Business Breakdowns
· Matt Reustle, Jim Jones
[00:00:00] S0: Meta and Google, obviously there's an eyeball thing going on there. They built quite impressive businesses on the back of that thesis alone, the ability to measure the ROI in your ad spend, so certainly checks out. I was reading this, negative investor reporter, COVID, you obviously had all of those sales reps basically grounded, weren't able to visit hospitals. Therefore there was this big need for Doximity. Was there anything noteworthy that came out of revenue from that time period where naturally you would expect to see a big push into a channel like Doximity? Was there any hiccup or breaking of that trend as you merged out? What did the revenue trajectory look like through that period of time? [00:00:00] S1: Your instinct is right on. During COVID, this was an absolutely necessary tool. Coming out of the COVID probably pushed some pharma into the digital channel maybe a little faster than they would've gone otherwise. I think opened their eyes to the effectiveness. During COVID, hospitals were shut down. Pharma reps weren't allowed to go in. What we see now is an increasing number of doctors that are what's called "no-see" doctors, where they don't want you to bring them in a box of donuts and talk about their drugs anymore or take the doctor out for a steak dinner. It's almost generational that that's not how people are being marketed to or prefer to be marketed to these days.
· Jim Jones, Matt Reustle
[00:00:00] S1: Your instinct is right on. During COVID, this was an absolutely necessary tool. Coming out of the COVID probably pushed some pharma into the digital channel maybe a little faster than they would've gone otherwise. I think opened their eyes to the effectiveness. During COVID, hospitals were shut down. Pharma reps weren't allowed to go in. What we see now is an increasing number of doctors that are what's called "no-see" doctors, where they don't want you to bring them in a box of donuts and talk about their drugs anymore or take the doctor out for a steak dinner. It's almost generational that that's not how people are being marketed to or prefer to be marketed to these days. [00:00:00] S0: The medical sales profession is quite unique. Would you expect, in terms of that share shift over time—you mentioned still quite far behind most other industries or just the economy broadly in terms of digital ads as a percentage of total—would that be the natural place where you see share gains coming from, from the medical sales profession? Is it split evenly from traditional linear advertising, print advertising? Where would you expect it to come from the most?
· Matt Reustle, Jim Jones
[00:00:00] S0: The medical sales profession is quite unique. Would you expect, in terms of that share shift over time—you mentioned still quite far behind most other industries or just the economy broadly in terms of digital ads as a percentage of total—would that be the natural place where you see share gains coming from, from the medical sales profession? Is it split evenly from traditional linear advertising, print advertising? Where would you expect it to come from the most? [00:00:00] S1: It's coming from a few different areas. The pharma reps will have fewer of those going forward. Banner ads and print, more traditional sources. Increasingly, consumer advertising will be moving over. There was an executive order to really clamp down on what needs to go into a TV commercial for pharmaceuticals advertised to the consumer. In essence, you need to add 30 seconds to the commercial and talk about all the risks. It sounds a lot less appealing after 30 seconds of all the things that could go wrong. The ROI or the attractiveness of that channel is decreasing with this executive order. Pharma spends about $10 billion a year in direct-to-consumer marketing today. Direct to the physician is about $7 billion. This is a pretty big shift in terms of where the dollars were going historically, both from within the HCP channel and then also now stealing from other buckets as well.
· Jim Jones, Matt Reustle
[00:00:00] S1: It's coming from a few different areas. The pharma reps will have fewer of those going forward. Banner ads and print, more traditional sources. Increasingly, consumer advertising will be moving over. There was an executive order to really clamp down on what needs to go into a TV commercial for pharmaceuticals advertised to the consumer. In essence, you need to add 30 seconds to the commercial and talk about all the risks. It sounds a lot less appealing after 30 seconds of all the things that could go wrong. The ROI or the attractiveness of that channel is decreasing with this executive order. Pharma spends about $10 billion a year in direct-to-consumer marketing today. Direct to the physician is about $7 billion. This is a pretty big shift in terms of where the dollars were going historically, both from within the HCP channel and then also now stealing from other buckets as well. [00:00:00] S0: You mentioned the numbers on the overall market growth being quite healthy, multiples of GDP growth. Has there been any periods of time where you've seen a material pullback, or would there be anything that could represent a threat to overall pharma ad spend that would be noteworthy to keep in the back of your mind?
· Matt Reustle, Jim Jones
[00:00:00] S0: You mentioned the numbers on the overall market growth being quite healthy, multiples of GDP growth. Has there been any periods of time where you've seen a material pullback, or would there be anything that could represent a threat to overall pharma ad spend that would be noteworthy to keep in the back of your mind? [00:00:00] S1: The pharma companies, they were operating on an ROI basis as well, so if there was discussion of tariffs, there's a push to have U.S. consumers on fewer drugs. I'd say if the profitability of pharma takes a hit, then they will likely spend fewer dollars advertising for their drugs. If there are caps on prices or whatever may drive lower profitability to pharma would flow through to advertising and therefore Doximity. [00:00:00] S0: Before we get into the profitability metrics of Doximity, I'm curious if they have done anything as it relates to in-person events. This is somewhat of my media community audience brain going back into that world, but it's a common attachment to these types of businesses is to have trade shows or things of that nature. Is that ever anything they've explored or noodled with, dipping their toes into the live space, event space? Anything along those lines?
· Matt Reustle, Jim Jones
[00:00:00] S0: Before we get into the profitability metrics of Doximity, I'm curious if they have done anything as it relates to in-person events. This is somewhat of my media community audience brain going back into that world, but it's a common attachment to these types of businesses is to have trade shows or things of that nature. Is that ever anything they've explored or noodled with, dipping their toes into the live space, event space? Anything along those lines? [00:00:00] S1: They don't do, to my knowledge, a whole lot of that. They have a board of directors of doctors that they bring in once a year, and they get ideas from the doctors on what would be helpful to you, what would help productivity, and I think that's a 36-hour meeting on an annual basis that is just brainstorming and throwing stuff against the wall, and Doximity implements and gets a lot of ideas from that weekend excursion. [00:00:00] S0: Always good to have design partners in the business. On the margin side of the equation, how does this stack up? It sounds very technology based, so I would assume that there's some impressive numbers here, but can you just give us a snapshot of the margin profile of the business and whether that's materially changed over the years?