I’ve been seeing some buzz about this company being innovative, growing fast, and under the radar. So I thought I’d look into it. I have not opened a position yet, but I probably will soon. This is still a tiny company, with just 14M share float, and average daily volume around 229K.
I have analyzed three years of their financial reports, and I will post that down below because I think there is a compelling case. But in the meantime, I’m still not sure how this company makes money.
I struggled initially to understand exactly what they do. I’m still struggling to understand how they generate revenue, what their target market is, and who pays them and how.
What is OptimizeRx?
Their web site states “OptimizeRx?is the?only point-of-care?focused platform on the market – linking life sciences, physicians, patients, and pharmacies within one platform.”
Their software platform apparently integrates directly into EHR systems to reach ambulatory healthcare providers in the US, spanning multiple therapeutic areas and specialities.
From a positioning standpoint they call it digital optimization at the point of care, where they provide access to clinically relevant data and workflow improvements.
Another bunch of words on the OptimizeRx website states:
"OptimizeRx Corporation (NASDAQ: OPRX) is a pioneering digital health company that provides healthcare communications solutions for life sciences to engage in streamlined, outcomes-focused dialogue with healthcare providers and patients.
Connecting more than half of healthcare providers in the US through a proprietary electronic health network, the OptimizeRx digital health and communications platform is a SaaS solution supporting treatment access and adherence by advancing affordability and transparency.
The platform unlocks novel patient and provider touchpoints for life sciences along the complete longitudinal patient journey, from both ambulatory and hospital point-of-care, to retail pharmacy, through patient engagement outside the care setting."
It took me a lot of digging, but after connecting dots through news articles and quarterly reports I think OptimizeRx is basically a pharmaceutical sales and marketing platform, directly embedded into EHR systems (which OPRX refers to as the point of care). This enables pharmas to offer discount coupons to the practice, provide handouts and educational materials to patients, manage the patient opt-in and disclosures forms for the providers, send reminders to patients to get their prescriptions filled or renewed, notify physicians when their patients get their meds, and link the physicians directly to pharmaceutical products for prescribing, as well as tracking their patients’ adherence to their prescribed medications.
Their website is gibberish. There is a lot of fluff, and the marketing is aimed at improved patient outcomes through digital communication between Pharmas, physicians, and patients, but there are no indicators of how the revenue cycle works.
Their website states 370+ active EHR channels, 695K Providers reached, 19.5M coupons distributed in 2019. It is March 2021 now, why do they still have 2019 stats prominently posted on their site?
I also read through the “TelaRep” page, which is one of their newest offerings that was just introduced to the market in the past month or so. The TelaRep page states:
- In Person Meetings Are Out. Strengthen Your Virtual Connection Points.
- TelaRep Keeps the Lines of Communication Open Between Manufacturers and Prescribers
- There’s no going back now. Even before COVID-19 providers had limited time to meet with pharma reps in-person. Now, in-person meetings are non-existent for the foreseeable future, and it isn’t much easier to connect virtually. Especially for brands that don’t already have airtight relationships with the HCPs most likely to prescribe their treatment.
- TelaRep, the newest addition to the OptimizeRx digital health and communications platform, changes that.
So the TelaRep platform enables a prescriber to request samples from pharmas, obtain educational information about their products, and book a virtual meeting with a pharma rep.
The differentiator, I am guessing, is since TelaRep is embedded directly into the EHR clinical workflow, it is supposedly non-disruptive, they can engage pharma reps with one click, without leaving their electronic workflow. Those interactions would be driven by the provider, rather than the pharma, so that should minimize spam from sales reps trying to push their meds. And since providers are unlikely to take an in-person sales call from a pharma in a pandemic environment, then I guess this app helps Pharmas to be more accessible.
What I am still struggling with is how do they make $$$ from this? Do they get kickbacks from the Pharmas for the prescriptions prescribed? I would think the Pharmas would be the ones paying for this service, since it gives them a channel for connecting directly with physicians, but it is not clear.
I would also assume OptimizeRx is probably paying something to EHR companies in exchange for embedding their software, and may even be sharing profit with them, which likely eats into their margins in some way. But I still haven’t connected all the dots yet.
Does anyone know? Please chime in with any knowledge you may have.
