OptimizeRx Corporation (OPRX) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for joining this session of the BofA Securities Virtual Health Care Conference. I'm Michael Cherny, the health care tech and distribution analyst here at BofA. And it's my pleasure to have with us OptimizeRx on the phone with me today, unfortunately, not sitting on the stage in Las Vegas to do this fireside chat and presentation live, but we have Will Febbo, the Chief Executive Officer of OptimizeRx. I think Will is going to go through a presentation, and then at the end, we'll probably address a few questions. So with that, I will turn the stage over.

Thanks, Mike. And as Mike said, my name is Will Febbo. I'm the CEO and Director of OptimizeRx. I just want to remind the audience to look at our safe harbor statement. It's prepared by OptimizeRx for information purposes only. I'll leave it to the audience to read through that. More importantly, who is OptimizeRx? We are a digital health company. We're the nation's largest point-of-care communication platform, principally for life sciences companies, in other words, the pharma manufacturers. We have multiple provider, and when we say provider, we mean physician; and patient communication solutions all done digitally. We basically have a wonderful total available market and, both organically and through acquisition, have been adding solutions which in essence help industry communicate with providers and patients at point of care when the doctor and the patient are together making critical decisions. And we're really focused on connecting the care pathways and strictly using technology. I want to make it clear, we're not a service business, we're a technology business, and we're trying to enable the best options and opportunities for good outcomes for patients. We have about a $27 million trailing 12 months revenue, about a $30 million run rate based on Q1, which we announced last week, about $135 million market cap. We're 70 people, early-stage, early innings company. We reached 300,000-plus physicians, which is about 60% of the population we are focused on. We have about 60 clients, all of which are household names. And then we technically integrate with over 370 electronic health record or e-prescribing platforms, of which there are about 550. If you think about who our customers are, which are principally the pharma manufacturers. We really help them reach patients and providers digitally. Why is that important? Well, they drive all their revenue, and they are very hard to get to for pharma. We reach about 50 of -- we are -- 80% of our revenue is the top 50 brands in pharma, so we're really well situated there. And we have about an 86% renewal rate with our customers, which just shows we have a lot of trust and stickiness with our clients. What -- a couple of things happened to really get this business off the ground. First thing was the founders, who were both sales reps for pharma, saw the writing on the wall and saw how hard it was to actually effectively talk to a doctor for their employer. And so they said, let's try to get some relationships. Let's digitize content. Let's get it into the workflow. In 2009, the HITECH Act was passed, and that really forced providers and all health care professionals to start using computer systems, hence is born the electronic health record, of which is over 550 of them, I have mentioned. They saw a moment to connect into where the doctor will prescribe, and in this case, they were trying to enable some financial assistance on co-pays. That's how the company started. It was a brilliant vision, and it was borne out of that HITECH Act. Then obviously, we all started using smartphones. Adoption went from 20% in 2004 to over 87% to 90% today of doctors using EHRs. And so they were -- they had a great vision. And I came in, in 2016, when we were about 10 people and we'd just enabled financial messaging. And today, we focus on both providers and patients. For the providers, we're really enabling therapeutic knowledge, if you think about all the new medications coming to market. If they're too busy to meet with reps, too busy to travel or now disrupted from travel, how are you going to get all that new information? And it's really critical that they do. And then on patients, there's a lot that needs to be done. We all know adherence is a problem, and we all know affordability is a problem. We squarely focus our solutions on care management, affordability and adherence. We are honored this year to actually be recognized by the Financial Times as one of America's 500 fastest-growing companies, really proud of that, proud of the team. If you think about why we're valuable to all the stakeholders. And when I say stakeholders, I mean physicians, patients and industry, which is pharma, payers and any kind of delivery of care. Well, reaching providers and patients keeps getting more difficult for industry, right? You've got these hundreds of EHRs where doctors are. You have less time for sales reps to get in and, certainly in these times, no time to get in and then you have a spike in FDA approval and more complex specialty medications. On the other side, digital communication pathways continue to grow, but it's really all over the place. 