Pill delivery startup Zoom Health is looking to raise $3 million through crowdfunded equity platform Snowball - to pursue what it sees as a $175m market opportunity.
A sister company to online pharmacy Zoom Care (in which it holds a 49 per cent stake), Zoom Health delivers prescription medicine to "high-value" patients - or those on five or more medications.
"These high-value patients tend to be over 50 years old and many live in low socioeconomic communities," Zoom Health says in an investor summary.
Co-founder, managing director and major shareholder David Taylor is blunt in conversation with the Herald.
He says many of Zoom's target customers don't have the money for a bus to the pharmacy, let alone $15 for delivery from his company.
Soon after Zoom Health was created, Taylor and his team "Realised we were chasing the wrong patient," he says. Many suffering chronic conditions, particularly in the Maori and Pacifika communities, just didn't have any means to pay for Zoom's service. "I grew up in Panmure. I thought New Zealand was better than that."
It wasn't, so around 18 months ago, the embryonic Zoom Health changed tack, with a new business plan to draw income primarily from existing public funding between Pharmac (which cover all or most of the medications) and local health authorities (that cover the delivery cost).
Zoom started to chase contracts with District Health Boards. So far, 10 of 20 have signed up.
Without home delivery, many in the target market have low rates of taking up prescriptions - especially if repeats are involved.
Prescriptions are often divided into multi-pill sachets to make it easier for patients to take the right mix of medication at the right times.
"We bring the pharmacy to you," Taylor says.
During, the first Covid lockdown it was literally "we" as Taylor and his team scrambled to fulfil a number of deliveries themselves as couriers were variously sidelined or overwhelmed. Although hectic, the MD says it was also a crash-course in meeting customers face-to-face.
His company now has an exclusive contract with NZ Post's courier arm for next day delivery in most areas, and two-day delivery for remote rural addresses.
Founding investors have put $10m into establishing Zoom Health, Taylor says (the one-time Radiant Health MD and AstraZeneca director owns 50 per cent of the company himself at this point).
There have been a couple of years of chunky losses as Zoom Health (which now has a team of seven) got established and built an app. Taylor was very happy with the app, which allows people to order and see their prescriptions being filled in real-time, as well as keeping a history of their prescriptions and drug-taking that's useful for healthcare professionals. There are also quick summaries of need-to-know information about various drugs, plus video tutorials on the like of how to use an inhaler.
But another blunt early lesson was that more than half of older, chronic patients don't have a smartphone - and not all of those who do are comfortable wrangling an app. Orders would also have to be taken by txt and other lower-tech means.
Circling around a valuation
At this point, no valuation is set for the raise. Taylor says Zoom Health will be guided by feedback from wholesale investors. Early talks indicate the raise will be at a valuation of around $20m.
An investment memorandum is due to be finalised by early November, with the raise wrapped up by the end of that month.
The money will be used purely for scaling up Zoom Health's operation in New Zealand.
Taylor has pencilled in another raise for next year. If that goes ahead, those funds will be used to expand into Australia.
Zoom Health has also fielded interest from Singapore and Europe. A funding round for those opportunities could follow the year after next.
"And the following year we could list," Taylor says.
The competitive landscape
The US market is already spoken for, with around one in three prescriptions delivered door-to-door.
US company PillPack first implemented the delivery medicine model in 2014 and quickly grew revenues to US$299m by 2018. Revenues were forecast to reach US$635m in 2019 before the company was acquired by Amazon for an estimated US$750m.
Locally, there's direct competition from privately-held Pilldrop, also founded in 2017, which follows the same model and has contracts with six DHBs.
The competition "helps to create more noise around direct pharmacy," Taylor says, "We're confident we have a superior offer."
Zoom Health made a $2.2m ebitda loss in FY2020, according to its investor summary, as revenue doubled during what was its second year of commercial operation to $1.1m.
It predicts a similar loss next year before an ebitda profit of $453,000 in FY2022 - which it forecasts will grow to $17.7m by 2025 as sales top $151.9m.
The investor summary says the total market for subsidised prescriptions, and subsidised handling fees, is some $533m per year, with the chronic patient segment of that accounting for an around $175m.
In other words, with its predicted $153m revenue within five years, Zoom Health sees itself very much dominating its niche.
"It's taken us three years to develop something, but it's very sticky. Once people are on it, they don't move," Taylor says.