OptimizeRx Corporation (OPRX) Earnings Call Transcript & Summary

Good morning. Thanks for joining us at the RBC Capital Markets Annual Healthcare Conference. My name is Daniel Cohen, and I'm with RBC Capital Markets. I'm honored to host OptimizeRx and the company's Chief Executive Officer, Will Febbo. I'm going to turn the conversation over to Will.

Thanks, Daniel, and thanks for the invite. My name is Will Febbo. I'm the CEO and Director of OptimizeRx, been in this position for about 4 years. Prior to starting, I just want to remind our listeners that this -- of our safe harbor statement. This is for informational purposes only. Please read at your leisure. Okay. OptimizeRx. Who are we? OptimizeRx is a digital health company. We're the nation's largest point-of-care communication platform for life sciences companies. We offer multiple physician and patient communication solutions. And we have this expanding available market where we've incorporated new solutions to connect industry when doctors and patients are together to manage care. And what's important about that is we want to make sure it's a smooth process of communication, using technology to increase treatment options, awareness and affordability. We have net revenue trailing 12 of about $27 million, a market cap of about $137 million, 70 employees. We reach about 60% of the ambulatory market or 300,000-plus physicians. We have about 60 clients, and we integrate into about 370 electronic health record companies, of which there are 500 plus. If you think about the benefits of OPRX to our 3 constituencies, we've got customers, physicians and patients that we focus on. Our customers, we help them reach patients and providers digitally. The majority of our revenue is with pharmaceutical manufacturers and 80% -- where we deal with 80% of the top 50 brands within pharma. For providers, we help keep them informed of recent therapeutic knowledge and continuing care when new treatments come to market. And for patients, we obviously want to help them afford their medications, stay on their medication, and then digitally manage that. And if you think about why these benefits came to be, in 2009, the HITECH Act was passed, which basically enabled physicians to use computers to track all our medical records. You couple that with a few years later, the amount of adoption of smartphone and use for medical purposes, it crosses 50% adoption. And then by 2015, you've got 87% of physicians using electronic health records, which is a move from 2004 of about 20%. So pretty fast increase in adoption. And then of late, obviously, we have COVID, which has accelerated all use of things digital for health given the disruption in travel. So I mentioned that we have -- 80% of our revenue is the top 50 brands. We also have an 86% renewal rate with our clients. So very, very happy with the benefits we bring to our clients. On Page 5, so how are we changing or improving health care for the good of all stakeholders? Well, think about how hard it is for clients, our clients, to reach physicians and patients. You've got physicians on hundreds of different electronic health records. You've got sales reps who really can't get into the offices even pre-COVID. With COVID, they can't at all, but pre-COVID it was very challenging. But then you have an increase in FDA approvals for specialty medications, which are complex and take a lot of education to get the physician to understand the true benefit. Then on the other side, you've got digital communication pathways that are growing exponentially, right? As I mentioned, we're now at 90% adoption of EHRs by physicians. They're spending over 6 hours a day on the computer. And then on the consumer patient side, you've got people using consumer mobile phones up to 94%. Well, OptimizeRx sits right in the middle, and we focus on affordability, adherence and care. As you can see in Slide 6, we've got an amazing group of clients. In pharma, they're all household names. This is a selection of those clients. As we said, we have 60 total. In med tech, we also have some great names. And then of late, through an acquisition, we have some payer and provider clients. And what we're really doing here is we're optimizing provider communication or physician communication, and we're optimizing patient engagement. In our current network, we reached 60% of prescribing HCPs, which is ultimately 60% of commercially covered lives or people insured. And so we take this fragmented market of EHRs, this incredibly connected mobile community we have, but we make that very simple for our clients to communicate critical clinical information and financial information to the patient through the physician when they're together. Slide 7 is important to visualize where we enable messages through the journey of the patient. So we want to do everything to make sure the physician is aware of the latest therapeutic knowledge through to staying with the patient while they're taking