90% of the physicians are using EHRs. They're spending almost 6 hours a day on the computer, which they are not happy about, but they really have to do it to stay up with regulations. And obviously, the consumers, 94% of them have a mobile device. OptimizeRx sits squarely between those 2 issues for industry. And we focus on helping patients afford the medication, adhere to their medication; and then keeping awareness at the therapeutic level for physicians. If you think about who our clients are, we really have 3 segments. We have pharmaceutical manufacturers. And if you look at Slide 6, you will see many of them. This is just a sampling. We also have med tech, and we have payer and providers. OptimizeRx is really providing -- is optimizing provider communication and patient engagement. We -- as I said, we reach about 60% of the prescribing HCPs, health care providers, in the United States. And through that network, we reach about 66% of commercially covered lives. The spectacular -- think of us as the easy button really for industry, right? So you want to reach cardiologists. They use multiple different EHRs. It would be very hard for pharma to have direct relationships with all those EHRs. The EHRs rely on us to sell to industry and make it easy. So we basically make it easy for the EHRs to generate some sponsored revenue, and we make it easy for industry to reach the practitioners they are trying to reach when they're with the patient. And if you think about what we do in terms of what kind of information we're distributing, you really have to think about a patient journey, right? So a patient becomes aware of a symptom, they go in and see a doctor and they get a diagnosis, then there's a treatment selection and then there's sort of fulfillment prescribing and then there's this idea of just staying on the medication. Well, through OptimizeRx, our clients can deliver messages at different touch points along that patient journey so that we can make sure the physicians are aware of the latest clinical information. And then we can stay with the patient so they stay on the medication. So we deliver things like therapeutic support messaging, some brand messaging. When I said financial message early, that's really a digital co-pay. In other words, when the patient goes to the pharmacy to pick up their prescription, that co-pay could be covered. There is over $8 billion in the industry set aside to cover co-pay because they have gone up over 200% in the last few years, and it's a big problem to adherence. We enable that distribution. And then there's the idea of the physician wanting to actually reach a medical liaison. We can enable that right in the workflow of the EHR. And then as they're prescribing, and this is the part that really got me excited about the business 4 years ago, is the physician, after they have selected their medication, will see if there is some financial assistance available. That does 2 things. One, it allows the physician to pick what they want, not necessarily what the system pushes, and it also allows that patient to afford it so that they could take it long enough to feel the effects of the medication. So these are digital health tools that provide simple enrollment into the financial and other hub support programs that really make them stay healthy. And then that's not enough because then the patient leaves, and they're largely on their own or with a caregiver. So over the last few years, we have acquired some technology and teams which allow us to now stay with that patient and do patient engagement and care management. In these buckets, we have both an SMS platform and we have an app. And part of that app, we actually do deliver virtual care, which is today's buzzword of telehealth, and we have several active clients in that area. Why is it important? Well, we basically want to be able to go to our clients and say, "From the launch of your product through to the life of exclusivity, we can help you communicate with health care providers and patients so they understand your medication, they prescribe your medication and then the patient stays on your medication." It's a very compelling value prop. As a matter of fact, we see a 50% to 60% increase in scripts when our clients use this service. And then relative to direct messaging within workload, we can see almost a 5:1 return on their marketing investment. So how do we do all this? Well, we've got an unbelievably powerful technology stack, which is hosted on Amazon cloud. We basically take content and offers, we digitize those for providers or patients. We then go through our cloud-enabled platform for authorization, translation and mapping, and then we push that out to the channels, and there is a 2-way flow of information that is subsecond interactive communications. It's obviously all SaaS technology, it's secure and compliant and the performance has to meet the standards of the largest pharmaceutical companies in the world as well as of physicians who don't have time to wait for something to show up. And I want to be clear, this isn't about pop-ups and windows. This is highly precise delivery of information that's helpful to the provider when they are with a patient and helpful to the patient when they leave the office. So in terms of -- I'm on slide now -- 9 now. We've got a great team, right? This is just the executive team. And behind us, there's even a better team. So we've got growth leaders and growth drivers. The only way that you can attract really good people is if they see those growth drivers. I have been here for about 4 years; Doug, our CFO, about 5.5, almost 6; Miriam about 3; and Steve joined just over a year ago. We -- what's really driving our growth of late and especially the 46% growth in Q1 of 2020 over last year is everyone is using wearables and the Internet of Things. We're just getting more and more comfortable sharing information and actually self-reporting information. We have seen it with our parents, we see it with ourselves and we see it with our kids. It's sort of finally the voice of the consumer has finally arrived, and the content has as well. Then you have sort of this legislative and industry changes where the government wants everything tracked, they want it digitized. They want more transparency. And then industry obviously needs to work on affordability and adherence to keep people out of hospitals, which is where the biggest expenses are. And on the focus of global adherence, just trying to get people to stay on the medication that a physician has prescribed is a very big problem that we're focused on. Reaching providers, right? Those -- that's incredibly hard. We've come up with an incredibly efficient system where we, today, reach about 60% of the market we want, and we've got a great pipeline of those remaining. But what our clients want is