Medbox (MDBX.PK) is a common "weed stock" that we like to cover here just because they have some ties to the (medical marijuana) prescription dispensing industry but as we've frequently stated, the business is much more than a "Redbox" type dispensary for medical marijuana. Medbox has figured out what it has needed to do thus far and is becoming better and better positioned to capitalize on a huge scale. However, there's still one missing link that's left on the table that investors across the globe are thinking about, especially with their latest announcement Tuesday morning.
In summary, in the past few weeks/months, Medbox has figured out that the key to gaining attention and media buzz within their industry is to continually and effectively produce press releases on a very frequent basis. They want to stay in people's minds and at this stage of the game, they have the budget to publish press releases on the fly at any indication of information that could be considered "good news" to investors. And honestly, we definitely don't see anything wrong with that because as an investor, we want as much information as possible for such a small, yet budding, publicly-traded company! So let's get into the brass tacks of the latest announcement and what it means to investors.
The Bulk of the Meat
The Medbox announcement that was made this morning has a couple of main highlights that most of the media is picking up, but I'd like to discuss a couple that really popped out to me that may or may not be factored into the share price of $72.00 per share at the time of this posting.
So let's break it down:
Obviously, the first and most notable of the points is one that the bullish folks for this stock hope ultimately works out. The negotiation and introduction of their product line to big retail chains, most notably Rite-Aid and Walgreen's.
Medbox, Inc. announced that they offer solutions to major pharmaceutical chains like Walgreen's and Rite Aid that are designed to streamline operations, reduce customer wait times, and increase the number of prescription medicines that can be dispensed at any given time.
So, they are coming out and saying that they are now ready to take on these retail giants with millions of customers and more than likely are taking steps to set up some propositions with these retail chains to test and develop some hard data of some kind to show their products actually have the security and convenience benefits that they claim. They do have some data already published out there, but I would think these retail giants want to see it in action and in an environment that they have already proven "works" for them. This is the big missing link for Medbox and pretty much the make-or-break for them in the current competitive landscape. If they can get their foot in the door to these retail giants then we could be seeing the share price and consequently returns, through the roof. However, you have to consider on the flip-side, how much of this is baked into the current (high) share price? (Who really knows...) Let's keep digging.
Eyeing Acquisitions For Faster Growth
Meanwhile, Medbox is currently working on targeted acquisitions within the healthcare technology sector that will help shape the landscape of sensible medication dispensing nationwide that will demand accountability without creating a nuisance to valid consumers.
This is a good sign that Medbox is using their lucrative share increase over the past couple months and subsequent cash supply for good use and exploring ways to expedite the market penetration and subsequently, explore more niches, such as medical marijuana. If they find what is later determined to be a good acquisition candidate, we could see accelerated growth, but at this point, there is really no conclusive information to do more than speculate.
New York's Promising Medical Legislation
The biometric technology that has made Medbox the preferred system of choice in several markets throughout the healthcare industry, has now been written into legislation in the State of New York as a requirement to improve patient identification and combat Medicaid fraud.
Medbox is going straight for the kill here and pointing out that their technology is the same technology that New York legislation has found to be critical to combating Medicaid fraud, which they later mention to be estimated by New York officials to be $5.4 billion this year for that state alone. So Medbox is introducing their product and how it works specifically to help trim this huge number down and ultimately take some fees in the process. This strategy could definitely work as long as they are given the chance and can prove that their products can help shrink this $5.4 billion fraud charge down for New York and more so than other methods out there.
The specific product that Medbox is promoting with this release is what they call the "The Lockbox Rx" and "is a proprietary system developed by Medbox that allows customers to pick up their medications at their local pharmacy, quickly and conveniently, 24-hours a day, from a specially designed storage kiosk that is loaded by the pharmacist for later retrieval by the consumer." Furthermore, they go on to explain a little bit more about how it works: "Medicaid patients would receive Identification cards containing coded and encrypted biometric markers. Checkups would always begin and end with the card being scanned. Physician offices, facilities, and pharmacies would also scan patients' fingerprints and swipe the card, which would then allow payment from the Medicaid system."
Sounds pretty nifty, doesn't it? Especially for medical marijuana patients that don't always have the freedom or accessibility to make it to pharmacies at certain times for their medication. Additionally, legislators favor this method because it provides added security and regulation, of course. However, there's one thing to remember in the grand scheme of things.
Competition & Risk:
It all sounds good and great that New York is looking to shrink this $5.4 billion Medicaid fraud down and Medbox is perfectly positioned to capitalize on this legislation and furthermore is making all the "right moves" to try to get it into retail chain stores but the fact of the matter remains. How stiff is the competition? With such a big amount of cash, you can guarantee companies are coming out of the woodwork to capitalize on this lucrative opportunity, especially as the Baby Boomer age continues to mature and more and more medical prescriptions, whether or not they are medical marijuana, are being processed and need to be filled. Medbox has that advantage in the sense they are the biggest public ones, but private companies that are less scrutinized by the media and more nimble could swing in and take away big profits that Medbox is counting on.
Additionally, I would be lying to each and every one of you if I didn't say that Medbox's share price and market capitalization still kind of scares me from a personal investor point of view. You have to consider all of the above information and reasoning that I mentioned is somewhat baked into the share price. Therefore, if there is any good/bad news about whether or not they are making progress with acquisitions, their products, or retail giant partnerships, this stock could go zooming either way. For now, I am going to continue watching and wait for some significant news or for the price to come down before I make my move and invest in MDBX.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.