their medication. And as we've all been through, you have symptom awareness, you go to a doctor. Inside that atmosphere or you're either in a hospital or a practice, because we're connected into the electronic health records, we can actually make sure physicians are aware of new therapeutics or changes in indications or just data available for them to see and we deliver that right into the workflow of their EHR. So they don't need to go to a website. They don't need to go to a book. They don't need to make a phone call, and it keeps them very informed. Then once they're making their treatment selection, we're able to help our clients deliver everything from a brand message to a financial message, which is an offset of a co-pay or a voucher as well as most recently, we rolled out something called TelaRep, where it allows the physician to actually communicate with the manufacturer or a medical liaison if they have a question. And just to give you an indication, those -- they have a lot of questions every day because there are so many new indications, and most of the times they're dealing with patients with multiple issues or medications that overlap. So then you move down to administration and fulfillment, which just means getting your prescription. And there, we deliver again the financial message. So when the patient goes to the pharmacy, they can get the co-pay covered. We can also give the physician refill alerts. So they're reminded that a patient maybe hasn't picked up their refill. And then ultimately, we help with the hub enrollments on specialty medications, which is another way of saying sort of pre-authorization paperwork. It just makes everyone's life easier and it's done digitally. And then in the last 2 years, we acquired 2 firms that actually then stay with the patient and help engage with the patient, help them understand side effects, also deliver all our core messages but just help them stay on the medication. So from a client perspective, the benefit is you have one platform which delivers multiple solutions, which allows you to stay with the physician and patient through that journey. Slide 8 is a quick view of the technology we have. So obviously, we're dealing with very large multibillion-dollar companies and clients. And we're dealing with providers who are -- who cannot have any latency in anything delivered. And in the middle, obviously, we're dealing with a lot of EHRs that dealt with very sensitive information. So we've put together a world-class technology stack which delivers subsecond interactive communications. It does everything from provider communication, patient communication. It's all on the cloud. It's scalable, secure and compliant. And it's really built for performance. And I guess from the investors' perspective, the good news is most of this investment is done. So now it's time to leverage the platform. Quick highlight of people on the team, growth leaders and growth drivers. So I came in about 4 years ago, as I mentioned. What got me excited about this business was the whole vision of getting industry to communicate with physicians and patients. Having been in the space for 20 years, I know how difficult that is. I saw the challenges with reps. I saw the increased adoption of technology. And the founders of this company did a very good job early getting relationships with some of the EHRs like AllScripts, Quest, Dr. First. And what that enables is really the ability to connect right into that workflow, as we talked about. So once I got in and saw what we had, I then needed to bring in an expert in health HIT. That's where Miriam Paramore came in. She helped -- she was one of a small team that helped build up Emdeon, which is now Change Healthcare, did a wonderful job there, really understands platform and exchange. Doug was in prior to me but has a great financial background to handle a small-cap public -- micro-cap public company. And then about a year and a year a bit ago, we brought in Steve to really start to scale our commercial team and move towards enterprise sales. But our growth drivers, which you need to attract people like this, are just increasing the use of wearables and Internet of Things. Legislation and industry changes were on our side. Obviously, a global focus on adherence. Reaching providers is difficult, and we make it easy. And obviously, everyone wants things quickly, accurate and they want it digitally. And just -- we added additional -- this adoption of digital health. Obviously, we're seeing that across the board as highlighted with telehealth, but amazing team. We also have a team in the middle that is equally as strong. So lots of heft to execute against our plan. On Slide 10, sort of sizing the opportunity and our growth strategy. You've -- all the investors have seen big numbers from pharma marketing. We've got plenty to go after especially with about a $30 million run rate today. I just want to highlight that there's plenty of space for us to