Trxade Health Inc. (NASDAQ: MEDS) Q4 2022 Research Summary

Trxade Health Inc. (NASDAQ: MEDS), an integrated drug procurement and delivery platform, is on a mission to empower the independent pharmacy market by making healthcare services and pharmaceutical products affordable and accessible. After gaining a significant foothold in the business-to-business market, the company is expanding its network by partnering with independent group purchasing organizations.

So far, the response to Trxade’s services has been quite encouraging, as the platform helps in increasing foot traffic and prescriptions for partner pharmacies. The management is focused on forging suitable tie-ups with vendors interested in providing value to independent pharmacies with competitive pricing.

Company Profile

Trxade’s commendable contributions during the pandemic underscore its relevance in today’s world. The company facilitated remote healthcare delivery through its telehealth arm Bonum Health, the digital healthcare business subsidiary that was acquired in 2019. Trxade is led by chief executive officer Suren Ajjarapu who has been holding that position since its inception. The company, which became public in 2020, operates through multiple business segments:

• 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)

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Trxade explores alternative ways to find partners for B2C assets: CEO Suren Ajjarapu

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The views of Trxade executives resonate with the widespread call for affordable healthcare, signified by the Affordable Care Act that was signed into law earlier. The Trxade platform allows pharmaceutical buyers and sellers to strengthen their relationships.  A key feature is its ability to dispense pharmaceutical products worldwide without production modifications or deviations.

Competition

Trxade’s competitors include MatchRxand, RxCherrypick, PharmSaver, and PharmaBid. However, its innovative business model – marked by providing both brand and generic products to pharmacy partners — gives it an advantage over traditional players. While the American pharmaceutical industry is seen growing at an accelerated pace in the coming years, most of it is controlled by a handful of monopolist wholesalers.

Risks

For Trxade management, the primary challenge is to achieve consistent profitability. At the same time, the ongoing consolidation in the healthcare industry might require the management to revisit the business model. Macroeconomic uncertainties and pandemic-related supply chain issues could weigh on performance, in a market where customers and healthcare firms suffer due to a lack of transparency in drug pricing and inadequate coordination among stakeholders.

Financials

Expanding its drug procurement marketplace further, the business added 291 new registered members in the September quarter, bringing total membership to about 14,100. Meanwhile, consolidated revenues decreased 6% to $2.4 million, mainly due to weakness in the Community Specialty Pharmacy and Trxade Prime segments. At Trxade Prime, processed sales volume and units sold decreased by 28% and 35% respectively.

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TRxADE Health Inc Q3 2022 Earnings Call Transcript

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The bottom line benefited from a 30% fall in operating expenses. Gross profit moved up 8% to $1.4 million, and net loss narrowed sharply to $0.06 per share from $0.16 per share last year. Trxade is scheduled to report fourth-quarter 2022 financial results on February 6, after regular trading hours.

Market Cap

Trxade’s market capitalization has more than halved in the past three months. The stock has been experiencing weakness for quite some time, reflecting the not-so-impressive earnings performance and muted investor sentiment. Of late, the stock has constantly underperformed the larger market. Nevertheless, it is widely expected to shrug off the slump and bounce back next year, regaining most of the losses.

Updates

In December 2022, Bonum Health signed a preferred telemedicine services agreement with an independent group purchasing organization. Under the pact, the latter would provide high discounts to access Bonum Health’s service platform for 100+ pharmacies and their patients in the northeastern part of the country.

Earlier, Bonum Health had clinched strategic services distribution agreement with multiple insurance brokerages to offer access to telemedicine services for small to medium-employer groups. As part of its strategy to grow the business, the company recently launched a private offering to buy $1.8 million of its stock from a single institutional investor.

Outlook

Going forward, the management’s priorities would be the implementation of software automation and restructuring of overhead costs. It is also exploring alternative ways to find partners for the company’s B2C assets, as a means to reduce costs further.

Conclusion

The continued membership growth can be seen as a testament to Trxade’s ability to withstand adversities. However, the weak top-line performance shows it is not fully resilient to the lingering pandemic woes and economic uncertainties. But the company has what it takes to tide over the short-term issues, thanks to its innovative business model with the potential to transform retail pharmacy by bringing more transparency in pricing and distribution of business.