GoodRx has been downgraded from ‘Buy’ to ‘Underperform’ by Bank of America (BoA) analysts on their concerns about competitive risks facing the company.
They also lowered their price target from US$8 to US$4.50 citing “substantial uncertainty for GoodRx’s future earnings profile.”
GoodRx shares traded down more than 15% at US$5.66 on Tuesday afternoon.
The BoA analysts wrote in a note to clients that over the past year, some of the largest pharmacy benefit managers (PBMs) and retail pharmacies have launched competing offerings to GoodRx, which allows patients to save money on prescription drugs at the pharmacy counter by taking advantage of an ecosystem of PBM network rates that can often be cheaper than a patient's rate through their insurance.
“Over the past year, OptumRx (owned by UnitedHealth Group Inc (NYSE:UNH)) and CarelonRx (owned by Elevance) have introduced new discount programs that are directly integrated into their pharmacy benefits,” they wrote.
“In November, Walgreens Boots Alliance Inc (NASDAQ:WBA) launched the Rx Savings Finder, which allows patients to access multiple third-party discount cards including GoodRx.”
Additionally, last month CVS Health Corp (NYSE:CVS) launched, a new pharmacy reimbursement model that could reduce the volatility of PBM reimbursement rates called CostVantage.
“One of the main ways GoodRx makes money is when PBM reimbursements vary substantially,” the analysts wrote.
“CVS' new model could standardize PBM reimbursements, which could cause the variability of PBM network prices to dissipate. GoodRx's value proposition to patients could weaken if PBMs reimburse pharmacies using a more consistent framework.”
Taken together, the analysts wrote that these initiatives threatened GoodRx’s model.
“The outlook for GoodRx is more uncertain than at any point during the company's short life as a public company, and we see near-term risks to valuation and intermediate-term risks to its earnings profile,” the analysts wrote.
“We see downside risk to GoodRx' earnings, with risks beginning in 2025 if CVS' model is broadly adopted.”