Telehealth retailers Hims & Hers go public with financial transactions

• Hims & Hers will go public by partnering with a unique acquisition company and a new research contract that gives three-year-old telemedicine users nearly $ 1.6 billion as Wall Street remains optimistic about help.

• Hims & Hers will merge with Oaktree Acquisition Corp., a franchise company backed by huge global investment manager Oaktree Capital Management, in a transaction expected to close in the fourth quarter of this year. Following the transaction, the combined company will be listed on the New York Stock Exchange under the symbol HIMS.

• The merged company will have an estimated $ 330 million in cash after closing, including cash plus $ 205 million forecast by OAC and up to $ 75 million from a concurrent private placement. (PIPE) actions. Ordinary, priced at $ 10 per share institutional investors.

Digital health companies are making big bucks from investors as COVID-19 continues to drive Wall Street’s interest in virtually-delivered health care. Funding in the sector could exceed $ 8 billion in the third quarter, according to analysts at CB Insights, against $ 5.8 billion in the still record second.

The industry is booming as patients have turned en masse to telemedicine for elective care since March to prevent possible transmission of COVID-19 in doctors’ offices and hospitals.

This positive wind, coupled with growing consumerism and the need to cut costs, has significantly accelerated virtual assistance and spawned a number of recent transactions.

His & Hers started out as a millennial-centric startup that deals with erectile dysfunction. In recent years, the San Francisco-based company has grown to cover primary care, mental health, sexual health, dermatology, and hair loss, selling both prescription and over-the-counter products. Sexual health still constitutes the bulk of income.

His & Hers, which has a network of 240 vendors and a digital pharmacy, plans to use the funds to drive growth and new product lines, the company said. Short-term opportunities include sleep, fertility, diabetes, and cholesterol care, according to an investor presentation on the operation.

His & Hers targets the consumer massively, which sets them apart from suppliers as Amwell and Teladoc focused on the business-to-business-to-consumer space. The company does not accept the insurance, although it noted in the statement that it could change. His & Hers has initial collaborations with the Oschner Health and Mount Sinai hospital systems and also offers a telemedicine benefit to employers.

In June, Hims & Hers had around 260,000 subscriptions on its platform. Since its founding in 2017, it has made more than 2 million telemedicine visits and has seen steady growth, with 100% compound annual growth in revenue over the past two years, from $ 27 million in 2018 to $ 83 million in 2019 and a forecast of $ 138 million this year, based on internal data.

His & Hers more than doubled its gross margins to 71%, with recurring revenue accounting for 91% of its sales.

Its $ 1.6 billion valuations are equivalent to 8.9 times its estimated revenue in 2021 and 12.2 times its estimated gross profit in 2021, the company said.

For comparison, two of the largest telemedicine operators in the United States, Teladoc and Amwell, have company values of about $ 20 billion and $ 6 billion, respectively. Chronic care management company Livongo, which Teladoc acquired in an $ 18.5 billion mega-deal in August, was valued at around $ 17 billion before the purchase.

Private companies may view blank check companies as a way to go public, giving them guaranteed access to capital in lieu of a traditional initial public offering. Another telemedicine company, SOC Telemed, went public in late July with special-purpose acquisition company Healthcare Merger Corp.

Under the deal, Hims & Hers management and existing shareholders, including McKesson’s venture capital fund and Thrive Capital, a venture capital firm led by the brother of White House adviser Jared Kusner, will invest nearly 100% of your shares in the phone business.

As is, current Hims & Hers shareholders will own approximately 84% of the combined company’s shares at closing, Oaktree Acquisition Corp. shareholders will own 12% and PIPE investors will own approximately 4%.

Its CEO, Andrew Dudum, will retain 90% of the voting rights after the deal, according to documents filed Wednesday with the Securities and Exchange Commission.