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Executives

David Lester - Chief Operating Officer

Shad Stastney, Chairman and CEO

Analysts

Brian Marckx - Zack’s Investment

Jason Revland - Blueprint Capital

Ryan Parker - EquityBrief Capital

Joey Delahoussaye - Mindshare Capital

OptimizeRx Incorporated (OTCQB:OPRX) Q2 2013 Results - Earnings Call Transcript August 14, 2013 12:00 PM ET

Operator

Good everyone and welcome to the OptimizeRx Incorporated second quarter 2013 earnings release conference call. Just as a reminder, today’s conference is being recorded. This will be a 30 minute call with the potential for questions after the discussions. A transcript will be available for 90 days for those interested parties who want a copy. Please contact Ms. Gabrielle Sabatini in our Rochester, Michigan headquarters.

Now, for opening remarks and introduction, I would like to turn the conference over to Mr. David Lester, Chief Operating Officer of OptimizeRx. Please go ahead, Mr. Lester.

David Lester

Thank you, operator and thank you everybody good afternoon, thank you for joining the OptimizeRx second quarter 2013 earnings call. As required, I am going to take a moment to read the Safe Harbor language to begin this call.

This conference may contain certain forward-looking statements within the definition of Section 27A of the Securities Act of 1933 as amended in subsection 20(1)(e) of the Securities Act of 1934, amended. These forward-looking statements should not be used to make any investment decisions, the words potentially estimate possible and seeking or similar expressions identified forward-looking statements which speak only as of the date the statement was made.

The company undertakes no obligation to publicly update or revise any forward-looking statements only because of new information, future events or otherwise. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified.

Further events and natural results could differ materially from set forth and contemplated buy or underlying the forward-looking statements, the risks and uncertainties to which forward-looking statements are subject to include but are not limited to the effective government regulation, competition and other material risk.

With that, let me just take a moment to share the financial highlights from the second quarter of 2013. We finished the second quarter of 2013 with revenue of $1,104,087 bringing revenue for the first six months of 2013 to $1,773,377. Additionally, we achieved net income during the second quarter of 2013 of $354,159. During the same period for 2012 revenue was $591,628 while the company had an operating loss of $76,059.

The record revenues were driven by our SampleMD solution which generated approximately 256,628 new ePrescriptions with co-pay coupons or free sample vouchers during the second quarter of 2013 helping patients more affordably start and stay under prescribed medication, thus the substantial increase from 177,000 distributions within the first quarter of 2013 and even more substantial from the 49,400 distributions we had in the second quarter of 2012.

As mentioned earlier, net income for the three months ending June 30 of 2013 was $354,159 compared to a net loss of $76,059 from the three months ending June 30 of 2012. Net income for the first six months ending June 30, 2013 was $249,333 compared to a net loss of $376,795 for the six months ended June 30, 2012. To talk more about this record performance and the company is going forward. I would like to now turn the call over to Mr. Shad Stastney, Chairman and CEO of OptimizeRx, Shad.

Shad Stastney

Thanks very much, Dave and thanks everyone on the call for joining us again this quarter. As Dave detailed we are very pleased with our second quarter growth both in absolute terms and in terms of the growth from the first quarter of this year and second quarter of last year.

We are also very excited about the potential to continue that growth going forward. As we’ve discussed with many of you and on these calls in the past, there are two pieces to that growth; one is to continue to grow our distribution phase by adding EHRs and adding healthcare providers and the other is by continuing to grow our brand cabinet in our relationships with manufactures.

We see good progress on both of those fronts. On the EHR particularly, we have highlighted in the past for you the importance and the optimism we have around our partnership with [PR] position. As referenced we expected that that will lead to the first EHR addition through them in the fourth quarter of this year. Currently scheduled to come online November 1st and that it’s a group called NextGen.

We also expected that there will be an additional healthcare provider access through PDR which we are excited about. On the brand side we continue to see a very strong sales pipeline, driven both by the addition of new brands and new manufacture and by the expansion of our relationships with our existing manufacturers going from select brands to enterprise wide contracts. So we continue to actively engage in using both levers to increase that total distribution number.

However in addition to the coupon business which we continue to see growing, we have made significant strides in terms of adding capabilities to offer other products to our EHR distribution network and to offer for subscription by our pharmaceutical clients. And we expect to have a number of announcements regarding strategic partnerships on that front over the course of the next several months, which will lead to concrete product offerings in 2013.

