The coronavirus (COVID-19) pandemic has been driving the need for accelerated innovation in healthcare and the pharmaceutical e-commerce space, in particular, has seen massive pandemic-induced growth.
No other Canadian company has ridden the pandemic wave as well as health tech savvy Mednow Inc (TSX-V:MNOW, OTCQB:MDNWF). It is disrupting the prescription drug industry by emerging as a pan-Canadian online pharmacy based on its leading pharmacy app, specialty pharmacy services, telemedicine support, and strategically placed fulfillment centers across Canada.
“Back in 2018, I was running my company Care Pharmacies, a group of independent pharmacies across Canada. We didn’t know at that point if the virtual pharmacy we were creating was going to be a digital division of Care,” Mednow co-founder and CEO Ali Reyhany told Proactive in an interview.
“But as we saw the opportunity sprout, we came out of stealth mode in June 2020 with our first raise, and in 2021 Mednow became a public company,” he added.
Integrated pharmacy platform
Mednow.ca not only offers virtual pharmacy and telemedicine services but also doctor home visits. “The integrated operation gives patients a fast and efficient alternative to the old-fashioned pharmacy lineup,” according to Proactive Research analyst Daniel Appiah.
Mednow has been able to successfully compete in the fast-growing market as both Reyhany and Mednow co-founder Felipe Campusano know the pharmacy space like the back of their hands. After graduating from pharmacy school, they started Care Pharmacies (Canada). The privately held Care Group has since expanded to 700 employees, a network of 70 pharmacies, and $250 million in annual revenue.
“We built our model based on my 15-year experience as a pharmacist. Mednow co-founder Felipe bought his first pharmacy the day he graduated pharmacy school. We did it the hard way. We scratched and clawed - we lost money and made money,” said Reyhany.
“We learned more from all the places we lost money and so the understanding we have of the Canadian retail pharmacy space and how to make money in it, that knowledge-base, connections, and our reputation are our biggest assets.”
Mednow has been able to distinguish itself from the competition by remaining rooted in the pharmacy business while having multiple sales channels feeding the business.
“The key component of our business is our digital pharmacy which is why instead of selling makeup and candy-like some brick-and-mortar pharmacies, we bring in doctors, digital advice, and health products,” said Reyhany.
Mednow’s integrated pharmacy platform includes a virtual pharmacy offering prescriptions fulfillment and free delivery, specialty pharmacy services focused on high-cost medications, mental health support, virtual walk-in clinic, wellness e-commerce, telemedicine, and at-home doctor visits.
“We are much more than a glorified delivery app, a discount pharmacy, or a lifestyle medicine company,” noted Reyhany.
Strong financials and revenue
Mednow has logged three consecutive quarters with triple-digit growth. For the fiscal third quarter ended April 30, 2022, Mednow reported revenue of $6.14 million, a 225% quarter-over-quarter improvement driven by sales from its retail pharmacy segment.
The company’s retail pharmacies in British Columbia, Manitoba, Ontario, and Nova Scotia collectively generated $5.71 million in revenue, up from nil in the comparative period a year earlier. Revenue generated by doctor services was $382,537, also up from nothing in 2021.
Mednow has seven pharmacy Urban Distribution Centers which connect seamlessly to patients through proprietary platform technology and provide same-day delivery to over 70% of Canadians living in Toronto, London, Vancouver, Winnipeg, Calgary, Halifax, and Montreal.
The company’s patient count has also shot up by 20% quarter-over-quarter to 23,000 in the fiscal 3Q, compared to 19,000 in the 2Q.
“We first focused on creating a consumer brand and collected one customer at a time. Now we’re very excited as growth will be driven rapidly by our Mednow For Business (MFB) division,” said Reyhany. “We’re in exciting late-stage conversations with big companies that are going to be cutting deals with us - that will get us patients en bloc as they retain Mednow as their preferred pharmacy to support their employees.”
Mednow has also struck partnerships with mental health and genetic testing companies.
In a clear path to profitability by 2023, Mednow expects to produce adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of around $5 million to $10 million.
Revenue for 2023 is forecast to range between $105 million to $110 million, with $102 million coming from pharmacy services and $5 million from doctor services. The gross margin is expected to average 25%, with 110,000 to 120,000 active patients.
Recession-proof fundamentals
Canada’s economy has fired on all cylinders following the pandemic shutdowns, but warnings about a looming recession have recently reached a fever pitch. However, Reyhany says people depend on healthcare services whether the economy “is booming or in a recession.”
“During the pandemic, there were only two businesses that were allowed to stay open: grocery stores and pharmacies. Healthcare is the safest business outside real estate. Moreover, you don't have high inflation effects on drugs because we're in a highly regulated market,” noted Reyhany. “Mednow is recession-proof and will also continue to grow as it enjoys a fundamental demographic advantage: the Candian population is greying and will require age-related treatments and medications.”
Over the next 20 years, Canada’s older population - aged 65 and older - is expected to grow by 68%, according to the Canadian Institute for Health Information.
Open to opportunities
Undoubtedly, Mednow has seen rapid growth since its March 2021 IPO, driven by the acquisition of regional pharmacy businesses. In August last year, Mednow acquired Medvisit for $1.32 million in cash and a conditional earn-out of up to $680,000 linked to profitability milestones. Medvisit is Canada’s largest and longest-standing doctor house call service, having been in operation for over 30 years.
“We're always opportunistic and thanks to 15 years as an entrepreneur in the healthcare space I have a lot of deal flow. There are a lot of things we could buy tomorrow,” said Reyhany. “But in this market and funding environment, we are focused on organic growth. The nice thing is that we've spent a lot of money to build the ship - we don’t need an acquisition to get to hundreds of millions of revenue.”
On November 24, 2021, Mednow closed a $500,000 investment in Doko Medical for a foothold in the pharmacy services market.
“We put an investment into Doko so that we can learn about the dynamics of the US market. We’ve made a minor investment, but it gives us the benefits of learning, strategizing, and the knowledgebase,” said Reyhany. “When the right acquisition or investment presents itself, we will be looking at the US which is a 20 times market. There's a lot more opportunity there so we have to be open to it.”
High growth potential
Currently, virtual pharmacy utilization in Canada is less than 2% but, since the pandemic, 50% of Canadians are open to using a virtual pharmacy, according to Maru Blu Research. With few purely virtual pharmacy competitors at the national level, Mednow with its high-octane growth is well-positioned to be the market leader.
“We have a $47 billion retail pharmacy market in Canada. We estimate digital adoption to be in the 1-to-2% range currently, so we think that we’ll get to at least 10% digital adoption in five years,” said Reyhany. “The total addressable market for Mednow’s business is roughly $5 billion in Canada.”
In both a business-to-business (B2B) and business-to-consumer (B2C) context, Mednow can enable easy, efficient, and transparent prescription drug buying, inevitably leading to higher demand for such offerings across the board. Clearly, Mednow is tightly aligned with the ever-changing provider and patient needs in this increasingly digital world.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
Follow her on Twitter (NYSE:TWTR): @UttaraProactive