<p><img src="https://static1.businessinsider.com/image/5eb5c618578532106b535324-2400/hims.jpg" border="0" alt="Hims" data-mce-source="Hims" data-mce-caption="Hims cofounders Hilary Coles and Andrew Dudum"></p><p></p><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><p>Digital health's steady parade toward the public markets isn't letting up just yet.</p><p>Hims, the digital health company most well-known for prescribing and shipping medications for conditions like hair loss and erectile dysfunction straight to your door, will be the latest startup to debut on public markets in 2020, and one of just a few opting for a less-than-traditional way of doing so.</p><p>In October, <a href="https://www.businessinsider.com/hair-loss-treatment-vendor-hims-agrees-deal-to-go-public-2020-10">Hims said it was going public</a> through a reverse merger with blank-check acquisition company Oaktree. The deal, commonly called a <a href="https://www.businessinsider.com/healthcare-startup-founders-should-know-blank-check-spacs-2020-8">SPAC IPO</a>, values Hims at $1.6 billion on public markets and will be completed in the coming weeks.</p><p>It's a successful exit by most measures for the three-year-old company led by cofounder and CEO Andrew Dudum. Even in a historic year of healthcare initial public offerings and acquisition deals, the Hims SPAC IPO stands out as uniquely ambitious given the company's age and willingness to forgo private funding that has stalled other tech companies' public debuts for years. </p><p>Instead of staying private as long as possible, Dudum told Business Insider that he's eager to take Hims public relatively early after its founding. In fact, he had been planning to take the company public since it was just six months old.</p><p>"We've actually been preparing to take it public since the first six months out of launch," Dudum told Business Insider. "From a business standpoint, we built a company that saw 90% growth year-over-year with 70% gross margins. That's not something you see in public markets. You see this in private companies after years and years of growth cycle."</p><p><strong><em>Read more: </em></strong><a href="https://www.businessinsider.com/amazon-push-into-pharmacy-competition-pharmacies-health-plans-startups-2020-11"><em>Amazon just put the entire healthcare industry on notice with its latest push into pharmacy. Here's who stands to win and lose.</em></a></p><p>In <a href="https://www.sec.gov/Archives/edgar/data/1773751/000119312520274641/d47481ds4.htm#rom47481_22">publicly available filings on October 1</a> that were <a href="https://www.sec.gov/Archives/edgar/data/1773751/000119312520308150/d47481ds4a.htm">updated on December 2,</a> Hims released financial information that indicated just how the business had fared over the last few years, and what the terms of the SPAC deal were based on.</p><p>Business Insider looked through the 300-plus-page filing and its update and spoke exclusively with Dudum to get a sense of Hims' financial situation leading up to the IPO in the coming weeks. </p><p><img src="https://static2.businessinsider.com/image/5bedce8ada27f832e7673b80-1777/hims gummies-10.jpg" border="0" alt="Hims Gummies" data-mce-source="Hollis Johnson/Business Insider"></p><h2><strong>A slow and steady approach to growth</strong></h2><p>Hims has been inching towards profitability since 2018, the earliest year for which financial data was included in the public documents. That's largely due to Dudum's slow and steady approach to growth, a stark contrast to other startups' growth at all costs strategies.</p><p>In 2018, Hims recorded $26.7 million in revenue. By 2019, that ballooned to $82.6 million. Through the first nine months of 2020, which Dudum said has been the biggest year for the company, Hims recorded $107.3 million in revenue, surpassing 2019's annual total. </p><p>However, expenses have regularly outpaced revenue since 2018. In 2018, the company's net loss clocked in around $75.8 million and fell to just over $72 million in 2019.</p><p>Its losses appear to be narrowing in 2020. Through the first nine months of 2020, net losses were only $12.9 million, down from $59.7 million over the same period in 2019.</p><p>Marketing costs decreased substantially in the first nine months of 2020, likely tied to fewer costly out-of-home marketing campaigns like subway takeovers.</p><p>"The best part of the business is its consistent, slow and steady improvement," Dudum said. "There's nothing in our business that is seasonal and nothing that's acute because of the pandemic. We're always improving on those core fundamentals, but there's nothing to suggest those margins would go any other direction than they've gone in the past."