grow into. How are we going to do it? Well, we're going to move from tactical selling to enterprise level offerings. We'll talk about that in a little bit. Obviously, that would increase the customer's share of wallet. We want to reach more HCPs. So we have a team that's just dedicated on going after the EHRs that we don't have. We're also looking at expanding into hospitals and health systems. And once you get into a pharmaceutical company, and we're in the top 20 and have 40 others behind that, you basically land and expand and bring in additional brands. And then obviously, we've been opportunistic with strategic acquisitions, and that has helped us broaden our solution set. Slide 11, I like because what it highlights is how scalable our revenue model can be. And we're seeing a lot of traction year-over-year, '19 over '20. We basically define an enterprise deal as a brand that uses all our solutions, and it's an annual contract. It's recurring. And it is not based on transactions. So in 2019, we had one brand that did that. And when we looked at that and the value it brought, it was easier to manage, it was stickier and it was a meaningful increase over previous year. So our plan from '19 to '20 was to get 4 to 5 brands. We already have 4 closed in production. Our annual contract value for those brands is $3.6 million. And we expect to secure a few more of those into the year. But if you think about how many potential brands there are, there are about 200 to 300 left. So if you're thinking about the wide space we have to grow into and everyone invests for the future, we have a lot of room to grow. We've got the team to do it, the technology and the network to execute against it. So you can see how we could get client B and C and D and E and just keep going. And that allows for a very nice, scalable SaaS-based business. Slide 12, just a quick glimpse. Strong financial momentum. Q1, we were up 46% year-over-year. Gross profit up about 20%. We have $15 million in cash or cash equivalents and no debt. You can see our CAGR is about 47% since we've been in business. Very proud of this. The team did a great job starting the year. And we see a very positive momentum going into the rest of the year. Obviously, optimistically cautious just because of COVID. But if you think about what we do, we enable communication digitally for the pharma manufacturers at a time when they're going to not be able to go to medical conferences and not have reps on the street. So certainly an increase in need for our core service solution set. So if you think about key takeaways, highly scalable platform. So we have a lot of capacity left today with our existing platform. We don't need to invest a lot in it to get it to be a $100 million run rate business. It's also been proven with some of the largest companies in our space, the largest partners in our space, and with hundreds of thousands of physicians who would be very quick to highlight any issue with anything we've seen. The technology as well. We have a CTO who also was at Emdeon or Change Health, who has built a wonderful stack that it can process data. We can incorporate all sorts of analytics into that data to improve the stickiness and effectiveness of our programs with clients. We have a large and expanding market opportunity. If we just focus on the near term and what COVID has done, the transition from office visit to telehealth due to necessity. And we don't think that goes back to the 6% or 7% adoption. It stays at the 50%-plus going forward. That basically -- that raises the tide and all boats go up, okay, because it allows all the platforms to have the latest technology. It's giving physicians a different perspective, really empowers the physician to use tools to maintain their business because it is a business for them. And they want to continue care. What else do they want? They want to make sure people can afford their medication. They really want to make sure their patients stay on the medication. And they need to keep up. They can't travel as much. So they'd need to have therapeutic knowledge. These are all things that we deliver digitally. So I think we're in a really good spot for our clients. And sustainable competitive advantage. We don't have IP, per se. But being integrated to so many of the EHRs and being early on that and having long-term contracts, they are under a lot of pressure to stay compliant to keep up with CMS regulations and now incorporate telehealth into their workflow. They're not going to be looking to add new people into their vendor base. We are a trusted partner, and I would just highlight one of late actually signed an exclusive deal with us where the EHR basically empowers us to be their sales force to pharma and to bring these tools to providers that help them deliver better care. So very sustainable and really fortunate to be in that position. With that, I'm going to stop and open it up to questions, but thank you. Thanks for the time.

