Doximity Summary Memo
Doximity Summary Memo
& Healthcare Software Comps 4/21/23
Let me describe a publicly traded company: founder who built a tech product out of his dorm room. Verticalized social network that monetizes through hiring, job postings, and very specific ads, among other things. Business model based on huge network effects. Trading at a fairly rich revenue multiple.
But no, it’s not the story of LinkedIn, Facebook, or Snap. It’s Doximity, the social network for doctors. Well, not exactly, but it is the the largest medical professional network in the nation.
See below for the Summary.
PROBLEM: In the S-1, the Company does a decent job laying out what problem they are solving, although it is in a rather roundabout way that only SEC filings can really do - they are helping doctors avoid the hassles of daily activities involved in being a doctor, like sending real faxes on real fax machines, and allowing those doctors to tap into the power of the internet. Which is a remarkable statement to make about a company that was founded in 2011 and went public in 2021, but that sort of tells you everything you need to know about the state of our current healthcare system. It’s dated and out of touch.
From Doximity’s perspective the problem is that doctor’s have trouble connecting with each other and other medical professionals. What accountants, consultants, and nearly everyone else in the white collar workforce can do on LinkedIn, Slack or Zoom, medical professionals have trouble accomplishing because of regulatory requirements (although I am unsure how big of a problem that really is in this context) and general network density. On top of that, today’s communication tools used in health systems, medical practices, and throughout the healthcare community are not purpose-built for doctors, which is to say that they are really hard to use and outdated. In other words, fax machines are very much still a thing in most care provider settings.
While some of Doximity’s paying customers are doctors themselves, most are pharma manufacturers and health systems. The problem for pharma is that they spend a ton of money developing drugs, and they need to re-coup that by selling those drugs to the right patient population, but the only way to get those drugs into a patient’s hands is through prescription, which is filled out by doctors. And getting a doctor’s attention is expensive. The pharma industry spends about the same amount on marketing spend as P&G, which might not sound like a lot, but keep in mind that P&G is in the top three of marketing expenditures every year. Billions of dollars are spent on getting in front of doctors, and it’s still not super effective.
From a health system perspective, they are facing staffing shortages like a lot of industries these days, and they also need to get in front of doctors to recruit and advertise in any way possible. On top of that, health systems frequently have need to advertise to doctors beyond just recruiting, such as launching a clinical trial and recruiting potential patients.
In short, medical professionals are participants in the attention economy just like the rest of us. There are big dollars involved in grabbing their attention.
SOLUTION: In a classic “come for the tool, stay for the network” play, Doximity has developed the leading medical professional network in the country by providing several tools that have attracted doctors to the platform. Checking the Wayback Machine, early marketing for Doximity surrounded providing tools specifically so that doctors could connect with other doctors. But these weren’t just a run of the mill social network feature set, but rather messaging services that are HIPAA compliant, searchable fax numbers, send faxes via phone, earn CME credit, etc. As time went on, Doximity started adding more tools. Notably, during the pandemic, they offered one of their first tools paid for by doctors, a telehealth solution. This has become maybe one of the biggest reasons for docs to join the site (I say maybe because data on product usage is limited).
Today’s tools include:
Professional Network - where doctors and other medical professionals can go and search for colleagues and professionals with certain specialties, look for careers, and keep their profiles up-to-date.
Newsfeed - classic social network feature, which is curated to include relevant medical articles, medical videos, and opportunities for CME credit.
Digital Fax, eSignature, Secure Messaging - send and receive HIPAA-compliant faxes, signatures, and messages.
Dialer - a mobile tool that physicians can use to initiate and receive telehealth visits and requests.
Marketing Solutions - allows for pharma manufacturers and health systems to create and publish content to the Company’s various networks.
Hiring Solutions - allows for pharma and health systems to recruit talent, very similar to LinkedIn hiring tools.
CUSTOMER: As previously stated, the Company’s customers are pharma manufacturers and health systems. As of the end of 2022, the Company has 265 customers that are paying at least $100K annually in subscription revenue, up from 141 in 2020 and 200 in 2021. The Company’s current net revenue retention is 157%.
GROWTH STORY
QUESTIONS: Can they add ads to their dialer pro tool? Can they bolt on additional features that doctors can buy? Are they limited to strictly the medical profession? Can CRO’s use this tool to recruit doctors to recruit patients for Clinical Trials - assuming pharma is doing this already as well? Can they further penetrate other medical professionals, such as physical therapists, nurse practitioners, dentists, psychologists, medical administrators as well. Can they displace more entrenched, broader systems like EMRs - doctors use it and like it, how hard is it to get them to enter patient data into this tool?
My two biggest questions are related:
What are usage stats? In the 2021 S-1, the Company stated that they have 80% of doctors on platform. In the 2022 10K, they stated the same number. However, I had a hard time finding any real user stats - DAUs, MAUs, etc. So how much are doctors actually using this tool? This affects growth potential, market size, competitive positioning, etc.
Does this company have network effects? Are there any signs of inherent product virality? As more doctors use the tool, does that attract other doctors to use the tool? In theory, they should have a very strong network effect power, but unsure on how entrenched the tool really is.
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