quick, accurate digital information delivered to the physician on content that's relevant to that physician when they're with that patient, not just general information. And so this is highly precise. And then obviously, we think that what we've seen in the last few months and really over the last few years but it's been accelerated with telehealth adoption is just digital health in general. It's becoming a mainstay of the budgets within pharmaceutical companies. In that vein, opportunity sizing and growth strategy, we're -- we have a $30 million run rate. So we are small, and it is early. There's $34 billion out there to go attack, so we've got plenty of room to grow. We can dissect that in a separate discussion but just needless to say it's a big market and the digital component of all this is growing faster than anything. How are we going to do it, though? So we've largely moved from tactically selling to brands on solutions to enterprise selling, where we include all our solutions for a given brand and make it an annual contract, a subscription to the network. We -- and I'll talk about that in a little bit. We're obviously trying to increase the share of the wallet, so land and expand. We're in the top 20 pharma. That alone can scale us to a very large business, but we then have 40 other clients behind them. We can still get additional reach to physicians. We've got a tremendous pipeline there and expect to continue to grow that, but we generally get a 20% to 30% lift each year as we get integrated to more and more partners. We're also going beyond just the ambulatory setting into hospital systems and health systems, which are even harder for industry to communicate into, and there are some exciting opportunities there. And then obviously, that land and expand, we can get more brands from pharma. And we actually have been fairly acquisitive in buying 2 technology companies over the last 2 years and integrating them into our commercial team. So if you want to think about how we scale our revenue, Slide 11 is very helpful, I think. In 2018, we didn't have any enterprise or SaaS clients. We had a lot of clients who bought individual solutions, maybe the financial message, maybe the therapeutic message, maybe a patient engagement solution. Starting last year, we basically said let's put these all together and offer really a value-over-volume value proposition. We have gone from 0 in '18 to 1 brand, to 4 brands in 2020. The annual contract value in 2020, which we spoke to recently in our earnings call, was $3.6 million. Very proud of that. But if you look at the chart to the right: Client A is a tactical build, right? It takes about 4 years to get them up to a significant amount. Client B, you still need to prove it to pharma. They're not just going to jump in, but you can very quickly scale the revenue. And client C -- so client B is all about one brand using multiple solutions. Client C is going to all their brands, let's say, in oncology, and [ having ] them access our oncologists and various solutions. So our plan is to stay on this, really convert to this so we have more recurring revenue, better visibility and smoother revenue quarter-over-quarter. We have 4 brands. And there are about 200 to 300 potential brands to go after, just to give you a sense of the sheer opportunity. So just a quick view of our financial momentum. Q1, we're up 46% to $7.6 million year-over-year. Our gross profit was up 20% to $4.3 million and cash or (sic) [ and ] cash equivalents was $15.2 million. We always burn a little bit more in Q1, as you will see in the financials, but operationally, it was only about an $800,000 burn. And we really feel we've given a very positive outlook for the future. We don't give guidance. We do have 4 analysts covering us and very happy to talk to anyone about what we are seeing based on the COVID and just our general pipeline. So just some key takeaways, I think, highly scalable platform, right? We're in the early innings, lots of capacity within the existing network, and we still have a lot to scale in terms of reaching physicians. The current commercial team has the ability to get to a $100 million run rate. And so we -- in these times, we're not stuck. We are actually accelerating and, we believe, are a more valuable resource now that our clients are being disrupted on the conference side and on the medical liaison side and ad board side. We're a proven health care technology platform. I mean we cut our teeth with the largest companies in the space and have been able to put together a tech team, which is spectacular. Our CTO was at Emdeon, which is now Change Healthcare, and really understands how to build that data stack so that we can scale that efficiently. But from an investor's perspective, that investment is done, and now it's time to leverage. The expanding market opportunity is -- everyone understands that today just given if you're looking at HIT and what's happened with the many companies in that space. Well, we're in that. The difference is we're an early-stage public company. So you've got the opportunity for venture return because we didn't wait to go public. We went public very early through reverse merger, OTC, and then uplisted in '18. And then lastly, I think we really have a sustainable competitive advantage and a moat around what we have because getting integrated into the EHRs today would -- it takes a long time. They've got a lot of priorities ahead of other people. We are in the majority of them and very quickly going to be in others. So we become that company that's between industry and point of care, and we're very proud of that. We think that it will become more and more valuable as companies that we are delivering content either by hand or by mail or by e-mail see how that's really challenged in today's world, and they will want that digital connectivity at point of care, then we stand ready to work for them. So with that, I want to wrap up. That's a quick overview of OptimizeRx. And Mike, I just want to hand it over to you with some questions.

