Doximity: Right Path To Consolidate Market Share (NYSE:DOCS)

Description

I recommend buying Doximity (NYSE:DOCS). DOCS is a platform that provides a range of benefits for healthcare professionals, pharmaceutical companies, and healthcare systems. It allows healthcare professionals to interact with each other and coordinate patient care in a safe, HIPAA-compliant manner, and helps to streamline and digitize various processes to improve efficiency. It also offers the ability for pharmaceutical companies to conduct targeted digital marketing campaigns with a high return on investment, and for healthcare systems to conduct targeted campaigns and coordinate patient care across different systems.

Company overview

Doximity is an interactive platform and healthcare resource. Members of the platform can interact with coworkers, coordinate patient care in a safe manner, and perform virtual patient visits.

Healthcare industry has been slow to adopt digital tools to improve efficiency

U.S. healthcare spending rose 2.7% in 2021, to around $4.3 trillion, and is expected to rise to $6.2 trillion by 2028. In spite of the fact that healthcare is a major economic driver in the United States, it has lagged behind in adopting new technologies that have revolutionized other fields, creating a number of difficulties for hospitals, clinics, and individual practitioners.

More and more doctors are taking locum tenens jobs, in which they work temporarily at medical facilities in other cities or states. The COVID-19 pandemic has made this problem much worse, as many doctors have cancelled office visits in favor of seeing patients in their homes. However, doctors still rely heavily on paper forms and antiquated technology like fax machines when it comes to authorizing patient care. The ability of physicians to work efficiently in today’s digital and mobile work environment is hindered by the outdated and disconnected nature of healthcare operation.

In addition, developments in healthcare delivery and new medical discoveries are altering clinical practice. As a result, there is room for more specialized work and the development of novel fields of study. In order to provide optimal care for their patients, healthcare systems need to staff a wide range of experts and subspecialists, and primary care doctors must be able to properly recognize patients’ needs and refer them to the appropriate specialists.

The healthcare sector must implement measures to solve these issues, as this is becoming increasingly apparent. However, the HIPAA-compliant processes needed for medical professional communications are often absent from the commercial communication systems utilized in other businesses. On the other hand, healthcare-specific technologies are frequently created to cater to the requirements of administrators who has the final say on procurement, without necessarily giving due consideration to the operational workflow operations of physicians. The problem becomes even more complicated when healthcare providers from different systems must coordinate their efforts by communicating with one another.

DOCS product offerings meet the needs of all stakeholders in the value chain

To begin, DOCS is developed for doctors and other medical staff. Traditional medical practice has traditionally emphasized teamwork between primary care physicians and subspecialists in the sake of patient care and scientific progress. The DOCS platform eliminates these limitations with its cutting-edge applications . DOCS platform, for instance, greatly increases doctor efficiency by digitizing otherwise laborious and inefficient processes. Telehealth, electronic signature, and e-faxing capabilities developed by DOCS are also catered to the needs of doctors and may be accessed from any device with an internet connection.

Secondly, as for pharma manufacturers and Health Systems, DOCS connects the largest group of doctors and hospitals in the United States with the pharmaceutical industry and healthcare systems.

1. In my perspective, the ability for pharmaceutical companies to use DOCS to conduct highly targeted digital marketing campaigns that generate a high return on investment is the most appealing value proposition for these companies (DOCS estimated a 10:1 ROI in the S-1).
2. There are, in my opinion, two main selling points for healthcare systems: First, DOCS’s Marketing Solutions allow pharmaceutical company clients (health systems) to conduct targeted campaigns on our platform to reach certain groups of physicians (DOCS estimated a 13:1 ROI, according to the S-1); second, DOCS provides a trustworthy Telehealth solution (Dialer) for its clients. Since more than 90% (according to the S-1) of US hospitals already utilize Dialers, DOCS have a solid organic sales funnel leading from the member-level service to its Telehealth offering. Dialer works in favour for the Health System as it improves patient satisfaction and decreases appointment no-shows since it is dependable for doctors and simple for patients to utilize.

