Stock pick: Watermark Funds Management

MedAdvisor (ASX: MDR) is a digital health company offering SAS solutions to optimise patient medication management. In particular, MDR specialises in smartphone applications to promote prescription adherence. MDR has established itself as a leading company in this space globally, validated by a series of major offshore deals signed recently. It also has several large strategic partners and customers on its share register, including EBOS, Sigma, and HMS.

Poor prescription adherence is a real problem for the health system globally and is a common cause of hospital readmittance and therefore cost. The World Health Organisation believes that approximately 50% of patients with chronic disease in developed countries do not properly adhere to their doctor’s medication recommendations. As such, there are many stakeholders (governments, hospitals, insurers) looking for solutions. More recently, COVID-19 has accelerated the focus for digital strategies given reduced patient engagement with pharmacists.

While MDR has been around for a while and predominately domestic focussed, it has recently made some material in-roads to offshore expansion, especially the US. In the last 12 months, it has signed two US partnerships that should significantly de-risk its entry to that market. Adheris and HMS are currently market leaders in US adherence programs having built relationships over many years. Until now, however, they have not had adequate digital solutions to meet growing client demands. MDR’s partnership with these companies is symbiotic, as MDR gets a warm introduction to key clients, while its partners get a turn-key digital solution. Given the pent-up demand for digital adherence programs, there is potential for MDR to grow its US customer count quickly and efficiently. MDR is currently running pilot programs with two top-10 global pharma companies. Success here would be a key catalyst.

The key risk to our thesis is a delay in cashflow from pilot activity in the US. While MDR has many irons in the fire momentum in the US is the key value driver.

This information has been prepared and provided by Watermark Funds Management. To the extent that includes any financial product advice, the advice is of a general nature only and does not take into account any individual’s objectives, financial situation or particular needs. Before making an investment decision an individual should assess whether it meets their own needs and consult a financial advisor. This stock pick was published on 22 May 2020 and is subject to change.