Direct-to-consumer health company Hims Inc. said it plans to go public through a blank-check company. The San Francisco-based startup confirmed ongoing reports that it was in talks to sell to a special-purpose acquisition company.
The men’s health company first made its foray with cheeky subway ads for hair loss and erectile dysfunction medications. Its similarly branded site for women, Hers, launched a few months later, offering birth control pills, and hair and skin care products.
But more recently, both brands have expanded their services beyond wellness to include virtual primary care visits and mental health services.
“From the moment we launched the company about two-and-a-half years ago, we knew we had struck a really strong chord with people,” CEO and Founder Andrew Dudum said in a phone interview. “Men were coming out of the woodwork talking about how excited they were to finally get care.”
In this case, Hims will merge with a SPAC formed by Oaktree Capital Management. The newly formed entity, called Oaktree Acquisition Corp., went public in July with the intent of using the proceeds to make an acquisition.
After the deal closes, Hims’ stock will be traded on the New York Stock Exchange under the ticker “HIMS.” The combined company will be valued at roughly $1.6 billion.
Dudum said the company chose to go the SPAC route because it provided a faster speed to market and more certainty and flexibility than a traditional IPO. Hims has seen more than 100% compounded annual revenue growth over the last two years and has more than doubled its gross margins to 70%, according to internal data provided by the company.
The past six months, in particular, have been telling. Since the start of the pandemic, Hims began offering $39 cash pay virtual primary care visits, $60 psychiatry evaluations and $15 online support groups. It also rolled out an at-home saliva test for SARS-CoV-2, the virus that causes Covid-19.
“It’s been a transformative time for the company. The virus has acted as a looking glass into the future, where you can see more people than ever understand the benefits of telemedicine,” he said. “We had a four-year product roadmap with expansion that we were able to execute in two or three quarters. … We feel really confident in the business and the brand as it stands today.”
In the future, Dudum plans to expand further into managing chronic conditions. High cholesterol, diabetes, sleep and infertility are some areas the company might explore in the future, he said.
But Hims & Hers will still stick to its cash pay subscription model, rather than billing through insurance. Most treatments the two brands offer range from $20 to $40 per month, and are structured as a subscription model.
“For the conditions we’re talking about today as well as in the future, we believe we can offer cash pay prices that are cheaper than if not equal to people’s copay for their insurance,” he said.
Hims’ current management and shareholders will roll almost all of their equity into the combined company. Some of its backers include Founders Fund, Forerunner Ventures, Thrive Capital and McKesson Ventures.
After the deal closes, Hims’ shareholders will own roughly 84% of the combined company, while shareholders of Oaktree Acquisition Corp will own a 12% stake. Dudum will have roughly 90% of the voting power of the combined company, according to a filing with the Securities and Exchange Commission.
The combined company will have $330 million in cash, including $205 million from Oaktree Acquisition Company and $75 million from a private placement. The merger has been approved by both companies’ boards and is expected to close before the end of the year.
Photo credit: Screenshot of Hims website