And as we've highlighted for you in the past, we believe that's going to be a key part of our business going forward, that we'll be able to offer really a comprehensive solution to pharmaceutical companies and ultimately other advertisers who are looking to reach doctors in their work flow. In fact, in terms of quantifying the growth, I can announce that our July distributions were 110,627 which has a record number and are highest to date. So we're happy to say that the growth is continuing.

With that I would like to open the call for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Brian Marckx for Zack’s Investment.

Brian Marckx - Zack’s Investment

Can you talk about the revenue share rate, and what the percentage is of the revenue share?

Shad Stastney

Revenue share continues to vary by partner but between 40% and 50% is the range that we're operating in currently.

Brian Marckx - Zack’s Investment

Okay, and the 266,000 distributions number; are those all paid distributions?

Shad Stastney

No, of those 19,983 were the legacy unpaid distributions.

Brian Marckx - Zack’s Investment

Are you guys willing to break out what the distribution revenue was versus the set up fees?

Shad Stastney

We are. I don’t believe, I have that number handy now but we should be able to come up with that Brian and get back to you. The distribution number is well in to the 90% range for this quarter, but we'd happy to give you the exact rate now.

Brian Marckx - Zack’s Investment

Okay, that's great. Just one last one; on the health products partnership, the 10-Q mentioned the integration was complete, but if I understand right, there is about 2,200 physicians in the HealthTronics Network. So does the integration being complete does that mean that all point 200 physicians have access now to (inaudible).

Shad Stastney

I believe the plan HealthTronics and let’s verify HER, they are rolling out gradually by mid-September all probably 200 doctors should have access.

Brian Marckx - Zack’s Investment

Okay. All right thanks a lot guys.

Operator

Your next question comes from the line of Jason Revland with Blueprint Capital.

Jason Revland - Blueprint Capital

Hi everyone question about the strategic partnerships that you reference to that’s possibly kicking in 2013. Could you elaborate on what those could look like and are you suggesting those could be revenue generating in 2013 or will that be revenue generating in 2014?

Shad Stastney

Given that we are already setting in August, I don’t know how much revenue generation we’ll be seeing in 2013 its more likely to be 2014. But in terms of solidifying partnerships yes, that’s something that we hope to accomplish in 2013. And there are couple of goals with respect to those strategic partnerships.

First and foremost is to align ourselves with the best-in-class partners for each of the new particularly services or new products that we hope to introduce in to our EHR distribution network. So we have made a decision that it makes sense to kind of try to choose best-in-class from each area that we are looking at and not only potentially contract with those parties, but explore a deeper relationship as well which could include some sort of strategic partnership or could include some sort of investment in us.

So we are having a number of those discussions, currently, none of which are at the point where we can announce somewhere that are in final form but we are very excited about the potential there. So that’s the reason for pursuing that.

Jason Revland - Blueprint Capital

That’s great color I appreciate that. I’ll get back in the queue.

Operator

Your next question comes from the line of Ryan Parker with EquityBrief Capital.

Ryan Parker - EquityBrief Capital

Hey guys. Nice quarter.

Shad Shastney

Thanks, Ryan.

Ryan Parker - EquityBrief Capital

I think Brian already asked out of the 265 distributions in Q2 am I correct to understand that 245,000 were paid?

David Lester

Approximately, that’s exactly right.

Ryan Parker - EquityBrief Capital

Okay. 125, you said 19,000 something were legacy distributions.

David Lester

19,983 that’s correct.

Ryan Parker - EquityBrief Capital

Okay. What was it, what was the distribution reporting minus the distributions were $92,000 in April. So if back out the $110,000 from July would that be right that you have like $154,000 for May and June? Excuse me, for April and you got May and June.

David Lester

July is third quarter. So the July is incremental to the $265,000 from the second quarter.

Ryan Parker - EquityBrief Capital

Okay, right.

David Lester

July is the number that had been previously disclosed that will be part of the third quarter distribution total.

Ryan Parker - EquityBrief Capital

Right, right. Can you breakdown what the distributions were for the months April, May and June?

