How does Hims & Hers make money?

The company makes the majority of its money selling sexual health prescription drugs

While special-purpose acquisition companies (SPACs) have suddenly become a vehicle for all types of companies to go public this year, they've become especially popular in the healthcare space.

It was already assumed that 2021 was going to be the year of the healthtech IPO, and the emergence of SPACs as a viable means of going public could send it the number of companies entering the market into overdrive: it is already speculated that healthcare IPOs will be up 10% in 2021, while M&A activity could rise by 35%, and reverse mergers, which include SPAC deals, could grow by 47%.

SPACs act as an alternative way for companies to enter the public market without needing to go through a traditional IPO. Basically, a shell company is formed which goes through an IPO; it then acquires an established company so it can take over the stock. This allows companies to go public faster, bypassing the need for a months-long roadshow. There are at least 53 SPACs actively searching for target companies across the healthcare and life sciences industries and a number of companies have already gone this route, or have announced that they will, including Ambulnz, Clover Health, Science 37, Sharecare, Talkspace and 23&Me.

One of the biggest healthtech companies to go public via SPAC is e-commerce wellness brand Hims & Hers.

What is Hims & Hers?

Founded in 2017, Hims & Hers offers a subscription-based model, allowing patients to treat conditions relating to skin care, sexual health, hair loss, and mental health. Patients are connected to a physician through its telehealth platform, who then send prescriptions to the patient's door with no delivery fee. 

"To enable our mission of making healthcare accessible, affordable, and convenient for everyone, we offer a range of health and wellness products and services available for purchase on our websites directly by customers. Our offerings generally focus on chronic conditions, where treatment typically involves use of prescription medication on a recurring basis and ongoing care from healthcare providers," the company wrote in its filing with the SEC. 

"Most of the offerings on our websites are sold to customers on a subscription basis. Subscription plans provide an easy and convenient way for customers to get the ongoing treatment they need while simultaneously providing the company with predictability through a recurring revenue stream."

For subscription plans, customers can determine how often they receive products, be it every month to every two to twelve months, depending on the product.

A subscription fee on Hims or Hers is typically around $20 to $30 per month, and patients pay for everything out of pocket; the company does not accept insurance, though it does say that its products "are available at 50-80% off retail cost, making them more affordable and accessible to consumers."

Revenue breakdown

The company breaks down its revenue into two categories: online revenue and wholesale revenue.

Online revenue represents the sales of products and services on the Hims and Hers platform, either via subscription or from people buying individual products. In the fourth quarter of 2020, online revenue brought in $40 million, representing 96.7 percent of the company's $41.5 million in total revenue.

Wholesale revenue, which "represents non-prescription product sales to retailers through wholesale purchasing agreements," took in just $1.4 million, or 3.3 percent of total revenue. 

When broken down by category, the majority of revenue for Hims & Hers comes from products relating to sexual health, with 57%, while 35% comes from hair, dermatology and other products. The other 7% is from wholesale sales. 

The vast majority of products that the company sells are prescription medications, versus non-prescription products, including nutritional supplements, vitamins, and hair care treatments, which makes up only 10% of sales.A publicly traded company

Hims & Hers announced it would be going public in October 2020 via a SPAC merger with Oaktree Acquisition Corp.

The transaction, which was completed on January 20, 2021, valued Hims & Hers at roughly $1.6 billion and raised $280 million, including $205 million in from cash Oaktree, as well as a $75 million concurrent private placement (PIPE) of common stock from institutional investors, including funds managed by Franklin Templeton and certain Oaktree clients.

The stock, which debuted at $17.13 a share, closed at $8.97 on Thursday, down 48 percent. 

Prior to going public, Hims & Hers had raised $158.2 million in ventures funding from investors that included DCM Ventures, 7 Global Capital, Counterpart Advisors, Redpoint, 8VC, Founder Fund, Kyle Widrick, Maverick Ventures, Forerunner Ventures, Thrive Capital, IVP, SV Angel, UpHonest Capital, Wei Guo, Gin Lane, Cherubic Ventures, and Atomic.