By Brian Marckx, CFA
OptimizeRx Corp (OTC Markets:OPRX)
filed their 10-Q for the second quarter ending 6/30/2012 on 8/14/2012. Revenue came in slightly better than our estimate with net income and EPS handily beating our numbers due to much lower than anticipated operating expenses. Aside for updating our model for Q2 results, we have made no other changes to our financial projections and we are maintaining our Outperform rating and $5.00/share price target on OPRX.
OPRX notes in the 10-Q that they continue to make progress on various fronts, all of which are geared towards expanding their customer base and growing revenue. OPRX cites ongoing progress with bringing on new accounts (which is evidenced in the recent revenue growth), with integration of SampleMD into their partners' eprescription systems, enhancements to SampleMD, and in building awareness about their prescription drug couponing system via attendance at industry events and conferences.
Q2 revenue was $515k (+158% yoy), up from $329k (+57%) in Q1 and about 8% better than our $475k estimate. Operating expenses were $592k compared to our $917k estimate, marking the second straight quarter that they came in well below our numbers, mostly as a result of lower than modeled advertising expenses and professional/consulting fees.
Q2 net income and EPS were ($76k) and ($0.01), significantly ahead of our ($442k) and ($0.03), the difference mostly attributed to the beat on operating expenses. We continue to model Q3 as the first quarter that OPRX turns in a positive quarter.
We believe management has done an excellent job with not only growing revenue and making tangible progress on the operational front but also with cash management. OPRX exited Q2 with $528k in cash and equivalents, compared to $798k at the end of Q1. Cash used in operations in Q2 was $248k but stripping out changes in working capital, cash from operations was an inflow of $80k. Cash used in investing activities was $22k in Q2 and $56k through the first six months of 2012. The majority of cash used in investing activities relates to web development costs.
Operational Progress Continues On Several Fronts
- Integration Into e-Prescription Platforms: As a reminder SampleMD was first integrated into Allscripts' e-prescription system in late 2010. Since then OPRX has been very active in expanding the SampleMD footprint in additional e-prescription providers including NewCorp and DrFirst, two e-prescriber applications that adopted SampleMD since late 2011. OPRX notes in the most recent 10-Q that during Q2 they completed the integration of SampleMD into the NewCorp platform and launched it with DrFirst. Allscripts has now committed to integrating SampleMD into the remainder of its electronic medical platforms including their PRO EMR by year-end 2012, which will significantly expand the reach of SampleMD. Our modeled ramping in revenue growth in 2H 2012 reflects the expansion of SampleMD to almost 100k prescribers by the current year-end.
- SampleMD Enhancements: OPRX has been working on certain enhancements to SampleMD including functionality for physicians to be able to schedule meetings with drug reps. As we indicated in our initiation report on OPRX, drug rep scheduling functionality could reduce the hassle physicians deal with heeding drug reps' sales calls at all points during the day and eliminate rep cold calling - potentially benefitting both the doctor and drug rep/drug companies. OPRX rolled out their eRep Scheduler application in a beta test to Louisiana's largest health system - OPRX notes in the 10-Q that they are "working with a major pharmaceutical manufacturer" in this pilot test. OPRX will test the application further and hopes to initiate a targeted launch in Q4 of this year. Other enhancements to their technology that the company is working on is functionality to allow prescribers to connect in real-time directly to manufacturers for inquiries about the products (drugs) as well as developing plug-and-play connectivity/integration allowing for SampleMD to work seamlessly with existing electronic platforms.
- Marketing / Advertising: OPRX recently hired a VP of Eastern Sales and beefed up their sales and marketing staff. The company attended some focused industry conferences, promoting the benefits of SampleMD to health systems and drug manufacturers. The company will continue to attend events and in Q2 attended the Marcus Evans Pharma Executive Summit, an invitation-only event of the top 150 pharmaceutical marketing and brand executives and the Pharma West conference. OPRX will also be a keynote presenter for the Allsripts ACE User conference in August. The company has also begun other marketing and awareness building initiatives designed around increasing visibility of OPRX and SampleMD.
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