David Lester

I believe we have that we can certainly get that and get back to you, it’s they were, to give you the preview they were relatively consistent in the $85,000 to $95,000 range from us, so there is some plateauing there but we move up again in July.

Ryan Parker - EquityBrief Capital

Okay, that’s it from me. I will get back in queue.

Operator

Your next question comes from the line of [Sean Marcony] a private investor.

Unidentified Analyst

Yeah, I just wanted to actually the question last week I saw that Merck's bought controlling interest in the Physicians Interactive and I know you guys have a law suit against those guys, right now, and that was a shame from an investor's perspective, how should I look at that current situation?

Shad Shastney

I think there are kind of two ways to look at it. It really depends on how you (Inaudible). One is, you can -- and we think both have positive assets to us. On the one hand what we hear from evaluation standpoint is positive and certainly the interest of Merck in the space is a positive sign. The fact that Merck even knows through venture arm recognizes the value here, I think it’s a very strong statement and we consider that significant positive.

From the competitive standpoint I would say we consider it to be a very tangible positive, in that with Merck a single pharmaceutical company, said that essentially although through their venture arm, Physician's Interactive we are less chance really the sole agnostic pipe through which groups can deliver their offers and to health care providers and select (Inaudible), from the EHR side as well.

So I think we're, suffice to say quite excited about the fact that acquisition took place, again two different ways to looking at it, but both have we think very aspects for us.

Unidentified Analyst

I know, I agree that's only a positive thing. Do you guys have any idea what kind of valuation that Merck bought in this (Inaudible)?

Shad Shastney

We've seen no confirmation and have no direct information on that. We had the rumored number is over $100 million, total equity value and total enterprise value, yep.

Unidentified Analyst

Okay. Thank you guys.

Operator

Your next question comes from the line of [David Shear] a private investor.

Unidentified Analyst

(Inaudible)

Shad Shastney

David, I had a very difficult time hearing you.

Unidentified Analyst

Is Healthtronics situation is that off that or is (Inaudible).

Unidentified Company Representative

Its Healthtronics is op out only.

Unidentified Analyst

Okay, great. And are there any new developments in the PDR relationship you can talk about against that and how is that and solidify?

Shad Shastney

I think it's there has been no structural change to the PDR relationship, we continue to strive, it is a very good relationship. I would say that we are going through the implementation phase and really with the first EHR to come online or vetting out what a natural deal looks like as opposed to what a [perspective] deal looked like in the original documentation phase. So I wouldn't [scot dry] that there are any issues what so every, it's really just get it done.

Operator

(Operator Instructions) Your next question comes from the line of Joey Delahoussaye with Mindshare Capital.

Joey Delahoussaye - Mindshare Capital

Couple of questions. Can you confirm that the PDR integration, is that going to be producing revenues starting in the fourth quarter. Is it hard to tell from the Q if the integration is still on time for the end of October or if that’s slipping couple of months?

Shad Shastney

What we're being told now and again we're accessing [next gen] through PDR, is that remember, first is the target launch date. That would likely mean that there will be some revenue in the fourth quarter, but primarily it's going to be a 2014 impact. So, it will be some sort of phase in just look most EHRs will go. We don’t go directly from earth to Pluto; we'll go from earth to Mars and (Inaudible).

Joey Delahoussaye - Mindshare Capital

Can you say how many drugs I guess, you're so called promoting through the coupons and maybe how that’s grown sequentially from the first quarter numbers?

Shad Shastney

In terms of the current brand contract, we have approximately 65.

Joey Delahoussaye - Mindshare Capital

Okay, that sounds a little bit familiar. Is that about the same number as then in the first quarter?

Shad Shastney

It's roughly the same numbers in the first quarter and you know, the way in the pharma space the way we typically see is that it will be chunky as with the case with the past year in the first quarter and as pharma budgets get set for next year which is the process we're starting right now, will the changes as we go forward from here in particular in to next year. So I wouldn't frankly be expecting, I wouldn't want you to expect a ton of new brand editions between now and the end of the year.

Joey Delahoussaye - Mindshare Capital

Okay. Of those 55 drugs, were any of them Merck drugs?

Shad Stastney

I don’t believe so.

Joey Delahoussaye - Mindshare Capital

No, okay. And can you remind me of, I guess the number of doctors, prescription writing doctors that you guys in front of and maybe how many new I guess HealthTronics would be on the table and PDR again?