[Operator Instructions] So Will, we have a question to you, that you alluded to COVID and the current environment. The first question we have is what changes in pharma company behavior, if any, are you seeing amid-COVID? Are you seeing an increased willingness to engage with providers who value your platform?

Yes. So initially, none of us were sure what would happen at the client level. We all of a sudden were working from home. The good news is with people working at home and a lot of the plans disrupted for medical conferences and also the medical liaison, their sales reps being sidelined, is they had this immediate need to reach doctors and patients because they couldn't do it the way they had planned. And keep in mind, pharma plans well in advance. So last year, they were prepping for this year in terms of content generation, legal review of that content generation, training people to explain it. And there are literally 500 brands, right? And so that's a lot of content. The agencies do a lot of generation there. So now they're sitting on this spend and how do they get it out. So what we saw was an increase, not only in calls, but we saw an increase in pipeline, which at this stage of year we usually see it go down as we're closing business not necessarily growing. We also saw an acceleration of decisions from a 90-day average to a 30-day average. And our close rate on average, as we've talked about in other earnings, is around 35%. In previous years, they popped up over 50%. So net-net, we're very thankful and appreciative that our clients are turning to us, and COVID is definitely helping. I will say, though, Q1, with that kind of growth, really had no effect from COVID. So we went into the year with pretty aggressive expectations internally. And we do think COVID, on the second half of the year, will help us exceed those.

We have another question, which is, can you discuss your recent acquisitions and what they bring to the network effect between doctors and pharmaceutical companies?

Absolutely. So one of the things we looked at when Steve came in is how do we have the solution set for our clients which allow us to sell at an enterprise level. And so we had tremendous access to doctors. We have one of the largest networks in the market. Very smooth, very transparent, very measurable, all the good things. But then we weren't staying with the patient. And what happens is the patient leaves. They take a few months of prescription and then a very large percentages will just stop. And that's the adherence problem. So we looked for technology companies that could enable text-based communication with patients, and that was our acquisition in late '18. And then we needed something that had more virtual care. So some telehealth mixed in but also just app-based digital communication. And so now we have a complete set of patient engagement tools technologically, and those allow us to go to pharma and say, "We can help you from prelaunch all the way through the life of your patent with your stakeholders." And without those, you really -- you risk not being able to do larger enterprise deals. So now that we've gotten that, we feel like we have our complete set. We're completing the integration of those things. And we're seeing really good response as demonstrated by 4x to 5x more enterprise clients this year than last year. So very excited about those acquisitions.

Another question we have from the audience is you alluded to telehealth in your last comment. And the question is how do you or can you work with telehealth even more as that becomes a much more important part of the environment these days?

Sure. Well, through the acquisition of RMDY Health, we picked up that technology. And currently, we have 4 clients using it. They are mid-market payer and/or clinics and/or associations. And obviously with COVID, that's all been accelerated. But if we think just longer vision, if we're helping industry communicate with providers, physicians, nurses, patients, that whole ecosphere, it's clear that they're going to be spending a good percentage of their time on what I would call virtual point of care, and that is the telehealth arena. We are not going to be a company that's competing with Teladoc and Amwell. They're just not -- that's not what we'll do. But we do want to be in the space where the clinicians are because that's another opportunity to keep them aware of therapeutic knowledge. It's another opportunity to make sure the patients are aware of savings that they can have on their prescriptions whether they're branded or generic. And it's another place to build trust with the consumer, the patient, so we can help them stay adherent. So we are in the early, early innings of that. But we're grateful to have the technology. We're grateful to have bought it prior to this incredible increase in adoption. And we think it will become another point-of-care reference point for us. So when we go to our clients who are all asking us now, "What do we do with telehealth?" we can say, "Well, this is an option." Let's make sure they're aware of the savings and the adherence programs. It's not a place for your typical banner ad or -- that's not what we're interested in. We're really interested in clinical, therapeutic knowledge, awareness, affordability and adherence.

Thanks, Will. Well, we're bumping up against our end time. We want to thank you very much for being with us today, and we want to thank everybody who participated in this webcast. Thank you.

Thanks, Daniel. You have a good day. Take care.