NowRx is raising funds through preferred stock at a $275 million valuation. Given its revenue of $13.4 million in 2020, it has a revenue-to-valuation multiple of around 20x. Although this valuation seems inflated, it is not outrageous. Looking at the company’s impressive traction and growth, there is only a small gap between NowRx’s revenue multiple and the industry standard multiple. However, it is worth noting that a $275 million valuation far outstrips most other growth stage startups raising capital online. Therefore, NowRx is slightly overvalued in this funding round.

The global pharmacy automation system market is worth $4.57 billion in 2021. Since NowRx mainly targets the US market, the obtainable market size will only be a fraction of the global size. On top of that, it is a competitive market, leaving NowRx with limited opportunity to grab its portion of the market. However, the market is growing at a decent annual rate of 8.3%. Increases in deaths and injuries caused by drug prescription errors are also pushing pharmacists and healthcare providers to utilize more effective technology. Automation in the pharmacy system could effectively reduce pharmacy costs and improve patients’ safety.

NowRx also targets the generic prescription drug market (specifically in supplying these drugs to patients, not in manufacturing them). Prescription drug spending increased by 4.9% between 2019 and 2020, reaching $535.3 billion. This growth is expected to continue for the next few years. One major trend driving the market’s growth is the aging US population. Seniors receive more prescriptions than any other age group. As more patients continue to become eligible for the federally funded Medicare prescription program, prescriptions are likely to increase even further. 

 NowRx’s current obtainable market size is rather small. However, there is huge growth potential in the future as the demand for prescription drugs continues to increase. The fact that NowRx is ready to expand to other US states and create more product lines will help grow its obtainable market over time. 

Co-founder and CEO Cary Breese has a Bachelor of Science in electrical engineering from Drexel University and a management and leadership certification from Massachusetts Institute of Technology. Prior to founding NowRx, Breese founded Trafalgar Marine Insurance Service, a technology-leveraged insurance service business. This company was acquired by an insurance conglomerate, generating an 18x return for its investors. Breese then worked as a CEO in a database tech company called GenieDB, where he met co-founder Sumeet Sheokand. 

Co-founder and CTO Sumeet Sheokand got his bachelor’s degree in electrical and computer engineering from National Institute of Technology Kurukshetra. He also has a master’s degree in business administration from University of California Los Angeles Anderson School of Management. Prior to becoming the CTO of NowRx, he was a software engineer at multiple companies, including Keane, Experian, and XI Technologies. Then, he became a CTO in GenieDB. 

Neither founder has experience in the pharmaceutical industry, but both have impressive management and entrepreneurial skills. The founders’ lack of experience in the pharmaceutical industry is mitigated by NowRx’s Director of Pharmacy Melissa Bostock. She earned a bachelor’s degree in microbiology and immunology as well as a master’s degree in public health from University of California Los Angeles. Then, she earned a Doctorate of Pharmacy from University of California San Francisco. She has a total of 15 years of experience in the industry, which will help the NowRx team understand the market better and expand its network. 

In total, NowRx has 82 team members, including 13 licensed pharmacists. The company has three advisors, and all have expertise in the pharmaceutical industry. Some notable investors have also backed the company, such as Ulu Ventures, Decathlon Capital, and Checkmate Capital. So while neither Breese nor Sheokand has direct experience in the pharmaceutical industry, they have successfully developed a talented and skilled team. Breese’s past successful exit with Trafalgar Marine Insurance Service also bodes well for NowRx’s future prospects. The NowRx team looks well-qualified to continue growing and scaling the company.

NowRx operates in the prescription delivery market, which is pretty competitive. It is filled with not only up-and-coming startups, such as Capsule and PillPack by Amazon, but also old and established players, such as CVS and Walgreens. Additionally, NowRx will eventually compete with companies like Medly and Alto that focus on specialty pharmacy delivery, a market which NowRx plans to enter in the near future. 

NowRx intends for its core pharmacy technology — QuickFill — to provide a key differentiator. QuickFill enables pharmacies to manage insurance claims, inventory, coupons, and refill requests quickly and easily. NowRx also has a robotic and artificial intelligence dispensing system as well as its own delivery service. The combination of these products and services will boost efficiency for pharmacy operations and reduce out-of-pocket costs paid by patients. NowRx also offers free delivery and accepts most insurance providers, creating a better customer experience. Moreover, NowRx prioritizes customer satisfaction first. This focus is supported by the company’s positive customer reviews. NowRx’s product is fairly defensible, as it is patent-pending. There is also a somewhat high barrier to entry, as the market is highly regulated. All of these factors put NowRx in a strong, well-differentiated position.

NowRx has achieved a terrific amount of traction and growth since its incorporation in 2015. The company has been able to grow its revenue from $4.7 million in 2019 to $13.4 million in 2020. It has been expanding its micro-fulfillment centers throughout California as well. The company expects to have 12 micro-fulfillment centers at the end of 2021, a notable improvement from only having one micro-fulfillment center in 2016. NowRx is also moving into other US states, starting with Arizona. This nationwide expansion will likely mark a new era in the company’s growth. Furthermore, the company has raised an impressive $31.8 million in its previous rounds. Finally, NowRx sports high ratings on Yelp, suggesting its promise to emphasize customer service is being kept. With strong revenue growth and continued expansion, NowRx’s performance is very encouraging.

