Hims, a direct to consumer telemedicine company that prescribes and sells personal products (higher margin) for men and women, is going public just three years after launching. The company is merging with a special purpose acquisition company or a SPAC offered by Oaktree Capital Management (which will take a 12% stake in the company). The company will be valued at $1.6 Billion (on $136 million in revenue) and the merger is expected to bring in another $280 million of funding. It will be listed on the NYSE under the symbol HIMS. Their incredible adoption rate and rapid increase in valuation is only bested by the scooter mobility startup, Bird. This is a rapidly growing model with others such as Ro, Curology and Nurx offering similar business models.

About Hims: Hims is a direct to consumer telemedicine company. Hims which sells men’s personal products was launched in 2017 after being incubated by co-founders Andrew Dudum and Jack Abraham in the startup studio Atomic.Vc. This was followed by the launch of Hers for women’s personal products in 2018. In 2019, just two years after launching, Hims became a $1 billion unicorn following a $100 million raised in a Series C round.

Products: The first product for Hims was a hair loss treatment (prescription finasteride) which also included DHT-blocking shampoo and biotin (vitamin B7) gummies. A quick recap--testosterone is converted to the much more potent dihydrotestosterone which plays a role in hair loss. Their other product was prescription erectile dysfunction pills. Hers was launched to sell birth control, skin care, and also hair loss products. Today the company continues to expand its product offerings and as we can see in the ‘spend’ row above, the addressable market is in billions for each condition that it is looking to treat.

Business Model: Hims is a Telehealth platform versus a Telehealth service which is not vertically integrated. Hims has video visits with a network of 240 licensed physicians, digital prescription in a native electronic medical record, and a cloud (or mail-order) pharmacy. This has allowed the company to accomplish a gross margin CAGR of 254% over the past three years. More than half of their revenue comes from selling sexual dysfunction support products on prescription and in a subscription model. This direct to consumer model is similar to GoodRx but differs in that GoodRx only offers the Telehealth service and gets a commission on every drug sold. Additionally, digital first companies like Teladoc and Livongo have a Telehealth platform but have not fully integrated yet across the value chain, especially the mail order pharmacy, and are competing in the B2B2C or selling to payers and providers who then offer it to their patients (the consumer end user). The company is yet to be profitable and projections don’t show it becoming profitable for at least another 2-3 years. A big portion for the delay in profitability is similar to other direct to consumer products--namely the customer acquisition cost (CAC) is pretty high taking almost a year to recoup the cost. Fortunately, both the annual revenue from customers is increasing and the CAC has steadily been dropping from $161 in 2018 down to $110 in 2020.

Accelerating Adoption: With a staggering annual revenue growth rate of 125%, and currently serving 260,000 paid subscribers, the company might know a thing or two about marketing to millennials. A series of suggestive advertisements appeared in New York targeting millennial consumers. CEO Andrew Dudum in addressing the media frenzy following the posting of these ads said “

“The one thing I want everybody to know is if you worry about an issue or a condition, or are struggling with something, that statistically you’re likely in the norm,.. The shame we deal with and things we worry about are the same things almost everyone deals with and worries about.”