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Healthy Assessment for Doximity IPO on Wall Street

Doximity (DOCS), which operates a professional network for physicians, has pulled off one of the hottest IPOs of the year. The shares of the company soared more than 100% on the first day of trading (June 22, 2021), bringing its market capitalization to $9.4 billion. (See Doximity stock charts on TipRanks)

The initial range on the IPO was $20 to $23. However, the company was able to price the deal at $26 and issue 23.3 million shares. In all, it was able to raise $606 million. The underwriters on the deal included Morgan Stanley (MS), Goldman Sachs (GS), J.P. Morgan (JPM), Piper Sandler, and William Blair.

Backgrounder on Doximity

Jeffrey Tangney, along with Nate Gross and Shari Buck, cofounded Doximity in 2010. The goal was to create a secure social network for physicians. The team had deep experience in the healthcare and digital industries. For example, Tangney was the cofounder of Epocrates, which provided online services for physicians.

Within a few years, Doximity has gone on to became the leading player in the U.S. and has maintained this position until today. The network has roughly 1.8 million medical professionals, and all the profiles are verified for accuracy.

With Doximity, members can communicate and share documents. The platform offers a personalized news feed, which includes algorithmic analysis of over 200,000 articles per week, as well as access to job posts. Recently, Doximity added the capability to have virtual visits with patients. Given the impact of the COVID-19 pandemic, this has become extremely popular with physicians.

Keep in mind that mobile has also been critical to its success. In the Apple (AAPL) Appstore, Doximity has a 4.8 rating and more than 100,000 reviews. This has definitely boosted user engagement.

Doximity also helps improve workflows for physicians. For example, it offers a tool that that digitally signs and faxes a referral notes to other hospitals. This can replace the many legacy systems in the healthcare field.

For physicians, the Doximity platform is free, which has certainly helped with its adoption. The company generates revenues through promotions from pharma operators and other healthcare companies.

This business model has been effective. In fiscal 2020, revenues soared by 77% to $206.9 million. The company has even been able to be profitable, which is unusual for tech IPOs. For fiscal 2020, the net income jumped by 69% to $50.2 million. It helps that Doximity’s marketing and sales costs are relatively low.

Currently, the company has all 20 of the top pharma manufacturers as customers, as well as 20 of the top hospitals and health systems.

TipRanks’ Rating

According to TipRanks’ stock analysis, Doximity earns a Smart Score of 7, which means “Neutral.” The stock is likely to perform in-line with market performance.

Bottom Line on Doximity

Doximity has benefited from powerful network effects. As healthcare professionals use the platform more, this encourages others to do so. That, in turn, attracts pharma companies and other healthcare organizations. This means that there should be strong barriers to entry into the field for potential competitors, which will drive long-term value for Doximity.

The target demographic, which is attractive, benefits from having a specialized online community. According to the Doximity S-1 filing, physicians direct about 73% of the $4 trillion in total U.S. health care spending. Thus, Doximity is in a strong position. It should also have access to new revenue sources in the coming years, such as from telehealth.

All in all, Doximity looks like one of the most interesting IPOs to consider this year.

Disclosure: Tom Taulli does not have a position in Doximity.

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.