Call Reminder | GDRX | Best Idea Long

GoodRx (GDRX) is a consumer-focused digital healthcare platform that offers information and tools to help consumers compare prices for prescription drugs. It operates applications and websites that provide prices and discounts at local and mail-order pharmacies. 

OVERVIEW

GoodRx (GDRX) is a new Hedgeye Health Care Best Idea long. We will host a live presentation later TODAY to review our outlook. Our thesis has three major legs. The total addressable market (TAM) remains large and under-penetrated in drug coupons, the threat from Amazon is overblown, and the rebound in in-person care will drive upside to month average users (MAU) and revenue for 2021 and 2022. Longer term, GDRX's tight relationship with the consumer provides a well-liked platform for added services, the HeyDoctor telemedicine acquisition likely the first of many. We see a path back to the previous highs on better than expected results and a revitalized belief in the the GDRX platform narrative, or 30% to 50% higher from here.

THESIS

Large TAM | We believe there are over 40 million people in the GDRX TAM for drug coupons based on insurance status and income. In the near term, GDRX growth will be largely tied to the .motivated prescription shopper. Amazon's expansion into pharmacy, namely their coupon and mail order business, is unlikely to take much share. The demographics of Amazon Prime and GoodRx suggest Amazon's entry is less threatening than the GDRX stock price reaction suggested. We believe the number of consumers searching for price relief will continue to rise.

COVID Comp Positive | COVID-19 had a negative impact on GDRX MAU and volume growth. In the early days of the pandemic, fear was high and access to care was severely restricted (many offices closed for weeks longer than expected due to the lockdowns). As physician offices and clinics reopened, high risk populations continued to avoid in-person care, where these physician visits often lead to one or more prescriptions and an order for a lab test. We expect the deployment of COVID-19 vaccines to high risk populations through 1Q21 will unlock significant pent up demand across healthcare services, including physician visits and resulting prescriptions.

Consumer Platform Upside | Healthcare is rapidly transforming. After decades of excess inflation, regulation, and rent seeking behavior, the importance of the consumer has risen dramatically. There are only a handful of companies in Healthcare with net promoter scores over 90. It is far more common for Healthcare companies to have poor to negative consumer ratings. The gap in pharmaceutical pricing that GoodRx is exploiting really shouldn't exist, but there doesn't appear to be a clear incentive for the incumbents to close it, leaving the door wide open for GDRX to advertise its way to millions of shoppers who continue to return to pharmacies, talk to their local pharmacists, and pick up prescriptions using GoodRx coupons.