Through its subsidiary PharmCo, LLC, South Florida-based Progressive Care provides health services that specialize in the provision of prescription pharmaceuticals. The company is potentially an undiscovered story on Wall Street having been established in 2005 and becoming a public entity through a reverse merger completed in 2010. While the majority of Progressive Care's revenues stem from retail pharmacy orders, the company offers a broader set of services which differentiate it in the market from general retail prescription fulfillment. These services include health practice risk management, specialty compounded medications, special needs services including the sale of anti-retroviral medications, medication therapy management (MTM), and the supply of prescription medications to long term care facilities. In our view, Progressive Care is an intriguing growth company in the pharmacy industry that appears in the cusp of generating recurring free cash flow. Lacking institutional sponsorship, the company remains relatively unknown on the street despite strong share performance with shares up 300% over the last twelve months ending April 7, 2016.
"We have been impressed by the strong growth at Progressive Care. The company's top line rose by 21% organically last year in 2015 due to new products, sales and marketing efforts, and savvy leadership - despite the company being cash constrained. Looking ahead to 2016E, CEO Shital Mars sees strong 17%+ organic growth, with sales expected to reach at least $16mn and orders per month expected to surpass 21,000 by year's end. Further, while the company was able to achieve profitability on a management-adjusted basis - excluding non-cash and certain unusual items - in multiple periods during 2015, Progressive Care seems poised to finally reach a status where the company is generating recurring and growing EBITDA driven by higher sales and operating leverage. The company seems off to a strong start in this regard, reporting strong orders and sales growth for the first three months of the year, including record company results in March. Indeed, in March Progressive Care reported $1.5mn in revenue and 18,600 prescription orders. Longer term we see the potential for continued growth at Progressive Care, driven by a new facility, geographic expansion - Mars expects to have licenses to sell in all 50 US states by year-end - as well as possible strategic acquisitions to accelerate the company's drive to build a national brand," stated Ajay Tandon, CEO of SeeThruEquity. "We are initiating coverage with a 12-month price target of $0.10 per share."
Additional highlights from the report are as follows:
High impact pharmacy services
Although most revenues stem from pharmacy orders, we see Progressive Care as being highly differentiated due to the expansive specialized service offerings built around its pharmacy fulfilment. Progressive Care is much more than another drugstore pharmacy; it offers innovative, personalized solutions, which raise the overall quality of managing patient care while increasing the role of the pharmacy in the monitoring and determination of patient outcomes. These solutions include in-home medical risk evaluation with a licensed company representative to assess in-home health risks, patient quality of life needs, and address any problems with adherence to medication therapies. They also include a health practice risk management service for doctors' offices / clinics, whereby the company uses data and experience to identify areas for improvement in patient health outcomes and for reducing therapy costs. While these services add costs, they led to Progressive being designated with preferred provider status by many PBMs / healthcare institutions in South Florida, positioning it as an industry leader.
Strong fundamental growth
We have been impressed by the strong growth at Progressive Care. The company's top line rose by 21% organically last year due to new products and savvy leadership, despite the company being cash constrained. Looking ahead to 2016E, CEO Shital Mars sees strong 17%+ organic growth, with sales expected to reach at least $16mn and orders per month expected to surpass 20,000 by year's end. Longer term we see further growth potential stemming from geographic expansion - Mars expects to have licenses to sell in all 50 US states by year-end - as well as possible strategic acquisitions to accelerate the company's drive to build a national brand.
Initiate coverage with a price target of $0.10
Our analysis indicates a fair value estimate of $0.10 per share (detailed on pages 9-10) for Progressive Care. We see the company as an intriguing speculative growth story in a strategic area of the healthcare sector, with strong recent results and a chance to begin generating cash flow as soon as this year. If achieved, the price target of $0.10 represents potential upside of 200% from the recent price of $0.04 and a potential Enterprise Value of $33.7mn, which we see as appropriate for a company growing at double digit organic growth rates with $16mn in sales in FY16E and several potential additional catalysts ahead.
