Hi Richard - Thank you for another nice analysis! I wonder what is your take on the growth of GDRX's MAU, which is currently at 6 million and growing at 20~30% YoY for past quarters. Please correct me if I am wrong but this appears rather slow given the low penetration rate of a purported large TAM (~5%, with 30 million uninsured and 100 million on HDHP) and some heavy spendings on S&M (consistently ~50% of revenue). Many thanks in advance!
Hi Qin, I think it's important to consider that GDRX counts a user as a MAC when they use GDRX at least once in a three-month period. And the reported MAC figure is averaged across the quarter. So there are more unique users than MACs. Almost half of the population is on at least one prescription so their penetration is much larger. I think looking at the TAM through scripts is the better way of looking at it.
As for marketing spend, payback period was under 8 months at IPO and has remained relatively stable. They are also increasing ARPU through other services such as Gold and advertising. I expect MAC growth to accelerate post-COVID as they step up marketing spend when we see a return to baseline for doctors' visits.
Hey man! Enjoyed the latest on $GDRX. I just finished listening to the last Q call. Certainly feels like mgmt doesn't wanna talk much about their tele health service. I keep seeing ZocDoc ads running on repeat on TV when I'm at the gym. Can't understand why GDRX is not running these... linear TV viewers are surely their target demo. Are they hesitant to dive in here? Or is it concerns about diversifying into a much lower margin biz and bringing their overall margins down?
Thanks, I am much more optimistic on their advertising and subscription business than telehealth. GoodRx Care unit economics are much worse than their other segments as you mentioned and is primarily used to drive traffic to their prescription offerings. It is also very hard to differentiate as I see telemedicine as a commodity. I like the potential of the telehealth marketplace given the demand they've aggregated but they're both still very small compared to the base business.
Hi Richard, appreciate the great analysis! I only have a rudimentary understanding of Goodrx and I'm also not from the U.S so forgive me if this question seems flawed or silly. If Goodrx already beats 50% of the average insurance copay(and this number is growing), would it be probable that some consumers drop their health insurance all together and just use Goodrx in the near future? As you are unable to use both Goodrx and insurance on a prescription, there would be no point for consumers to pay for healthcare insurance if Goodrx offers a cheaper alternative. If this were to happen, wouldn't there be more uninsured patients? And wouldn't this strengthen the partnership between Goodrx and the PBMs? I used to worried about some government policy in the future reducing the uninsured population to 0% because if that were to happen the PBMs would lose incentive to work with Goodrx. But if my logic is sound, wouldn't there always be an population of uninsured people as goodrx is cheaper than the copay insurance? Would love to hear your thoughts. Thanks!
It's a good question and I think such a scenario happening would exacerbate the existing tension between PBMs and GDRX that I mentioned in the article, since PBMs mostly benefit when a patient uses GDRX that is not insured or cannot otherwise afford the script. I think it's unlikely that GDRX replaces insurance altogether. I think it's more likely for GoodRx to partner with companies like DoorDash and be provided as a benefit to people who are uninsured or are on high-deductible plans, which is still a sizable population. In terms of government policy, the risk is always there of some form of universal healthcare, but there are much larger players who would lobby intensely against it whereas GoodRx has figured out a solution where everyone wins.
Hi Richard - Thank you for another nice analysis! I wonder what is your take on the growth of GDRX's MAU, which is currently at 6 million and growing at 20~30% YoY for past quarters. Please correct me if I am wrong but this appears rather slow given the low penetration rate of a purported large TAM (~5%, with 30 million uninsured and 100 million on HDHP) and some heavy spendings on S&M (consistently ~50% of revenue). Many thanks in advance!
Hi Qin, I think it's important to consider that GDRX counts a user as a MAC when they use GDRX at least once in a three-month period. And the reported MAC figure is averaged across the quarter. So there are more unique users than MACs. Almost half of the population is on at least one prescription so their penetration is much larger. I think looking at the TAM through scripts is the better way of looking at it.
As for marketing spend, payback period was under 8 months at IPO and has remained relatively stable. They are also increasing ARPU through other services such as Gold and advertising. I expect MAC growth to accelerate post-COVID as they step up marketing spend when we see a return to baseline for doctors' visits.
Hey man! Enjoyed the latest on $GDRX. I just finished listening to the last Q call. Certainly feels like mgmt doesn't wanna talk much about their tele health service. I keep seeing ZocDoc ads running on repeat on TV when I'm at the gym. Can't understand why GDRX is not running these... linear TV viewers are surely their target demo. Are they hesitant to dive in here? Or is it concerns about diversifying into a much lower margin biz and bringing their overall margins down?
Thanks, I am much more optimistic on their advertising and subscription business than telehealth. GoodRx Care unit economics are much worse than their other segments as you mentioned and is primarily used to drive traffic to their prescription offerings. It is also very hard to differentiate as I see telemedicine as a commodity. I like the potential of the telehealth marketplace given the demand they've aggregated but they're both still very small compared to the base business.
Hi Richard, appreciate the great analysis! I only have a rudimentary understanding of Goodrx and I'm also not from the U.S so forgive me if this question seems flawed or silly. If Goodrx already beats 50% of the average insurance copay(and this number is growing), would it be probable that some consumers drop their health insurance all together and just use Goodrx in the near future? As you are unable to use both Goodrx and insurance on a prescription, there would be no point for consumers to pay for healthcare insurance if Goodrx offers a cheaper alternative. If this were to happen, wouldn't there be more uninsured patients? And wouldn't this strengthen the partnership between Goodrx and the PBMs? I used to worried about some government policy in the future reducing the uninsured population to 0% because if that were to happen the PBMs would lose incentive to work with Goodrx. But if my logic is sound, wouldn't there always be an population of uninsured people as goodrx is cheaper than the copay insurance? Would love to hear your thoughts. Thanks!
It's a good question and I think such a scenario happening would exacerbate the existing tension between PBMs and GDRX that I mentioned in the article, since PBMs mostly benefit when a patient uses GDRX that is not insured or cannot otherwise afford the script. I think it's unlikely that GDRX replaces insurance altogether. I think it's more likely for GoodRx to partner with companies like DoorDash and be provided as a benefit to people who are uninsured or are on high-deductible plans, which is still a sizable population. In terms of government policy, the risk is always there of some form of universal healthcare, but there are much larger players who would lobby intensely against it whereas GoodRx has figured out a solution where everyone wins.
I heard about you from Saga Investors letters, obvious you’re talent ! What precent is Redfin from Saga portfolio:) ?
Thanks! We do not publicly disclose the sizing of our positions in the Saga Portfolio. But please email me if you are interested in learning more.
Bravo man! Amazing analysis! Can you make valuation? What price is appropriate to enter? It seems expensive! IMO