Shad Stastney

Sure. And just to be we -- this is again information that we get from either our EHR partners or from PDR, so it’s approximately 100,000 currently, of which 2200 were added through HealthTronics and we think the potential about PDR through very at EHR contacts has the potential to add another 40,000 to 80,000 doctors.

Joey Delahoussaye - Mindshare Capital

And those eligible doctors or prescription writing doctors, 40,000 to 80,000 doctors?

Shad Stastney

We are told that those are prescription writing doctors, yeah.

Joey Delahoussaye - Mindshare Capital

Okay. And then on the 55 drugs that you mentioned your contacts, how many of those were in the urology space currently and would you expect that, I mean I guess tunnel through to the HealthTronics impact? And are there more drugs you would be expecting to bring on to the platform or just a greater penetration that was the current drugs, just looking to see, I guess what's your urology exposure is that and may be what it could be?

Shad Stastney

Sure. And I think there are currently four big urology drugs in our [pavement]. We would anticipate both of that additional manufacturers of primarily urology drugs will take note of the fact that we have a group like HealthTronics which is so focused on urologists with good reporting into tractability. So we expect that to be a key draw for those brands.

And we also anticipate that some additional drugs that are going to be coming on in any case including [Viagra]. So we already know that’s in process and then we would anticipate that I think there the other group as we had those additional urology drugs who will be more keen to join our platform. So it should be hopefully circle.

Joey Delahoussaye - Mindshare Capital

Okay, great. That addresses my questions for now. Thank you.

Operator

Your next question is a follow-up from Ryan Parker from EquityBrief Capital.

Ryan Parker - EquityBrief Capital

First of all, did you say that the -- you estimated the value of the investment in Merck or in physicians that are active by the Merck on to be roughly 100 million in enterprise value?

Shad Stastney

That’s complete rumor and just to be clear, but that is number that we heard.

Ryan Parker - EquityBrief Capital

Pretty impressive. Couple of other questions. What is the status of the LDM litigation for lawsuit?

Shad Stastney

At the current time we are waiting a decision from the Federal Court in Missouri on our motion for a preliminary induction. Unfortunately I can’t handicap exactly when we expect to receive that because they don’t give a timeline, but that is where that currently stand.

Ryan Parker - EquityBrief Capital

Okay. And on the -- I know that Allscripts is supposed to roll out enterprise-wide, I think I used the (inaudible), what is the status?

Shad Stastney

Allscripts has formed -- again this is kind of double exhort, Allscripts has formed a new business group which frankly alleviates the importance of what we do with them internally in terms of facets of pharmaceuticals and pharmaceutical messaging. So we have you that. On the other hand what that meant is that just (inaudible) into the queue for that group. So at the current time you just think it has not been officially made yet. We are still being called to expect that it will be made as we had been called to expect.

Ryan Parker - EquityBrief Capital

Okay, so instead of June 15, what was the new date?

Shad Stastney

Currently, we don’t have an exact target date.

Ryan Parker - EquityBrief Capital

Okay, thank you.

Operator

Your next question is a follow-up from Jason Revland with Blueprint Capital.

Jason Revland - Blueprint Capital

So regarding the just devices dilution overhang or the best option, could that be something that could be on the table as far as the strategic partnerships/strategic investments are being discussed or that be considered a wishful (inaudible)?

Shad Stastney

I would say that part of the reason that we would be interested in addition to having strategic partners taking capital from them is that they will help us move toward that number, the $9 million number which will allow us to take by the time. So I'd say taking -- exercising that option continues to be something that we would like to do and get a capital from strategic partners is as good frankly as getting it from anywhere else assuming that the terms are appropriate, I mean we also get all the benefits from the strategic. So yeah, that's a key part of the process.

Jason Revland - Blueprint Capital

Okay, great. Thanks guys

Operator

At this time, there are no additional questions. I would like to turn it back over to management for closing remarks.

Shad Stastney

Again, we'd like to thank you all for attending the conference call. We hope we answered all of your questions. If not of course and for those of you, for whom we offered follow-up materials, we'll do that. And we look forward to speaking with you in the interim, of course certainly after our next quarter. Thank you very much.

Operator

Thank you. This concludes today's conference call. You may now disconnect.

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