All right. Great. Thanks, Will. Thank you for the overview.

So I would love to get a little bit more sense on how you see the competitive dynamics in the market. You spend a lot of time talking about your interface and [indiscernible] EHRs. I've heard various different electronic health record companies essentially try and build out or target more businesses around some of this pharma connectivity. How do you plan on a competitive dynamic versus some of your channel partners in terms of EHRs that might be trying to do something that looks very similar? And where do you differentiate?

Yes. So that was my initial concern when I came in. I mean our partners are bigger than us and our clients are bigger than us, so why do we even need to be here? The reality is the EHRs work for doctors or hospitals, right? That's their client. And they need to be completely focused on that, and turning around and selling to pharma and the doctor is problematic on lots of levels. They're just completely different businesses. For the most part, the EHRs have outsourced that. They do sell some data, and there are a few that have decided to call directly on pharma, but we see that as a trend sort of going down, not going up. And we are more and more being brought in to be their sales team to industry. A good example of that is NewCrop, which basically recently went to us exclusively. Allscripts did prior. We're still in that relationship. That's been about 4 years. We don't need exclusivity. It helps, and I think it's a good testament that we had one fairly big recently. But the differentiation is pharma can come to us for many, but they would have to go to many to get to the physicians they want, right? So cardiologists are spread out all over. They're not all in one EHR, and that's just too complex. And pharma doesn't want to do that. And the EHRs, frankly, are not set up to service pharma. They are set up to service care, and it's better that they stay focused on that. So I'd say that's the biggest -- that's sort of the safety against someone in our space getting into the space. I do think EHRs will do a lot with pharma around clinical trials, around data. Those are very safe places where they can really help speed up clinical development, in my opinion. Relative to selling to pharma, obviously, a lot of people sell to pharma, and there are buckets of revenue. And we compete in the sort of marketing HCP and consumer buckets. So if you're putting us up next to impersonal marketing, which would be like Internet brand and others, we don't really compete with them. So what we're doing is going very specific. We're delivering very specific information triggered by ICD-10 codes at point of care when care is being delivered, versus search technology, impersonal on the web. And so we view ourselves as highly specific. We do have other people who can distribute at the EHR level. But what we've done is we've tried to move towards enterprise to get away from the race on price, and I think we have done a really successful job of that. So we can -- we do a 2:1 guarantee of return for our clients. No one else does that. And we can do it because of the way we're integrated with our partners, and we're really -- we really are partners with the EHRs.

And you mentioned an interesting comment just now about how your partners and your customers are bigger than you. Turning to the customer side: These are large, a lot of them sophisticated, organizations. How do you -- or how did you start to go about bridging the gap of [ broaching ] into the sales cycle? And can you maybe just give us a sense for pharma companies that you're not working with right now, what the average sales cycle looks like?

