Hims, a direct-to-consumer health company, is going public via SPAC
Hims, Inc., a direct-to-consumer company that sells health products and services targeted at millennials, is going public just three years after it got its start.
The company, which operates both men’s and women’s health brands and is sometimes called Hims & Hers, is merging with a special purpose acquisition company (SPAC) sponsored by investment management firm Oaktree Capital Management.
SPACs are an increasingly popular vehicle for companies to enter the public markets. They offer a way for private companies to go public on an accelerated timeline without jumping through certain regulatory hoops.
“We’ve taken a roadmap that was two to three years long and compressed it into a few months,” said CEO Andrew Dudum. “We’ve launched a primary care division, at home Covid-19 saliva test and a mental health platform, which were all things we wanted to do.”
The company will be valued at $1.6 billion, and the transaction will deliver up to $280 million in cash. Once the transaction is completed, the company will be traded on NYSE under the symbol “HIMS.” It is expected to close by the end of 2020.
Hims will join a growing group of companies on the public markets that are offering digital alternatives to traditional, brick-and-mortar health care services. The Covid-19 pandemic has offered these businesses a boost, as consumers are increasingly seeking medical care online and regulators are moving to offer greater reimbursement.
Hims is fairly unique, however, in charging consumers directly — it doesn’t take insurance — for a variety of health-related products and services, including birth control, acne treatments, and supplements. Many of its products are sold on a monthly subscription basis, and the company says about 90% of its revenue is recurring.
There’s also a primary care offering for people with ailments like sore throat, congestion and pink eye to talk to a health provider online, which is available for a flat fee of $39 per visit.
In the wake of the pandemic, Dudum said, the company has seen continued growth as more people are flocking to virtual health care. But he noted that that the company has driven 100% annual revenue growth over the past two years, with gross margins of over 70%. As of June of this year, the company said it had 260,000 paid subscribers. It is not yet profitable, but Dudum says it expects to cross that milestone in the near-term.
One of the most expensive aspects to building a direct-to-consumer business is customer acquisition. Dudum said those costs are going down over time, as more people are finding the service organically. He said the company is tapping into a growing market of people willing to pay out-of-pocket because of rise in co-payments and high deductible plans.
“For a long time, a lot of investors thought that it was impossible to go direct-to-the consumer route,” said Dudum. “But we’re seeing a lot of trends that are driving people to companies like ours.”
Hims is backed by a variety of venture capital funds, including Founders Fund, DCM Ventures and 8VC. It also raised a private equity round from the Canadian Pension Plan Investment Board. The company has pulled in more than $150 million in funding, according to Crunchbase. Hims is just one of a growing crop of venture-backed private direct-to-consumer health companies, including Ro, Curology and Nurx.