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Doximity Blows Away IPO Goal On First Day Of NYSE Trading

Healthcare technology platform Doximity Inc. and an investor raised $606 million after pricing an initial public offering above the marketed range, according to a company statement.

Doximity was originally shooting for a $100 million initial public offering (IPO) in its May 28 filing with the Securities and Exchange Commission for the ticker symbol DOCS.

The San Francisco-based company sold 23.3 million shares for $26 each Wednesday (June 23) after marketing them for $20 to $23, according to a statement. The company is valued in the listing at $4.6 billion based on the outstanding shares listed in its filings with the U.S. Securities and Exchange Commission.

Accounting for employee stock options, the company has a diluted valuation of more than $5.5 billion.

The company that describes itself as “LinkedIn for doctors” jumped by 69 percent in its stock market debut, a sign that interest level is high in the company’s services as more people continue to embrace digital health and telemedicine options.

What Doximity Does

With 1.8 million medical professionals in the U.S. on the site, including over 80% of physicians, Doximity has bolstered revenue by allowing pharmaceutical companies to promote drugs and treatments and by giving medical recruiters a central place to find prospects.

More than 80% of U.S. doctors use Doximity’s platform designed for medical professionals, the company said in its filings. Its platform includes video calling for telemedicine as well as secure messaging and a directory of clinicians. Doximity also provides a news feed with medical stories.

The company’s top shareholders are co-founder and Chief Executive Officer Jeff Tangney and affiliates of Emergence Capital Partners, InterWest Partners and Morgenthaler Venture Partners, according to its filings. InterWest is selling about 4.3 million Class A shares in the IPO.

Doximity reported $50 million in net income on $207 million in revenue for the year ended March 31, up 77 percent, according to the company’s prospectus. The business had almost $30 million in net income on $116 million in revenue for the same period the year before.

“Because Doximity spends virtually no money on advertising, operating costs are lower than at most venture-backed software companies,” according to CNBC. “That allowed Doximity to boost net income 69% to $50.2 million in the fiscal year that ended in March.”

Focusing on Telehealth

Doximity increased its focus on telehealth in 2020 and offered a free service since 2016 that allows doctors to call patients using their work number on a mobile phone. Doximity moved the dialer service to its main app in 2019.

In May 2020, the company added video, which it described as its “first telemedicine offering.” Doximity launched a paid enterprise version, though it said the video service would be free through January 2021. In its prospectus, Doximity said it had signed subscription agreements with over 150 hospitals as of the end of March.

Jeff Tangney, Doximity’s co-founder and CEO, said in an interview that even though over 80% of physicians are on the network, the company has at least a decade of “what we consider high growth” ahead because of the value it can bring to the health-care system.

For example, the referral system can get much stronger, so that doctors know exactly where in the country to send patients who have a rare cancer.

He also said that Doximity has plenty of opportunities to expand in telehealth given the size of its user base for its core product.

“Telehealth is 2% of rev today and it’s such a greenfield,” Tangney said after ringing the opening bell at the New York Stock Exchange. “We haven’t been aggressive on pricing yet.”

Diverse Portfolio of Services

Doximity’s overall growth is less reliant on telehealth than are other vendors in the market because its primary sources of revenue are not tied to doctor-patient communications. However, the company acknowledges that as the pandemic ends, its business could be hurt.

“The circumstances that have accelerated the growth of our business stemming from the effects of the COVID-19 pandemic may not continue in the future,” Doximity said. “If these customers reallocate a significant portion of their budgets back to in-person marketing, this could cause our growth to decline in future periods.”

The IPO marks Doximity’s first financing since 2014, when the company raised $54 million at a $355 million valuation, according to PitchBook.

As part of the offering, Doximity reserved 15% of the shares for doctors in the network. Assuming doctors maxed out their participation, they purchased about $91 million worth of Doximity stock.

Tangney said over 10,000 physicians participated in the offering, purchasing up to $24,000 worth of shares. As a group, they own more stock than any single new investor, he said.

The offering is being led by Morgan Stanley, Goldman Sachs Group Inc., and J.P. Morgan Chase & Co.

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