| Small & micro cap project / Activism insight

Tabula Rasa HealthCare: Signs of moat ​

by | May 12, 2020

The company has developed a proprietary, cloud-based software platform that reduces adverse drug events and lowers healthcare costs in at-risk populations.

What is different?

For over thirty years, traditional pharmacy software systems have offered clinicians a binary view of drug-to-drug interactions, presenting an assessment of one single drug against another single drug. These legacy systems may be adequate to assess the safety of a medication regimen consisting of only one or two medications. However, the elderly, the chronically ill and those with behavioral health challenges, are more likely to be prescribed more than two medications, and are typically at high risk of an adverse drug event, or ADE. In these populations, many patients take more than 10 different medications a day, and other technologies are inadequate to optimize safety and minimize risk. The company’s novel and proprietary Medication Risk Mitigation Matrix, or MRM Matrix, delivers a simultaneous, multi-drug review which identifies medication-related risks across a variety of safety factors and presents meaningful opportunities to mitigate these risks.

What we like / Signs of moat

  • Subscription revenue: The company charges subscription fees which are recurring in nature.
  • First mover + proprietary product + recurring revenue with a high retention rate provides the company with a huge competitive advantage which could make it difficult for a new entrant to penetrate the market.
  • High retention rates: The company’s annual revenue retention rate was 99%, 99% and 98% for 2018, 2017 and 2016, respectively, and the company’s client retention rate was 96%, 95% and 93%, respectively.

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