Santa Monica-based prescription drug comparison price and discount platform GoodRx Holdings Inc. late last month announced an abrupt transition, with its two co-founders ceding their chief executive titles to an outside internet tech veteran, who is assuming the role on an interim basis.
GoodRx announced after market close on April 25 that Tervor Bezdek and Doug Hirsch, who co-founded the company in 2011, will henceforward be chairman and chief mission officer, respectively.
Scott Wagner, who for eight years served as a top executive at Tempe, Arizona-based internet domain registration service GoDaddy Inc., was named interim chief executive while a search for a permanent replacement gets under way.
The chief executive transition came without warning, though it follows a challenging year for GoodRx, as a major grocery chain pharmacy operator temporarily stopped accepting GoodRx’ discount program, which sliced into revenue.
The company’s main business line is a platform that allows consumers to comparison-shop among 70,000 participating pharmacies for the pharmacy in their region with the cheapest prices for prescription drugs; that is coupled with a subscription service that provides substantial discounts off the marked price for the drugs.
In recent years, GoodRx has sought to expand its consumer focus with the acquisition of a telehealth service. It has also developed a direct business-to-business sales component with pharmaceutical manufacturers, helping the pharma companies to market their drugs on its platform. And it recently expanded its main consumer-focused prescription drug comparison-pricing platform to include health care providers.
Grocery pharmacy dispute
For much of last year, the company was embroiled in a dispute with Cincinnati, Ohio-based Kroger Co., parent of Ralph’s Grocery Co. and Food 4 Less. Last spring, Kroger pharmacies stopped accepting GoodRx discounts; neither company elaborated on the points of dispute. The impasse was resolved at some point last summer, but not before the company was forced to reduce its revenue guidance by $30 million for the third quarter. Prescription revenue remained lower year over year during the fourth quarter.
Over the longer term, GoodRx has been a disappointment for investors. After peaking at $56 a share in February 2021 – just five months after going public – GoodRx shares have been on an inexorable downward slide, closing at $4.67 on April 27. That’s a drop of more than 90% in a little more than two years.
“Just looking at that share price drop from nearly $60 a share to below $5 a share, that alone is reason enough for a CEO transition,” said Stephanie Davis, senior managing director at SVB Securities in New York.
Davis said another factor may have been the more public and investor-facing nature of a public company chief executive’s role, observing that Bezdek and Hirsch did not generally engage with the investment community beyond what was required in quarterly teleconference calls. She said Bezdek and Hirsch may have decided they preferred roles with more internal and strategic focus.
Officially, GoodRx in its chief executive-transition announcement chose to look forward, calling Wagner’s hire an “expansion of the executive team.”
Wagner was chief executive at GoDaddy from 2017 to 2019 and president of that company for five years prior to that. During his eight years with GoDaddy, the company’s revenue tripled to about $3 billion. Prior to joining GoDaddy, Wagner held executive posts at New York-based Kohlberg Kravis Roberts and Boston Consulting Group.
According to the announcement, Wagner “will work closely with Hirsch and Bezdek, who remain part of the GoodRx leadership team, to accelerate product innovation, strengthen the company’s ecosystem of industry partners, and grow its customer base.”
Wagner took a similar tack in his official comments.
“I look forward to helping the company expand its core consumer marketplace to serve more people with a richer, engaging experience for their health care needs,” he said. “GoodRx has a number of exciting opportunities to add value across the ecosystem of health care professionals, pharmacies, insurers and manufacturers – all in service of getting the consumer the right medication affordably and easily.”
Investors, however, did not have such a rosy outlook. The company’s share price tumbled 11.5% on April 26, the first trading session after the transition announcement. Shares fell another 4% on April 27 to $4.67.
Davis said the abrupt nature of the transition and the fact that Wagner was named as interim chief executive instead of as a permanent replacement likely played into investor concerns.
“Also, it didn’t help that this announcement was made two weeks prior to the first-quarter earnings release,” Davis said. Traditionally, public companies orchestrate C-suite transition announcements to coincide with an earnings release and conference call.
Davis and other analysts had a mixed take on the transition, and on Wagner.
“A change in perspective could be beneficial for the company and Mr. Wagner has had success in his prior roles, although we look to hear more on what he may look to improve upon at the company,” Jonathan Yong, an analyst with Credit-Suisse in New York, wrote in an update note hours after the announcement.
But other analysts expressed concern about the sudden and incomplete nature of the transition.
“The announcement to us seems abrupt, especially considering that Mr. Wagner is taking over as ‘Interim CEO’ and is not being placed in a permanent role effective immediately,” Jailendra Singh, managing director with Atlanta-based Truist Securities, wrote in a brief research note hours after the transition announcement.
SVB Securities’ Davis said she participated in a conference call with analysts the company hastily arranged for the morning of April 27; she noted that the fact the call was held at all was unusual considering the regularly scheduled conference call with analysts to review quarterly earnings was already scheduled for next week. She said Wagner was on the call, but that Bezdek and Hirsch weren’t.
“Scott (Wagner) discussed some of the areas that he saw the company falling short and how he intended to focus more on improving the consumer experience,” she said.