Yes, sure. So recently -- so we -- so the -- I will take my hat off to the original people because they did that knife fight of getting into the first few big clients. And they did that because they can see a pain point, right? Clients won't just take meetings. They have to -- there has to be some solving some issue. And what they saw was they couldn't get information to the doctors, right? So when we go in and show the client how we reach, where and how we reach physicians and patients and how transparent that is and measurable it is, they are really blown away, right? So you have to first prove it. So you do a lot of pilot work. That was done in '15, '16, some in '17. And then it's really on you to become more than one solution because if you are one solution, you're kind of bucketed. And so what we did is we tried to find all the pain points. So clinical awareness for physicians, financial support, patient awareness, patient adherence, anything around affordability. And then we go to the client and say, "Look, we can do all these things along the channel. We can reach 62% of the doctors you're trying to reach, and we can do all that and measure it and give you a guaranteed return." So it's really that. It's the ability to make it easy. And then as you impress and you actually do third-party ROIs, you start working yourself up the food chain. And really, in the last 1.5 years, we have done a good job of getting up to sort of the P&L holder within pharma for, let's say, cardiovascular disease or oncology. And there, you just have a bigger decision. It's a -- it's definitely an enterprise-level discussion. And that's where we are, right at that tipping point where we've gone from 0 in '18 to 1, to 4. We'll probably end with around 6 of those this year, really setting up for a big year next year.

And along those lines, as you think about it for next year, clearly, all participants in your channel are being impacted by the COVID outbreak. How does that change any of the discussions about potential alliance expansions, customer expansions? And is there anything optimize (sic) [ OptimizeRx ] can do as part of your broad offering to -- I don't know if pivot is the right word or expand or broaden your services specifically to address the challenges currently being faced due to COVID?

Absolutely. So what COVID's done is it's taken 80,000 sales reps or medical liaisons and put them on the bench, right? So our clients are really struggling with how to answer doctors' questions and how to deliver content. Well, that's what we do, but one of the newest innovations we have rolled out is something called TelaRep, where right in the workflow a provider can initiate a meeting and call with a medical liaison, a rep. That is a new innovation. That was -- we had that technology. It was going to come out over time, but certainly, COVID accelerated that. Secondly, all medical conferences have been distributed -- or canceled. They're now more virtual, but there's still a lot of content that needs to get to physicians around new indications, new medications coming to market. And that's going to be a real driver for us because we can deliver that information right into the workflow. And again, we're only delivering it when it's relevant to the physician or the patient. So we are -- we feel very fortunate, obviously cautiously optimistic with it's still a lot of disruption, but our clients actually probably have more reliance on us now because we're a partner to digitally connect at point of care.

Perfect. I guess, one last question from me -- actually, I have a question in from the audience, so [ we'll do that ]. "How do you think about the 2020 outlook given the volume pressures that a lot of the ambulatory providers that you pitch to are seeing because of COVID?"

Yes. So keep in mind all the...

[indiscernible] [ conceptually ], yes.

Yes, yes. So obviously, you've seen numbers from 25% to 60% down in terms of office visits over end of February through April and into May. Keep in mind all physicians use their EHR from home, first of all. So a lot of activity is still happening, and that's where we display, right? So we have not seen a dramatic drop through this in the branded product area mostly because we're focused on those medications which are essential. They are not elective, all right? So we have seen volumes in generics fall dramatically, but in terms of our core business, we haven't seen a lot of impact. I think we'll -- we all don't know what the actual forward disruption will be. But if we assume it will be sort of until there is a vaccine in next fall time frame, then I actually think if we're surviving this dramatic of a disruption, we'll actually be in good shape going forward to be a solution for providers, for the physicians, for patients and then also for the clients. But great question. Yes, it's hard to not think it would be disruptive. But if you really think about what we're doing, which is enabling information on the screen the doctor is using to care for patients, that's going to keep getting used. And I will just end with, because telehealth is now being adopted so quickly, that tide will rise all boats because basically everyone is using technology now to deliver care to maintain their businesses and just stay connected to their patients. That helps digital health in general. And what are the 2 areas that you're going to want to really focus on? It's affordability, being able to pay for it as a patient and being able to stay on it and making sure the doctors are all aware of the new medications. So I think we're in a good place for continued growth.

Excellent. Well, I think, at this point, we are officially out of time, but Will, very much appreciate you joining us today. [ And I came to know a little bit about the ] business.

Yes, Mike, great to speak with you, and thanks again for the invite to the conference.

Absolutely. I hope everyone has a great day. Bye-bye.