Progressive Care Inc. (OTCMKTS:RXMD) is a stock we have scouted in the past because the company has posted such dramatic growth relative to other pharmacy services stocks and now trades at a clear discount to the space on a sales multiple basis – most pharmacy services companies trade at around 0.6-1.0x forward sales, while RXMD is moving toward something like $50-60 million in sales on a market cap of around $20 million, or well under 0.5x forward sales.
While that doesn’t look egregious, it stands out as a cheap stock when you consider the growth curve in play: other stocks in the space – trading at a premium to RXMD – generally see growth on the topline at around 5% while Progressive Care Inc. (OTCMKTS:RXMD) has been putting up more than 100% topline growth over the past year, consistently.
Typically, growth is the source of premium. So, this suggests the stock may be cheap and deserving of a closer look.
That perspective gains a great deal more power this morning following the company’s announcement that it has made good on its promise of moving forcibly into the explosive Telehealth space, which puts RXMD in different class, aligning it with stocks that tend to trade at much higher multiples given the huge growth forecast for telehealth in the quarters and years ahead.
The MyApps Move
This morning, Progressive Care Inc. (OTCMKTS:RXMD) announced that on September 1, 2020, it entered into an LOI to acquire MyApps Corp, a leading developer of healthcare software that already pulls in seven-figure sales. Perhaps most importantly, the acquisition includes the emerging telehealth service app CallingDr™ (www.callingdr.com).
We point out CallingDr™ because it represents an already complete virtual platform providing multiple levels of service with a suite of products, including the capability to allow patients to take ownership of their own health records and provide access to health information through the related app and patient portal.
The reach already includes hundreds of medical practices in multiple states, including gastrointestinal, internal medicine, psychiatry, pulmonology, cardiology as well as remote clinics and in-patient settings. Customers include single-physician clinics, multi-physician clinics, emergency room centers, nursing homes, and home health setups.
CallingDr™ was ranked in the top ten list of patient engagement solution providers by Healthcare Tech Magazine in 2019, it’s already been integrated into top connected medical devices such as Thinklab’s Stethoscopes, it has already gotten into big systems like PointClickCare, the leading cloud-based Electronic Health Record (EHR) software designed specifically for the long-term care providers system, and it has accolades, including Technology Innovators, a leading tech-based digital publication, which listed CallingDr™ as one of the top 20 Innovators in Telemedicine for 2020.
According to the release, the CallingDr™ white-label software platform delivers features and functionality optimized to provide long-distance medical telehealth care, offering doctors the tools to manage clients through patient-doctor video, audio, and SMS HIPAA-compliant consulting and remote patient monitoring.
In other words, it’s already an established functioning telehealth platform with awards, accolades, partners, customers, deep functionality, device integrations, and EMR/EHR platform accessibility. It’s actively on the playing field, which means RXMD is now actively on that playing field as well.
Even more to the point, according to the release, Progressive Care will be immediately engaging MyApps to accelerate development of software platforms for ClearMetRX, Progressive Care’s wholly owned data management subsidiary, and its divisions.
The Dev’s in the Detes
According to the LOI, the terms of the acquisition are as follows: “Pursuant to the LOI, purchase price for the acquisition will be approximately $10,200,000, $7,500,000 of which will be paid in the form of Progressive Care common stock, at a price per share to be determined in accordance with the definitive agreement, and the remaining $2,700,000 of which will be paid in two annual installments, subject to the achievement of certain performance criteria.”
In other words, the price of the deal (or the cost of gaining this asset, for RXMD shareholders) is tethered to MyApps performance over the next two years. That’s a brilliant structure. We have written in the past that more deals should contain stipulations like this. It’s low-hanging fruit. Progressive Care Inc. (OTCMKTS:RXMD) isn’t just buying a pile of code. It’s buying the whole team and operating apparatus. People perform better when they have an incentive to do so.
That suggests the folks at MyApps will be working hard to pick up that extra money over the coming period. Companies like MyApps often have a small team and a small group of lead investors.
Progressive Care Inc. (OTCMKTS:RXMD) included a couple notes in its announcement that is clear and meaningful about the near-term impact.
First, as noted above, Progressive Care will be immediately engaging MyApps to accelerate development of software platforms for ClearMetRX, Progressive Care’s wholly owned data management subsidiary, and its divisions.
So, the team at MyApps will be working hard right out of the gates to deliver additional value by scooping up the synergy involved in the fact that RXMD already has a high-tech software-based asset (that has been showing huge growth, by the way, with over 100% sequential monthly growth in July) that can build extra functionality and, therefore, market dominant positioning now that there’s a top software development team in-house.
Second, as suggested by the company in its release, upon completion of the acquisition, Progressive Care will begin to provide health IT, HIPAA-compliant software development, HL7 integrations, and virtual healthcare services on a business-to-business (B2B) basis to hundreds of clients spanning the global healthcare distribution landscape, delivering services directly to consumers and through channel partners.
“Following the completion of the acquisition, we plan to market the software to the physicians that are currently our clients, and then to the entire community of physicians, medical practices, therapists, remote rehab centers, and nursing homes across the U.S,” commented Alan J. Weisberg, interim CEO and Chairman of the Board at Progressive Care. “Following the sharp and significant deregulation of the Telehealth system we have seen over recent months, the door to a very different – and far more efficient – overarching healthcare paradigm has been thrown wide open. And MyApps has already built something with revolutionary potential, making this strategic move a grand slam home run for Progressive Care given our stated objective to become a global leader in the delivery and integration of Telehealth and Telemedicine services.”
That sentiment was mirrored by MyApps chief and founder, Adnan Malik: “We look forward to joining the Progressive Care team, which will provide MyApps with a spectacular backing and platform to continue to drive value as an organization bent on changing the healthcare system from the ground up. Telehealth has been a revolution in the making for a decade or more. But the Covid-19 crisis has finally kicked down the doors and taken the system past the point of no return. With unnecessary regulatory barriers out of the way, the stage is set for an aggressive realignment in favor of telehealth solution providers.”