DOCS has the largest network of medical professionals

Its DOCS S-1 filing claims that its network contains 80% of US physicians, 50%+ of US nurse practitioners and PAs, and 90%+ of US medical school graduates. I think this says a lot about the breadth, popularity, and quality of the DOCS network and its offerings. In addition, this is a great selling point for prospective customers as members gain access to an extensive network of professionals and other opportunities. Due to DOCS extensive and reliable network, pharmaceutical companies and healthcare organizations frequently choose to engage with DOCS as a strategic partner. DOCS allows these groups to communicate with an important and elusive audience, while also expanding their reach to include a wide range of medical specialists and facilitating more targeted communication.

A major and potent network impact is also present here. Doctors and patients alike can benefit from DOCS’s extensive and evolving partner network. Expanding the network is a top priority for DOCS, thus they are continually introducing new features and improvements to the system. In my opinion, DOCS will be able to improve its tools and services, as well as expand, if it continues to add features that appeal to both potential and current users.

DOCS understands the pain point of physician, hence the product resonates well

DOCS’s success can be attributed to the fact that the founders are all practicing doctors, the designers and engineers have experience in the healthcare industry, and it has a large advisory board comprised of other medical experts.

Plenty of opportunities to further dive deeper into the industry via other verticals

I have no doubt that DOCS will attract more medical professionals in the future. This is especially true because, in my opinion, DOCS lacks presence among other medical verticals, such as nurse practitioners. Also, DOCS can expand its services to other medical and mental health professionals like physiotherapists, dentists, and psychologists. As more doctors sign up for DOCS, it will become a more powerful networking tool for its users and a more effective recruitment and advertising avenue for healthcare providers and pharmaceutical companies.

Valuation

I believe DOCS is worth USD41.49 in FY24, a 23% increase from the time of writing. This graph is based on my model and the following assumptions:

1. Revenue will meet expectations in FY23 and will continue to grow at a healthy clip in fiscal years 24 and 25. I believe DOCS’s growth momentum will continue because it is the market leader and there are numerous opportunities for it to seize. However, due to the tough comp due to COVID, I believe it is unlikely DOCS will repeat its high growth in the near future.
2. DOCS is currently valued at 11.6x forward revenue. While this is 10x lower than its average, it is still considered rich in the current environment. I believe so long as DOCS can continue to grow, it should be able to support this multiple in FY24.

Key risks

Tough comps

Pharma companies had to reevaluate their marketing strategies during the COVID-19 epidemic since it was difficult, if not impossible, to meet with doctors in person or hold conferences. Doximity benefited greatly from the year’s trend of businesses reallocating their marketing budgets to online venues. There is still doubt as to how rapidly pharmaceutical firms will continue to move their budgets online. High growth could be sustained, but it could possibly slow down due to challenging year-over-year comparisons.

Telehealth monetization

Many healthcare organizations were compelled to rapidly implement telemedicine during the COVID-19 outbreak. Doximity is just one of several telehealth providers that offers specialized tools and integrations with other systems. However, some of the most basic telehealth platforms are starting to feel standardised. Doximity may have trouble fully realizing the financial benefits of its platform to the extent that suppliers are ready to pay less for a basic platform.

Summary

I recommend to go long DOCS. DOCS is a valuable resource for healthcare professionals and organizations. It is a platform that allows healthcare professionals to interact with each other, coordinate patient care, and conduct virtual patient visits in a safe and HIPAA-compliant manner. It also helps to streamline and digitize various processes, such as telehealth, electronic signature, and e-faxing, making it easier for healthcare professionals to work efficiently and offer the best possible care to their patients.

For pharmaceutical companies, Doximity offers the ability to conduct highly targeted digital marketing campaigns with a high return on investment. For healthcare systems, Doximity’s Marketing Solutions allow them to conduct targeted campaigns to reach their target audience, and its Clinical Solutions help them to coordinate patient care across different systems.