Credit Suisse https://www.credit-suisse.com in a conversation with GoodRx (GDRX) https://www.goodrx.com management discussed GDRX’s announcement on their acquisition of vitaCare https://www.vitacarerx.com Prescription Services from TherapeuticsMD (TXMD) https://www.therapeuticmd.com for $150 min in cash, with an additional $7 min consideration contingent upon vitaCare’s financial performance through 2023.
The acquisition is expected to strengthen GDRX’s Pharma Manufacturer Solutions by increasing access and adherence for patients. Management notes that vitaCare’s services are highly complementary to their Pharma Manufacturer Solutions business, where GDRX’s strong manufacturer relationships, HCP awareness, and consumer traffic will drive more growth & adoption of vitaCare’s platform to deliver more ROI to Manufacturer Solutions, including 1) Adding manufacturers, 2) Adding incremental brands at manufacturers, and 3) Adding solutions overtime. The transaction is expected to close mid-2022.
vitaCare’s existing leadership will continue to operate under GDRX’s Pharma Manufacturer Solutions Business. TXMD will also enter into a long-term service agreement with vitaCare to continue to utilize the vitaCare platform.
GDRX expects the transaction to add under 1% to their current 2022 revenue outlook but be dilutive to their gross and EBITDA margin. Specifically, the company expects an unfavorable impact of ~200bps on their adjusted EBITDA margin in 2022. This implies revenue accretion of ~$8-9 min but an EBITDA drag of <$10 min in 2H22 (or an annualized revenue run-rate of $16-$17 min and adjusted EBITDA of negative sub-$20 min). However, the actual EBITDA impact is likely dependent on when the deal closes.
GDRX expects vitaCare’s revenue and profitability to improve in future years and does not expect any material impact on their long-term guidance at this point. Notably, GDRX commented that vitaCare’s revenue contribution would have been higher than the annualized run-rate had GDRX owned vitaCare for the full year, given GDRX’s incremental ability to sell the offering relative to the way it has been sold in the past.
vitaCare is a technology and services platform that supports patients in navigating key access and adherence barriers for brand medications. Specifically, vitaCare helps patients understand coverage and able to identify savings opportunities through their Pharmacy Tech, as well as facilitates communications between providers & payers. This compares with a traditional prescription fill experience where a doctor writes the script directly to the pharmacy, resulting in the patient often having no idea of the medicine’s cost or availability.
The platform also offers a seamless path for prescription fills primarily through a contracted network of mail order and retail third party pharmacies. As of late, the company has three live third party pharma manufacturer customers and pipeline of 30+ potential customers. Based on earlier company investor presentations, TherapeuticsMD had considered divesting vitaCare since November 2020.
GDRX. Manufacturers note that <5-10% of eligible patients historically interact with their active medication access programs, while providers rarely have time to help patients navigate. However, through the acquisition, manufacturers can now outsource the access and adherence work to vitaCare, which 1) reduces the burden on patients and providers, and 2) increases usage of manufacturer’s active programs.
In this process, vitaCare receives revenue solely from pharma manufacturers for encouraging patients of providers to interact with medication access programs from manufacturers, while patients and providers do not pay anything to use vitaCare. Meanwhile, vitaCare’s cost of revenue is mostly associated with their supporting labor that help manufacturers get patients on medications.
In the additional takeaways from the conversation with management, GDRX noted that there are opportunities for vitaCare to benefit from GDRX’s strengths. For example, GDRX already has a significant salesforce and relationships with 19 of the top 20 manufacturers and is able to push a large amount of revenue through the vitaCare platform. While vitaCare has historically focused on women’s health and associated medications, GDRX believes vitaCare’s core competencies in reducing provider burden and helping patients to gain access to manufacturer programs are specialty agnostic.
To ask questions, provide feedback, or news, email Jailendra Singh at jailendra.singh@credit-suisse.com or call 212-325-8121.