NowRx bears moderate risk as an investment opportunity. The company has high market risk due to the high number of regulations in the pharmaceutical industry. NowRx will need to ensure that it stays up to date with any laws or regulations that may change over time. Furthermore, it will need to operate within the requirements of each state it enters, which may add complications to its expansion plans. NowRx also has some financial risk, as the company has total liabilities of $4.5 million, which is a large amount of debt. The company will need to address this debt while still growing revenue and maintaining capital efficiency.

The last time NowRx raised a funding round was in 2020 on SeedInvest. Since then, there have been some changes around the company’s performance, team, and valuation. From NowRx’s 2020 SEC filing, it generated $4.7 million in 2018 revenue. That figure has now increased to $13.4 million in recent revenue. The team has significantly increased from 23 full-time employees to 82 full-time employees. Moreover, the company is currently serving an extra 13,000 customers.

However, NowRx did fall short of its expansion goals in the previous round. In the 2020 funding round, the company was aiming to expand to 20 territories by 2023. At that time, it had five locations throughout California. As of today, NowRx has expanded to Arizona and has eight locations in total. Thus, NowRx has only gained three new locations in the past year, not a rapid amount of growth. With this expansion rate, it might be difficult for the company to reach its goal of being in 20 territories in 2023. While its revenue and team growth is tremendous, the company increased its valuation from $65 million in 2020 to $275 million in this current round. This is a massive increase in a span of only one year, and it’s still not justifiable even with the company growth. Thus, KingsCrowd investment team has the current round as a Deal to Watch compared to the last round, which was a Top Deal. 

Because prescription drugs and medical information are both highly regulated, NowRx bears massive regulatory risk. The company needs to ensure that its system and operations adhere to all requirements — both state and federal — to avoid any legal issues. NowRx also has significant total liabilities. The company will need to increase its capital efficiency and begin to address these debts as it pursues profitability. 

Some of NowRx’s competitors already have multiple locations across the country. Therefore, the company’s nationwide expansion of its micro-fulfillment centers is a key factor if it hopes to compete successfully. However, expansion takes copious amounts of time, capital, and labor, which could result in scalability issues.  Additionally, the company purchases the majority of the drugs it supplies from a single wholesaler. This dependency creates the potential for disruption should that wholesaler cease working with Now Rx or suffer from some other supply-chain issues. NowRx may need to widen its supply channels as it expands, an additional complication for the company to address.

NowRx has shown impressive traction recently that helps to prove its product-market fit. It experienced 182% revenue growth since its previous funding round and has a huge amount of prior funding. The company has micro-fulfillment centers throughout California and is now expanding to Arizona. These accomplishments are likely only the beginning of the company’s growth, as it could take off even further once it expands to other US states. 

NowRx is led by impressive founders who have successfully brought individuals with pharmaceutical expertise onto the team. QuickFill, NowRx’s core technology, performs a variety of services and could play a major role in the company’s success. NowRx also has its own delivery system, which helps cut down third-party costs for both the business and consumers. These huge differentiation factors could improve the company’s capital efficiency since it is a cheaper business model compared to traditional pharmacies. Moreover, they also benefit customers, which might result in a higher customer retention rate.

NowRx is an end-to-end pharmaceutical solution that offers same-day delivery and telehealth services. The company delivers more than 250 prescriptions, including controlled prescriptions, refrigerated medications as well as common over-the-counter medications and supplements. Its pharmacy software solution makes inventory management, logistics, and insurance claims centralized and easy to handle.

NowRx’s current valuation is somewhat overpriced in comparison to both pharmacy industry standards and other startups raising capital. The pharmaceutical automation system market is also very competitive, leaving NowRx with a limited obtainable market size. The company will be competing against well-established and familiar names that patients trust. As it moves into new states and new local markets, NowRx may struggle to convince patients and pharmacies that its services are superior. The company also has significant debt that it will need to address as it pursues profitability. 

However, NowRx is led by co-founders who have impressive managerial and entrepreneurial skills. They have successfully surrounded themselves with individuals who have expertise in the pharmaceutical industry, which is crucial in bringing the company to success. NowRx has performed tremendously well while operating in a heavily regulated industry. The company achieved a big jump in revenue in the most recent fiscal year — up to $13.4 million. It is also successfully expanding its operations from California into Arizona, and the company has a huge amount of prior funding to work from. NowRx’s splendid five years of operation might be due to its sustainable differentiation factors. The key differentiators lie in its core pharmacy technology, QuickFill. The company also utilizes robotics and artificial intelligence in its dispensary system, and it has its own delivery system. These factors enable the company to  increase efficiency and reduce the rising cost of prescription drugs. Therefore, NowRx is a Deal to Watch. 

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com.

Analysis written by Inez Sanjaya, October 22, 2021.