Aussie medtech with 100% upside expectation addressing US$600 billion issue

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The COVID storm proved to be disastrous for scores of businesses that had to shut shop and wait for the waves to settle. On the other hand, some businesses ideally found themselves in front of macro tailwinds, were able to identify and address the situational needs and come out stronger than ever – one of those businesses could have been MedAdvisor (ASX: MDR).

Pre-COVID, the Aussie medtech produced total revenue from services of $1.9 million in FY15 which grew to $4.9 million in FY17 – 178% higher than FY16 – and then continued to grow to reach $9.2 million in FY19 and $11.1 million in FY20. In FY21, MedAdvisor’s revenue skyrocketed to $40.3 million, followed by an even stronger showing of $67.7 million in FY22.

Leveraging its tech capabilities, the business supported 2,100 pharmacies in streamlining the delivery of more than 3.75 million COVID-19 vaccinations as at February 2022. However, this is a hint of what MedAdvisor brings to the broader pharma sector – as was indicated by Gregg Taylor, Investment Director at Salter Brothers Emerging Companies Limited (ASX: SB2).

Speaking on Reach Markets’ The Insider: Meet the Fund Manager in February 2023, the former Canaccord Executive Director selected MedAdvisor (ASX: MDR) as one of his favourite stocks. Watch the full The Insider: Meet the Fund Manager session.

“The broader problem in the health care sector is the clogging of access to doctors and specialists for treatment. [The industry] is trying to unclog that system by pushing a lot of the work into the pharmacies and other distribution channels. MedAdvisor plays a key role in both Australia and the US in providing that solution,” Mr Taylor said.

MedAdvisor’s solution lies in delivering medical adherence programs. Pharmacies can use it to automatically renew, update and deliver scripts to patients without the need for a doctor’s visit and/or a specialist appointment.

Mr Taylor touted MedAdvisor’s management and board, an area of the business he noticed had evolved over the previous 12-18 months, particularly with the appointment of a CEO in Rick Ratliff who is well-placed to support MedAdvisor’s growth in the US and a Chairman (Non-Executive) in the vastly-experienced and accomplished Linda Jenkinson.

“That was what tipped us in. We’ve always believed in the sector opportunity but the execution of the business hasn’t been as great as we had hoped. The new CEO and new Chair of the Board [are] doing a great job and [are] giving us the confidence to back the company,” he said.

MedAdvisor CEO Rick Ratliff joined Reach Markets’ The Insider: Meet the CEO session in April 2023 where he described the company’s solution in more detail, provided a business update and highlighted the opportunities he will be looking to capitalise on in the coming years. Watch the full The Insider: Meet the CEO session.

“Poor medical adherence is widely recognised as one of the most common and costly yet preventable issues in health care today. This is an issue, according to the WHO (World Health Organisation), that’s really impacting health care systems globally to the tune of around US$600 billion annually,” Mr Ratliff said.

“Our products include a mobile application, pharmacy software and patient engagement solutions to help patients better manage their medications and strengthen their relationships with their community pharmacies.”

Recounting MedAdvisor’s 2012 launch in Australia, Mr Ratliff explained that the company’s platform enabled pharmacies to automate adherence reminders for regular prescriptions via SMS and email and, for the first time, allowed pharmacists to offer patients mobile apps for medication management. “Within the first 18 months, the business reached a thousand of Australia’s 5,700 pharmacies,” he said.

Over the last three years, the business has undergone rapid market and digital expansion, acquiring US-based Adheris Health in November 2020, giving the business immediate access to a US pharmacy network reaching over 60% of the country’s population. More recently, MedAdvisor acquired GuildLink, which expanded the business’ access to over 90% of Australian pharmacies.

“2022 was a very busy year for MedAdvisor. We decided to enter the UK market as well as the New Zealand market through an agreement with Green Cross Health. Looking into the rest of this year and beyond, we have a very clear plan. We’re committed to finalising the integration of our recent acquisitions. We remain focused on the successful execution of our digital strategy and we’re continuing to grow our global pharmacy network,” Mr Ratliff said.

With its global network of more than 37,900 pharmacies giving the company access to 235 million individual patients, MedAdvisor’s focus is on executing its pathway to profitability with initiatives aimed at improving margins and achieving sustainable cost base, which Mr Ratliff believes ultimately positions the company for future growth.

MedAdvisor’s plans for growth reflected Gregg Taylor’s opinion on the company being a high, yet defensive, growth business with structural growth driver and which he expects to grow at an “impressive” ~100% per annum without being too impacted by the consumer and global economy.

“We talk about a cash position north of $300 million and it’s very much on its way to reaching profitability and has more than enough capital to take it on that journey,” he said.

In the first half of FY23, MedAdvisor earned $64.1 million in revenue, close to its FY22 revenue of $67.75 million, while posting a record positive EBITDA of $8.6 million, $13.1 million more than the previous corresponding period.

Click here to view more videos from Gregg Taylor’s The Insider: Meet the Fund Manager session, or click here to view the full The Insider: Meet the CEO session with MedAdvisor CEO Rick Ratliff.

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