</p><p>Dudum said the average order size has increased, and the company has completed more than 2 million medical consultations since launch. He said Hims reached the 1 million visits just 12 months after launch, a milestone that <a href="https://teladochealth.com/blog/teladoc-reaches-one-million-visits-thanks-to-you/">eluded telehealth giant Teladoc for 13 years</a>. </p><h2><strong>A public debut three years in the making</strong></h2><p>Although Dudum had been preparing to take Hims public since its first few months, it remains a relatively young company to make a public debut. </p><p>In fact, companies like Airbnb opted to continue raising private funding for over a decade before going public because venture capital, in particular, remained widely available and relatively easy to get. After pandemic-induced delays earlier this year, <a href="https://markets.businessinsider.com/news/stocks/airbnb-stock-price-ipo-trading-debut-valuation-past-100-billion-2020-12-1029882956">Airbnb debuted on Thursday at $146 per share, more than double its set price of $68 prior to listing. </a></p><p>To date, Hims has raised $272 million in private funding from investors such as SV Angel, Atomic Labs, Thrive Capital, Founders Fund, Redpoint Ventures, Forerunner Ventures, and Maverick Ventures.</p><p>"The first question we had to ask was, is the company ready to go public'" Dudum said. "That was the question we were preparing for in the last few years."</p><p>As SPAC IPOs rose in popularity earlier this year, Dudum said he and his team started learning about the process "from scratch" because they had originally expected the company would complete a more traditional IPO. </p><p>Together with the company's board of directors which includes Founders Fund general partner and Facebook board member Peter Thiel and Forerunner Ventures founder Kristen Green, Dudum decided to charge forward with the more unconventional choice.</p><p>Dudum said the team was drawn to the SPAC's more efficient process, which typically takes about six months to complete rather than the traditional 18 months. He also said there was more flexibility in the terms of the deal, allowing him to bring in other investors on the deal that would be excluded in the more traditional process.</p><h2><strong>Hims' cash on hand could supercharge acquisitions and growth</strong></h2><p>As part of the merger with Oaktree, Hims will raise $280 million with a $1.6 billion valuation. The majority of funds raised, <a href="https://www.sec.gov/Archives/edgar/data/1773751/000119312520260568/d74354dex991.htm">$205 million, will be in cash</a>.</p><p>That puts the already-profitable startup in a good position to make acquisitions, Dudum said. The company's continued growth will need to match public market expectations, he said, and much of that could come from acquiring other companies that offer complementary treatments and tools in areas like hypertension, sleep, and diabetes. </p><p>"We're a natural consolidator," Dudum said. "If Teladoc and Livongo can merge, pretty much anything is on the table. Two of the biggest companies are saying it's better to go together."</p><p>Acquisition deals won't be Dudum's top priority in the coming months, he said, although it is something he is considering in the background of daily work. </p><h2><strong>Hims won't immediately compete with Amazon, but could in the future</strong></h2><p>Dudum is also wary of Amazon's newly launched <a href="https://www.businessinsider.com/amazon-push-into-pharmacy-competition-pharmacies-health-plans-startups-2020-11">Amazon Pharmacy</a> service, which provides Prime members with discounts and two-day shipping on prescription medications. </p><p>For now, the service doesn't directly compete with Hims, which also offers telemedicine services and consultations in addition to generic medications. As Hims grows, however, the odds of the two services coming into more direct competition increases, Dudum said.</p><p>"Could they launch in the future something that's like the front door of a hospital' I mean, never say it's impossible for Bezos to do anything because he would and he can," Dudum said. "If they wanted to come after us, they'd have to hire millions of doctors, and that's not happening at least for five or 10 years."</p><p>As a public company, however, Dudum will have to pay closer attention to Amazon's incremental and major announcements. It is not uncommon for companies' stocks to sink rapidly when Amazon as much as announces an intention to enter a new market, as happened with drug discount company GoodRx following the pharmacy announcement. </p><p>Dudum sees room for multiple winners, however, given how early the industry is into its technological transformation. </p><p>"I think we are at the first batter of the first inning of the healthcare industry being essentially entirely rebuilt with modern technology," Dudum said. </p><p>The public documents make no mention of Amazon Pharmacy as a potential risk to the business, although outages associated with Amazon's cloud provider, Amazon Web Services are included. </p><p><strong>SEE ALSO: <a href="https://www.businessinsider.com/verily-cofounder-tom-stanis-story-health-seed-funding-specialty-care-2020-12" >A Verily cofounder's experience coordinating doctors after his dad's stroke inspired his new company addressing one of the most overlooked parts of caring for patients</a></strong></p><p><a href="https://www.businessinsider.com/exclusive-hims-founder-how-preparing-for-its-spac-ipo-2020-12#comments">Join the conversation about this story »</a></p> <p>NOW WATCH: <a href="https://www.businessinsider.com/electric-planes-future-of-aviation-problems-regulations-2020-3">Why electric planes haven't taken off yet</a></p>
Click here to read full news..
