GoodRx $20 Billion Value May Draw Caution Amid Telemedicine Boom

(Bloomberg) -- Telemedicine site and prescription-drug pricing app GoodRx Holdings Inc. may draw a wary eye from analysts starting their coverage after the company’s 54% boom to an eye-watering $20 billion valuation.

Underwriters for the Silver Lake Group LLC-backed initial public offering will be eligible to publish their coverage for the company on Monday, when a 25-day quiet period expires for analysts at those banks.

The laundry list of banks that helped bring it public include Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Barclays Plc. Firms that bring a company to market tend to have favorable reviews.

However, analysts may question what’s next for Santa Monica, California-based GoodRx as its roughly $20 billion valuation tops that of telemedicine titan Teladoc Health Inc. and rivals legacy drug distributors like AmerisourceBergen Corp. and Cardinal Health Inc. The company’s gain from its public offering last month resembles a tech company more than a health-care firm, according to Bloomberg Intelligence analyst Jonathan Palmer.

“Ultimately, they don’t have any control of the underlying prescriptions being filled and it’s hard for me to imagine a player in this space maintaining that margin profile for the long-term,” Palmer wrote in a message. “That said, the market is large and their share of revenue is small so they can likely continue to show top-line growth for a while.”

The company, which was started in 2011 by Facebook veteran Doug Hirsch and entrepreneur Trevor Bezdek, has seen its rally stall out as the broader market was hit with a choppy few weeks of trading. The stock has shed 11% of its value from an Oct. 6 close at $57.16 after an early surge, meaning a cold shoulder from Wall Street could further pressure shares, while rave reviews could spur the stock higher out of its recent range.

GoodRx is known for its app that helps patients look for the best price for their prescription drugs. While the company highlighted its position in the growing telemedicine market, BI’s Palmer warned that it “seems very nascent relative to others” in the industry.

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