One of the many challenges startups face is finding the right niche for a business. After a few years of navigating choppy waters, ZappRx may be on its way to smoother sailing—as evidenced by some news the Boston startup is disclosing today.
ZappRx is making two announcements. First, the company—which is developing a way to streamline the cumbersome process of ordering and refilling specialty medications—has landed its first customer: Cambridge, MA-based Zafgen (NASDAQ: [[ticker:ZFGN]]), the obesity drug maker that pulled off a $96 million IPO last year and has a lead candidate known as beloranib in late-stage clinical testing.
Second, ZappRx is no longer a seedling. The Zafgen deal has led to a $5.6 million Series A round led by founding investor SR One (the VC arm of GlaxoSmithKline) and Atlas Venture. With the new backing, ZappRx has now raised $8.8 million in venture dollars since its inception in 2012. What’s more, Jeremy Levin, the former Teva Pharmaceutical CEO (and Ovid Therapeutics chairman, as we reported last week), has joined its board of directors.
Founder and CEO Zoe Barry (pictured above) says the company will use the cash to continue staffing up. ZappRx had six employees when Xconomy last caught up with the company in January 2014. It now has 25, with offices in Boston and New York, and as Barry says, half its employees are women.
The funding comes after ZappRx believes it’s finally figured out the best way to expand its business—cutting deals with biotech and pharma companies. ZappRx has had to go through a strategic evolution to get there. When Barry first started the company in 2012, the concept was simply to speed up prescription checkouts at pharmacies by combining aspects of e-prescribing medications and mobile payments in one software platform. The business plan? Target retail pharmacies and low-cost meds.
ZappRx shifted away from that and instead circled specialty medications—treatments that aren’t just pills you pick up at your local pharmacy with a prescription scribbled on a notepad. Rather, filling and refilling these prescriptions can be a hassle: several pieces of information, like lab results and diagnostics, are needed. Orders are processed between a matrix of healthcare providers, pharmacists, and patients, and can take days or weeks to fill.
ZappRx tries to make this complex system run more efficiently. It has a website and mobile app that automates the process, letting patients make their orders with a click and then track exactly where their prescriptions are. Providers can integrate the site into their prescription management systems. It’s all meant to help identify the bottlenecks in prescription fulfillment, and make things run more smoothly.
“As one person who’s not familiar with healthcare said to me, it’s sort of like a Domino’s Pizza tracker for a $100,000 medication,” Barry says.
Still, initially, ZappRx struggled with how best to implement that system. “We were still figuring out who pays for the platform: is it pharma? Is it a pharmacy?” she says.
The decision became clear: pharma and biotech companies benefit most financially when orders are filled more quickly. They are also more willing than other members of the healthcare ecosystem to try out a new technology, Barry says. So ZappRx is trying to establish itself first by forming partnerships with companies to help them fill orders faster. ZappRx would get an annual fee, as well as quarterly payouts, for these services.
“I think we’ll [eventually] come back to pharmacies, but for now, the platform is free to use if you’re a doctor, patient, or pharmacist,” Barry says.
ZappRx is specifically targeting biotechs and pharma companies with drugs for rare or orphan diseases that are getting close to launch, because there’s typically just one company selling them; “it’s achievable” to get that business, she says.
Zafgen is an example of that. It’s developing an injectable drug for severely obese people, and smaller groups of patients with rare conditions like Prader-Willi Syndrome. While both ZappRx and Zafgen are backed by Atlas (the VC firm actually incubated Zafgen several years ago), the two didn’t hook up because of a common investor. Rather, Barry says she randomly ended up seated next to Zafgen CEO Tom Hughes on a flight; the two started talking, and realized they both had the same backer.
“I said [to Hughes] ‘Yeah, we get high-cost medications to patients,’ and he said ‘Well, I’m going to need that.’ And the conversation went from there,” Barry says.
ZappRx isn’t divulging many details from the Zafgen deal, but Barry says that snagging Zafgen as a customer “triggered” its Series A, and apparently a lot more interest. Her company was originally going to raise a bigger round, but a “customer opportunity presented itself”—which she wouldn’t disclose—that led ZappRx to bet it could bank just as much cash without adding more investors and diluting the stakes of its current backers.
Will that bet pay off? The answer could come soon. “The market has matured faster than I had anticipated,” Barry says.
