GoodRX’s tendency to share user data with Google, Facebook and Braze among other websites. Specifically, they shared the names of drugs that consumers searched for and pharmacies they looked up. According to GoodRX, they’ve since amended their privacy statement by eliminating Facebook’s ability to see search data on medical conditions and pharmaceutical drugs.
Chance: If there’s one thing you should remember, let it be this: Historically, IPOs have a higher chance of volatility than stocks of companies who are already public, regardless of how promising the company’s finances seem. In the end, it’s all a matter of what feels right to you, the investor.
Bottom line
Just a few years back, the American pharmacy industry was worth $446 billion, nearly half of the globe’s value. But how much of that comes from overpriced drugs? This is the answer that GoodRX and its competitors seek to answer. Through the GoodRX IPO, this platform may just be able to raise $100 million in capital to fund their telehealth extension and continue keeping consumers from paying more than they have to on prescription medication. But the true market test will come with the “GDRX” ticker symbol on the Nasdaq, a moment that could easily arrive within the next few months.