Delivering Digital Pharmacy Solutions: Why We Invested In Medly Pharmacy
Based on our selective investment approach, we partner with a small handful of companies each year. Today, we announced the latest of these investments in the internet-enabled services vertical — a $100 million Series B we co-led with Greycroft for Medly Health, a company bringing much-needed change to the modern pharmacy experience. Medly is a prime example of an innovative company that has shifted a legacy business model online to lower costs and elevate the customer experience.
As we’ve discussed in a previous blog post, the pharmacy delivery market has multiple service gaps, and startups are just now beginning to address these in expanding geographies. We began our diligence with Medly long before COVID-19 increased the attention for on-demand home delivery business models. However, the crisis has created new awareness for the needs of consumers and patients today: the difficulties of people on lockdown (especially vulnerable groups) to get to a pharmacy for their prescription drugs. While incumbents like Walgreens and CVS are also starting to offer delivery as part of their response, we see significant value and advantage for companies with high-touch service baked into their culture as opposed to just “capitalizing” on it now.
The following are just three of the many factors that inspired our investment in Medly to support its nation-wide expansion of digital pharmacy delivery solutions:
A Massive and Growing Market
The larger U.S. prescription drug market is expected to grow to $550 billion by 2021, up from $424 billion in 2018. This market is unique because customer needs are driving retention and high patient loan-to-value ratios (LTVs). Investors are taking notice. Venture-backed deals and investment in pharmaceutical supply chain startups alone surpassed $1 billion in Q3 2019, a 65% increase from Q3 2018.
An Addressable Service Gap
More importantly, Medly is solving real challenges. The existing pharmacy landscape is an opaque and complicated system. The industry is highly regulated, the ecosystem is complex, and multiple stakeholders are engaged through every step of the value chain. Aggressive consolidation has also led to oligarchic dynamics and complacency. As we did our diligence, all players in Medly’s ecosystem communicated acute service gaps.
As one of the first full-service retail pharmacies to apply an on-demand eCommerce model to prescription drug fulfillment, Medly is uniquely focused on addressing the service gaps in the existing pharmacy landscape. Medly aligns opportunities to create value for each stakeholder, from payer to manufacturer to physician to patient. We believe the value proposition of outcome-driven pharmacies like Medly will only continue to increase as more health systems transition to value-based models of care.
A Capital-Efficient CEO with Deep Industry Expertise
Brothers Marg Patel and Sahaj Patel co-founded Medly in 2017 as the second generation managing a chain of family-owned pharmacies. Marg Patel, specifically as CEO, scaled the business to a $150M revenue run rate on $10M of equity raised. We believe this disciplined approach to growth will continue to hold as the company expands nationally. Further, we believe Medly’s ability to gain traction in new markets is the result of Marg’s intimate knowledge of the pharmacy industry, which has led to a bottom-up culture of service.
Taken together, Medly is a well-run and experienced company in a booming industry solving important challenges that have never been more relevant. As the Volition Capital Consumer Sentiment Study highlighted, during the COVID-19 related stay at home mandates, more than 96% of participants who tried pharmacy delivery for the first time during quarantine said they would likely continue afterward. Just as consumers are welcoming pharmacy delivery services into their homes, we want to welcome our friends at Medly into the Volition Capital family.