Here are the financials;
**Fiscal Year 2018-2020** **FY2020 FY2019 FY2018** TOTAL REVENUE 43.3 24.6 21.2 REVENUE CHANGE YoY 76.1% 16.0% 74.9% GROSS PROFIT 24.11 15.44 12.21 GROSS PROFIT CHANGE YoY 56.1% 26.5% 105.1% GROSS MARGIN 55.7% 62.77% 57.56% OPERATING INCOME -2.14 -3.69 0.18 GAAP NET INCOME -2.21 -3.14 0.23 Non-GAAP NET INCOME 3.18 -0.90 3.67 GAAP EPS Diluted -0.15 -0.23 0.02 Non-GAAP EPS Diluted 0.20 0.07. 0.31 **Quarterly Metrics** **Q4FY19 Q3FY19 Q2FY19 Q1FY19** TOTAL REVENUE 7.4 5.0 7.0 5.2 REVENUE CHANGE YoY 12.2% -7.6% 37.4% 26.7% GROSS PROFIT 4.47 3.02 4.32 3.63 GROSS PROFIT CHANGE YoY 9.3% -4.0% 50.9% 72.3% GROSS MARGIN 60.61% 60.40% 61.65% 69.60% OPERATING INCOME -2.32 -1.99 0.48 0.13 GAAP NET INCOME -1.99 -1.57 0.41 0.01 Non-GAAP NET INCOME -0.40 -0.94 1.29 0.98 GAAP EPS Diluted -0.14 -0.11 0.03. 0.0 Non-GAAP EPS Diluted -0.03 -0.07 0.09 0.08 **Q4FY20 Q3FY20 Q2FY20 Q1FY20** TOTAL REVENUE 16.4 10.5 8.8 7.6 REVENUE CHANGE YoY 122.6% 110.3% 25.4% 45.6% GROSS PROFIT 8.60 6.01 5.14 4.34 GROSS PROFIT CHANGE YoY 92.4% 99.0% 19.1% 19.8% GROSS MARGIN 52.4% 57.2% 58.6% 57.3% OPERATING INCOME 1.36 -0.18 -1.06 -2.26 GAAP NET INCOME 1.36 -0.28 -1.08 -2.20 Non-GAAP NET INCOME 2.65 1.11 0.25 -0.83 GAAP EPS Diluted 0.08 -0.02 -0.07 -0.15 Non-GAAP EPS Diluted 0.16 0.07 0.02 -0.06
- Q4 revenue was up 123% YoY, and up 76% for full year 2020 versus 2019, almost all from organic growth. Meanwhile operating expenses where up just 10% YoY.
- Q4 gross margin ended at 52.4%, down from 60.6% a year ago. Full year was 55.7%, down from 62.8% in 2019.
- The decline in margin was blamed on solution mix, where most of the incremental business came from lower margin solutions that were very easy to launch and fulfill in a short time period. However, the incremental business almost all falls to the bottom line.
- Non-GAAP net income for FY2020 was $3.2 million of $0.20 per share compared to $900K or $0.07 in 2019.
- In February the company raised $71 million in an equity offering, which they plan to use to expand the business (no details of what that entails).
- The company is debt-free and not planning to raise additional capital in the near future.
- Forecast Margins at 56% to 58% for FY2021
- Facilitating critical and timely communication between life science companies, physicians and patients.
- Leverages real-world data to deliver real-time information at the point of care with new AI-powered, real-world evidence solution.
- Last year restructured the organization based on MkKinsey digital factory model.
- Launched TelaRep, new virtual communication solution, enables providers to reach the pharma contact from within the EHR workflow with one click. Praised as one of the most innovative life sciences solution.
- Driving additional revenue from its existing network.
- Shifting to enterprise level engagements with recurring revenue streams.
- Client renewal rates at the end of 2020 reached al all-time high, while adding 60 new brands to the platform.
On the surface, some of the metrics are compelling; share price has advanced 137% in the past quarter, 208% in the past 6 months, and 613% in the past 12 months. YTD the shares have risen 91%, but surprisingly it still has a beta of just 0.67.
This is just my initial take for now. Hoping for some input if anyone can add to or correct anything I have here.