Categories Analysis, Health Care

Trxade Health Inc. (NASDAQ: MEDS) Q2 2023 Research Summary

Recently, Trxade closed the previously announced acquisition of Superlatus, a holding company of food products and distribution capabilities

Trxade Health Inc. (NASDAQ: MEDS) is a healthcare IT company that constantly innovates and expands into new verticals, with the latest such move being the acquisition of Superlatus to create a global food consolidation platform. The core operation of the company, which operates as an integrated drug procurement and delivery platform, involves digitalizing the retail pharmacy experience by optimizing drug procurement and patient engagement.

Headquartered in Lutz, Florida, Trxade is headed by founder and chief executive officer Suren Ajjarapu. It became a public company in 2020 and operates through multiple business segments.

The Business

As a testament to the relevance of its platform, Trxade played an important role in making remote healthcare delivery available to patients during the pandemic, through its digital healthcare arm. Having a business model that is well-aligned with the changing healthcare environment enabled the company to rise to the occasion and contribute to the COVID care program.

Trxade has expanded its independent pharmacy and clinic footprint consistently, with the total number of registered users growing to more than 14,500. As far as future growth is concerned, there is a big opportunity out there – it is estimated that the North American e-pharmacy market would grow at a compound annual rate of 15.6% through 2027.

Operating Segments

Trxade.com: The core business, which is a web-based pharmaceutical marketplace engaged in promoting and enabling commerce among independent pharmacies, small hospitals, clinics, and alternate dispensing sites with large pharmaceutical suppliers nationally.

Community Specialty Pharmacy, LLC. — This is an accredited pharmacy focused on specialty medications and operates with an innovative pharmacy model that offers home delivery services to patients.

Trxade Prime – This division allows pharmacy members on the Trxade platform to process, consolidate and ship purchase orders that are placed directly with Trxade suppliers via Trxade Prime.

Updates

Global Food Consolidation Platform: In July 2023, Trxade closed the previously announced acquisition of Superlatus, Inc., which is a holding company of food products and distribution capabilities. Pursuant to the transaction, shareholders of Superlatus will receive 136,441 Trxade shares, representing 19.99% of the latter’s total issued and outstanding shares, and 306,855 shares of a new class of Trxade’s non-voting convertible preferred stock with a conversion ratio of 100 to one.

The combined entity will focus on utilizing the competitive advantages of the separate businesses to create a global consolidation platform for the food and healthy snack industry. Also, there are plans to roll out plant-based meats, dairy products, and pulse-based snack foods. It is estimated that the global health snack food market would grow to $152.5 billion by 2030, representing a CAGR of 6.6%, as more and more customers turn health-conscious and the product supply chain keeps expanding.

Executive Appointments: In early August, Trxade appointed Forbes Fisher as chief operating officer and Dr. Eugenio Bortone as chief innovation & food technology officer. Forbes will lead product innovation and information technology, besides driving sales and supply chain optimization Dr. Eugenio Bortone is a food scientist and extrusion processing expert.

Financials

Trxade entered fiscal 2023 on a mixed note, reporting a narrower net loss and a double-digit decline in revenues for the first quarter. The business continued to add new registered pharmacy members, bringing total memberships to more than 14,500 at the end of the quarter.

Total revenues declined 31% from last year to $2.25 million in the first quarter, mainly reflecting a decline in Trxade Prime revenues. Despite the weak top-line performance, first-quarter net loss narrowed sharply to $0.68 million or $0.07 per share from $0.96 million or $0.12 per share last year. 

The bottom line benefited from a decline in operating expenses. At the end of March, the total inventory stood at $126,254. Trxade is scheduled to report second-quarter 2023 financial results on August 14, after the market closes.

The Stock

Trxade’s stock got a much-needed boost last month after the company announced its merger plan. Before that, MEDS has been almost stagnant since the beginning of the year. Though the shares have partly pulled back after the recent rally, they have gained more than 50% in the past six months. Currently, the outlook on the stock is quite bullish – the value is expected to nearly double in the coming months as the management’s growth initiatives begin to bear fruit, putting the company on track to achieve a turnaround.

SWOT Analysis

Strengths: The primary strength of Trxade is the innovative business model with a focus on its advanced web-based platform that enables healthcare buyers and sellers of pharmaceuticals to meet and transact with ease. Recent business expansion through the acquisition of food technology company Superlatus would open new revenue streams. Overall, the response to Trxade’s services has been encouraging as they help increase foot traffic and prescriptions for partner pharmacies.

Weaknesses: The company is yet to generate profit consistently, which is a hassle when it comes to investing in the business. Also, the retail pharmacy market experiences a dearth of coordination among the stakeholders and a lack of pricing regulation, despite continued efforts to bring price transparency.

Opportunities: The ongoing digital transformation and shift to technology-enabled healthcare can increase the demand for the services being offered by the company. There is a growing interest among vendors to tie up with Trxade for providing value to independent pharmacies through competitive pricing.

Threats: The healthcare industry is undergoing a rapid transformation including widespread consolidation, a trend that would require companies like Trxade to realign their business according to the changing trends. Pandemic-related supply chain issues and macroeconomic uncertainties continue to be a challenge for pharmacy retailers.

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