Online pharmaceutical purchases have seen
a steady increase in the US over the past decade and the pandemic is now
expected to fast-forward this trend going ahead. The increased digitization of
different sectors calls for identifying key players who are making this
transition possible, as these firms offer immense value to investors.
Trxade (NASDAQ: MEDS), which was recently uplisted to Nasdaq, has been bringing together independent pharmacies under one umbrella through its web-based purchasing platform. The company is now present in all 50 states and is rapidly adding 100-150 pharmacies every month.
In an interview with AlphaStreet, Trxade
CEO Suren Ajjarapu said the company’s focus is to empower independent
pharmacies to compete with bigger healthcare retailers such as CVS Health (NYSE: CVS) or Walgreens
Boots Alliance (NASDAQ: WBA)
by helping them achieve same-day delivery of drugs. Suren said:
“If you look at the telemedicine portals, those scripts are walking into the Walgreens and CVS. We want to see whether we can take these scripts to the independents. By giving them business, they will buy more from us. So that’s the strategy.”
Trxade’s in-house telemedical portals including Bonum Health and DelivMeds connect its patient base of 12-15 million with its network of independent pharmacies, with the promise of delivering the drugs on the same day the order has been made.
Trxade’s network currently includes around
11,400 independent pharmacies, compared to the estimated US market size of
approximately 24,000. The CEO noted that the company’s prime focus will
continue to be in expanding and building its existing supply chain.
Stock market ride
The Tampa, Florida-based firm was uplisted to NASDAQ Capital Market from OTCQB in February. And the stock market run since then has been quite lukewarm. Even as fellow online retail platforms benefited highly by the shelter-at-home orders, MEDS stock did not witness any significant positive impact.
The shares are trading almost at a flat price since its Nasdaq debut, presumably due to investors’ failure in recognizing it as an online delivery mechanism. Suren pointed out that the closure of pharmacies in key markets such as New York and New Jersey may also have contributed to the negative sentiment.
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Meanwhile, Taglich Brothers recently
initiated coverage of MEDS with a 12-month price target of $9.50, which is at a
46% upside from Wednesday’s trading price. The brokerage firm has a “Speculative
Buy” rating on the stock.
Beating the competition
Apart from retail giants CVS and
Walgreens, Trxade found another disruptive rival in Amazon (NASDAQ: AMZN) when it swallowed Pill Pack in mid-2018. Speaking on
this competition, the executive said:
“Their model is next day delivery or two day delivery versus our same-day delivery mechanism using our network of pharmacies. So that’s the niche that we’re trying to establish.”
Since its virtually impossible for small
independent stores to invest heavily in infrastructure to compete with the
corporate rivals, Trxade comes into play as a unification platform.
On the B2B end, the company does face competition from some small players but the CEO asserted that its algorithms and real-time pricing analytics database help them stay ahead.
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Costs vs revenues
Suren confidently says that the company’s revenue growth will not come at the expense of high marketing expenses, a trend that is generally seen in many emerging technology-based companies. He said its network of pharmacies will themselves act as marketing agents for the brand, reaching out to more patients on the go.
In-house marketing will be mostly limited
to social media channels such as Facebook and LinkedIn. Suren added:
“With the current infrastructure we have, we should be able to generate more revenue than increasing the expenses. Our store purchase per month is the one that we’re focusing on. Currently, we have a 200 million transactional volume. Within our existing infrastructure, we could go all the way up to a billion-dollar transactional volume.”
In the retrospect, Trxade ticks three requirements that value investors look for in stocks: a comfortable balance sheet, the ability to make profits and plenty of headroom for growth. Keep a watch.
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(Written by Arjun Vijay)