Have you ever gone to the pharmacy and felt ripped off by insanely high prices for your prescription drugs?
If you’re like most American’s, you have.
Because even for people with good insurance, these numbers tend to seem high.
But a company that holds its IPO tomorrow aims to fix that problem.
It’s called GoodRx (GDRX).
It plans to poke holes in the pharmaceutical market by exposing the lunacy of how much some drug stores charge for medicine.
In turn, consumers get a better price comparison and can find out where to get the cheapest medicine.
So it’s no wonder that the company calls itself, “the leading consumer-focused digital healthcare platform in the United States.”
As a startup with an online platform, it’s one of the few technology firms that’s actually profitable ahead of its IPO.
That’s a bullish sign to me, which is why I think a lot of traders may be hungry to get in on the action tomorrow.
GoodRx wants a piece of the pharmaceutical industry that’s projected to hit $1.5T by 2023.
And there’s a massive opportunity for it to do so by revealing cheaper drug prices to Americans without health insurance.
As of January 1, 2019, Americans are no longer mandated to have health insurance.
Prior to that, under the Affordable Care Act (ACA), Americans were required to enroll in health insurance and subject to taxation if they did not.
And as a result of that, it’s estimated that as many as 4 million Americans will choose not to have insurance over the coming year.
That means that a whole lot of people out there in the marketplace are going to be looking for better deals on these outrageously expensive drugs.
GoodRx provides the opportunity to find these drugs at a much cheaper price.
It positions itself as the #1 resource for the millions of Americans without health insurance who have to pay full price.
And get this… thanks to GoodRx, many people can even hunt down generic drugs at a price cheaper than the typical copay.
Case in point: a search for the generic version of the cholesterol drug Lipitor in Los Angeles revealed a price discrepancy of $19 at Costco all the way to $250 at Walgreens.
It just goes to show that within our entire health sector, pharmaceutical pricing is the least-transparent… with prices varying widely.
GoodRx recognizes that it can profit by helping customers get the best deals.
It does so in a few ways.
It collects fees from Pharmacy Benefits Managers (PBMs) after consumers implement GoodRx codes to fill prescriptions.
It additionally derives funding by allowing advertising from pharmaceutical manufacturers
And it brings in income through telehealth by providing a variety of support, including advice, reminders, and education.
GoodRx Has Strong Numbers, So I Expect a Strong Debut
Last year, GoodRx put up revenues of $388.2 million, a number that increased 55% from the prior year.
And what happened this year?
GoodRx reeled in a sweet $55 million in profit during the first half of 2020, which is 75% better than its performance during the period a year before.
That makes GoodRx one of the only tech companies that’s actually profitable ahead of its IPO this year.
The company plans to offer 34M shares priced between $24 and $28 in the IPO tomorrow.
It could raise funds of nearly $1 billion through the public offering.
How Am I Trading GoodRx (GDRX)
I anticipate that GDRX could be a good stock to get long on.
That’s not only because the numbers are so strong, but for a couple other reasons.
One, because it plays into the whole biotech sector which has been strong recently.
The Nasdaq Biotechnology ETF has had a great year.
And two, because of the IPO success of Snowflake (SNOW) last week.
We may have seen things rotating out of tech lately, but SNOW generated an enormous amount of hype.
While the pricing was at 120, it opened 2 times higher at 250 and still went all the way up to 319.
So if you got long on the open and sold a couple of minutes later, that’s a massive gain.
It shows how hungry investors and traders are for these IPOs.
If tomorrow’s GDRX IPO is even a fraction of the success of SNOW, then there’s a good chance someone will want to buy no matter what price.
In which case, it may not be a bad idea to buy the opening print.
But as for exactly how I plan to trade GDRX and whether I proceed with a limit on my order, you can find out by learning more about my strategy here.