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Trxade Health Inc. (NASDAQ: MEDS) Q3 2022 Research Summary

Trxade’s solid capital structure and multiple revenue sources create significant potential for return on investment

Trxade Health Inc. (NASDAQ: MEDS) is an integrated drug delivery platform that offers a digitalized retail pharmacy experience to independent pharmacies, allowing them to operate more efficiently. The health service IT company serves nearly half of all the independent pharmacies in the country through its web-based marketplace.

The Florida-headquartered company’s disruptive business model involves forging partnerships with global distribution channels to expand internationally, leveraging its technological prowess. During the coronavirus pandemic, the company played an important role in facilitating remote healthcare delivery, with significant contributions from its telehealth arm Bonum Health.

The Business

Trxade became a public entity in February 2020 and is currently headed by Suren Ajjarapu who has been serving as the chief executive officer since its inception. The company operates through these business divisions:

Trxade Inc. (Web-based Market Platform)

• Bonum Health (Telehealth/telemedicine App)

• Community Specialty Pharmacy (Pharmacy)

• DelivMeds (Rx Delivery App)

• Integra Pharma Solutions (Virtual Wholesaler)

Other products and Services

• Trxade Marketplace (Rx Marketplace)

• Trxade Medical (Rx Marketplace)

• Trxade HSO (Health Services Org)

• TRx Savings Card (Prescription Discount Card)


Read management/analysts’ comments on Trxade’s Q2 2022 earnings


The company is on a mission to bring together all stakeholders and create strong value, and transparency among pharmaceutical channel partners while helping to contain rising healthcare costs. That aligns with the new Affordable Care Act that calls for a reduction in pharmaceutical costs. The platform promotes and strengthens the relationship between pharmaceutical buyers and sellers while allowing patients and practitioners to connect at their convenience. It is designed to perform integrally within global pharmaceutical distribution and healthcare channels – drugs distributed can be dispensed internationally without production modifications or deviations. Currently, the platform serves more than 12,700 members nationwide.

Competition

Trxade’s unique business strategy – marked by providing both brand and generic products to pharmacy partners — gives it an edge in that segment, but the business still faces competition from the likes of RxCherrypick, PharmSaver, MatchRxand, and PharmaBid. Healthcare players like e-commerce platform Amazon.com (NASDAQ: AMZN), which owns digital pharmacy PillPack, Rite Aid Corporation, and Walgreens Boots Alliance are also constantly trying to expand their market share.  

The U.S pharmaceutical industry is growing at a rapid pace and is expected to reach $685 billion by next year. It is worth noting that the lion’s share of the market, which comprises around 65,000 pharmacy facilities, is controlled by a few large wholesalers, resulting in a dearth of transparency in pricing and delivery. When it comes to addressing the pricing issue, Trxade needs to take on big distributors like Cardinal Health, McKesson, and AmerisourceBergen.

Trxade Q2 2022 earnings infographic

Updates

Last month, the company unveiled what it calls the Trxade Prime Plus program through its pharmaceutical wholesale business subsidiary Integra Pharma Solutions. The program would give member pharmacies better access to around 20,000 products available for next-day delivery, without additional delivery costs. Earlier, the management announced the termination of a proposed public offering, pursuant to an assessment that current market conditions are not conducive for an offering on terms that would be in the best interests of shareholders. In mid-August, the company appointed Jeff Newell to its advisory board, who will be serving as a strategic resource for the continued development of trade relationships.

Financials

The revenue base is returning to the core TRxADE pharmaceutical market platform, lately, and the topline has improved steadily so far this year. Revenue is expected to grow sequentially in the coming quarters while continuing supply chain issues and elevated transportation costs would weigh on the overall performance. In the second quarter of 2022, revenues surged 73% annually to $3.28 million, reflecting double-digit growth in the core Trxade and Integra Pharma divisions. As a result, net loss narrowed sharply to $0.13 per share from $0.32 per share last year. A total of 319 new members were added in the second quarter. Adjusted EBITDA was a loss of $1.06 million.


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At the Bourses

Trxade’s stock dropped by double-digits after the company announced the termination of its proposed public offering, but regained most of the lost momentum in the following sessions. The shares have declined about 50% since the beginning of the year, bringing the market capitalization to $10.6 million. As of August 31, analysts recommend buying the stock, citing the low valuation.

Road Ahead

The management expects its continued focus on new partnerships, such as the recent tie-up with GALT Pharmaceuticals, to drive growth going forward. Currently, the main priorities are the further development of core business, building relationships with POS systems, and creating a strong value proposition for stakeholders. Meanwhile, the ongoing cost-cutting efforts should translate into improved margin performance.

Risks

A major challenge facing pharmacy technology companies is monopolistic pharmacy benefit managers and retail chains. In the case of Trxade, which is yet to become consistently profitable, the pandemic-related disruption and supply chain issues remain a drag on growth prospects. Another risk to the business is the potential impact on operating results from the ongoing consolidation in the healthcare industry. Both customers and healthcare companies suffer due to a lack of transparency in drug pricing and inadequate coordination among the different sections of the prescription drug market.

Conclusion

The steady increase in Trxade’s memberships underscores the relevance of its business strategy. The disruptive model is significant since it can bring positive changes to the retail pharmacy by addressing key issues like lack of transparency in pricing and monopolistic practices.

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