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Hims & Hers CEO on growing business in telehealth space

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Hims & Hers Co-Founder and CEO Andrew Dudum joins Yahoo Finance Live to weigh in on the company's $1.6 billion SPAC deal with Oaktree Capital Management and discuss the future of the telehealth company.

Video Transcript

BRIAN SOZZI: You've probably seen their commercials for erectile dysfunction meds, but today Hims and Hers will look to find its own stimulation via the stock market. The consumer product seller began trading on the New York Stock Exchange under the ticker symbol HIMS after doing a SPAC deal with Oaktree.

Joining us now to discuss is Hims and Hers co-founder Andrew Dudum. Andrew, good to speak with you this morning. Full disclosure, I'm surprised to see the market reception here to your stock in the early going, down slightly. Are you surprised? And anything you can put your finger on on why this response?

ANDREW DUDUM: You know, the beautiful thing about the market is it goes up and down, and you don't really know. The stock's up 60% in the last month or so. So I think a lot of that SPAC dynamic is built into that growth. Because of that structure, you have a little bit of a different dynamic than a traditional IPO where they pop overnight.

So we're really excited about where the stock is trading today. And I think most importantly, we're really excited about the next five and 10 years of us innovating in the health care system.

MYLES UDLAND: You know, Andrew, I'd love to just take a step back if I can and ask about what the model is here. As Brian mentioned, we were just chatting before the break. And I think a lot of our viewers are probably familiar with the commercials. They know that Hims is a brand. And I think the brand is quite strong.

But what part of the health-pharmacy system are you really going after? And what do you see as the opportunity there?

ANDREW DUDUM: Yeah, the opportunity with Hims and Hers was really to rebuild, essentially, the health care system in a consumer-first way. So anybody in this country can go to forhims.com or forhers.com. They can identify a condition, such as maybe anxiety and depression or a dermatology issue such as acne or aging that they might be concerned with, and then immediately get connected with a licensed physician in their state, get the medications they need, a personalized treatment plan for them, and then have that delivered to their door, all for a price point of roughly $20 to $30.

So we operate outside of the traditional health care system. We've rebuilt everything from that consumer front door, that brand that people across this country. But have also built the distributed network of physicians and providers across the country, our own EMR, our own 300,000-square-foot pharmacy and fulfillment center to be able to deliver this start to finish health care consumer experience in a way that really hasn't been brought to market today.

And so I think that's so much about what has been driving the acceleration of the business, growing 90% year over year last quarter, 76% gross margins, and having powered close to 3 million medical visits in just the last couple of years since launch. It's just really unprecedented growth when you think about the fact that we're living in a health care type of experience.

JULIE HYMAN: Andrew, it's Julie here. It's one thing to diagnose online something like baldness, pretty obvious, right? But how far does this go in terms of what you're going to be able to do and what your addressable market is and what your plans are?

ANDREW DUDUM: You know, it's a great question. When we talk to our board of directors, which is made up of incredible health care executives and leaders in this country, Dr. Toby Cosgrove from the Cleveland Clinic, our chief medical officer Patrick Carroll, who is the chief medical officer of Walgreens, we debate what portion of the US health care system is going to be moved to a digital-first experience like Hims or Hers. And the overwhelming consensus is something around 75% to 80%.

So that means 75% to 80% of the reasons that you go into a brick and mortar hospital will eventually, in the next five-plus years, be moved to a digital-first world. And that might include at-home diagnostics as an example, at-home testing. It might include at home continuous monitoring systems on your body, on your Apple Watch for glucose management, as an example.

But when you think about the fact that 80% will be moving to a brand or a system like Hims and Hers, and then you realize in step back that the US health care system is about a $4 trillion market, this opportunity is massive. And I think it's really the earliest of innings in the next five and 10 years. And the regulations have just made it possible. And I think the consumer expectation has also just made it possible where you can now have a digital experience where you can pick up your phone and access great health care. And I think we're all really excited about what that future could look like.

BRIAN SOZZI: Andrew, is this the year your company will be able to accept insurance?

ANDREW DUDUM: You know, it's something that we'll likely be able to roll out either this year or next year. It's a capability that is really important, specifically for those individuals that need medications or treatments that are highly specialized. And in most situations, those are on-patent drugs. As an example, Truvada is an amazing drug, prevention of HIV, with 99%-plus efficacy. But that drug is near $2,000 per month.

And until that gets fixed, us being able to offer insurance on the platform will unlock our ability to treat people with these medications that otherwise do not have generic options. However, for the majority of our business, there are great generics available. And because of that, we're able to not only help treat the patient, diagnose the patient, give them a formulation, but also have that medication shipped to their door, all for a very simple price of $20 to $30.

And so that generic dynamic makes it really affordable from a cash pay model standpoint. But with insurance, we'll also be able to unlock other medications that do not have those availabilities.

BRIAN SOZZI: Andrew, walk us through some of the numbers here. So 2021, you're looking for 30% year over year revenue growth and an adjusted EBITDA loss of $29 million. Now, your sales projection, the growth rate, that'd be slower than last year at about, what, 67%. And your losses are expected to increase. Has something shifted in the business? Or is this you guys being conservative out of the gate here?

ANDREW DUDUM: Yeah, you know, we like to be conservative out of the gate and make sure we can hit and beat expectations we put out as a young company. I think that's really important to build credibility and trust with the Street. But when you look at the business, even if you look at last quarter, the business is growing 90% year over year with 76% gross margins and increasingly improved cash efficiency quarter over quarter.

And so I think what we have here is a business that inherently has incredibly robust revenue potential, given the fact that we operate in so many different verticals and so many different conditions. And then given the verticalization, we've built also inherently high margin structures, with 76% gross margins.

So I think that combination of phenomenal revenue growth, high efficiency, and margin structure as well as being, I would say, on the forefront, and in many ways, I think the first inning of what will be a very long baseball game in this revolution in digital health care in the next five, 10 years will make for an incredible investment opportunity for the public markets, one that, frankly, as a capital markets investor myself, I haven't seen in a very long time. And so I think we're all very excited about that combination of factors that you have here with Hims and Hers.

BRIAN SOZZI: Andrew, real quickly before we let you go, when might the market see fertility and diabetes products from you?

ANDREW DUDUM: That's a great question. Both of those categories, along with other chronic conditions such as hypertension, high cholesterol are really important to us as a team because we see them with very high prevalence within the thousands of patients that we treat per day. To date, we've seen almost 3 million medical consultations come through the platform in the last three years. And so we're able to identify these conditions such as those you mentioned that our customers are really struggling with.

And so what you'll see from us is every year, us launch a couple of new major categories and really invest in making those experiences wonderful, affordable, and beautiful to encourage people to try to get some care. So we're hoping this year or next year you'll be able to see some of those new chronic conditions enter on to the platform.

BRIAN SOZZI: All right, we'll leave it there. Andrew Dudum, co-founder and CEO of Hims and Hers. Good luck in public company life. We'll talk to you soon.

ANDREW DUDUM: Thank you.