Personalizing Healthcare With Hims & Hers

On this episode of TD Cowen’s Retail Visionaries Podcast Series, Andrew Dudum, CEO and Co-Founder of Hims & Hers joins Jonna Kim, Retail and Luxury Analyst. Hims & Hers is health and wellness platform on a mission to help individuals feel great through the power of better health.

Transcript

Speaker 1:

Welcome to TD Cowen Insights, a space that brings leading thinkers together to share insights and ideas shaping the world around us. Join us as we converse with the top minds who are influencing our global sectors.

Jonna Kim:

This is a visionary podcast series about visionary ideas and people. My name is Jonna Kim and I am TD Cowen’s retail analyst. In this episode of our Retail and Luxury Visionary podcast series, we’re excited to spend time with Andrew Dudum, CEO and co-founder of Hims & Hers, which is the leading health and wellness platform on the mission to help individuals feel great through the power of better health. Hims & Hers has disrupted the traditional healthcare market via digitization and personalization, and we see a strong runway for growth ahead. Andrew, thanks for joining us today.

Andrew Dudum:

Thanks for having me, Jonna. I appreciate it.

Jonna Kim:

Just to kick off, in your own words, could you just tell us about the core competencies you’ve built that differentiate Hims & Hers in the health and wellness market?

Andrew Dudum:

Yeah, absolutely. At a very core level, what Hims & Hers is doing is connecting everyday people to personalized precision healthcare and doing that in a flexible way, in affordable way, in easy way, ultimately in order to help the masses. Every household in this country get access to better healthcare and feeling better. And so what does this mean? It means that we can connect you to a specialist in your region, in your state. We can help treat nearly a dozen different categories and conditions that are some of the most emotionally resonant conditions in your life. Things like mental health, sexual health, dermatology issues, hair care, sleep. And we do this all with a trusted experience, a trusted brand, and most recently now new and innovative products that are actually helping you get better outcomes. So it’s this full circle experience where you’re getting a high-quality clinical experience through personalization in the products and treatments that are helping you feel better faster, and something that’s accessible and ultimately affordable in a way that the mass market can really come and access.

Jonna Kim:

And personalization is a core competency of yours, as you said. With personalization becoming an increasingly important area of focus for the company, how are you aligning your strategies with evolving consumer preferences?

Andrew Dudum:

Yeah, when you think about healthcare in general, you think about a really cold and sterile experience. You go to the doctor, they might prescribe you a medication, it’s a standard generic medication, one dose. It might work, it might not work. You might have side effects, you might have questions. And ultimately what we believe is that a personalized medication and personalized treatments ultimately will result in better outcomes and faster outcomes. And what that means as a business is happier customers, higher MPS, and ultimately stickier relationships. Patients that are happier with treatments, seeing benefits faster, and ultimately having stronger retention dynamics. So we through a lot of innovation over the last five and six years, a lot of infrastructure build out throughout our affiliated pharmacies have built the capabilities for our providers to deliver really precise personalized treatments. This means that it could be combinations of medications, adjustments and doses, different form factors. Instead of a pill, maybe it’s a lemon gummy or it’s a winter green mint that you take daily. And these medications can not only solve the core issue that you came to Hims & Hers to solve but also underlying multicategory options.

So for example, our recent launch with our Heart Health offering allows men who are suffering from sexual dysfunction to also treat preventative cardiovascular risks. Because those two issues, cardiovascular health and heart disease, and sexual dysfunction are often very much tied. And this is treated in a simple daily mint that tastes great and encourages you really to continue to take that treatment. So this ability to tailor treatment in dose and form and composition, we think is giving providers and customers ultimately their first real experience with precision medicine in a way that is unlocking an experience that for the most part has been very limited to a very small group of people.

People who could afford very high-end tailored experiences, we aim to bring that level of customization and expertise, and precision medicine to the masses. And I think this wave of personalization is going to continue to really expand the brand’s reach because it’s changing the narrative. People know that you can not only get great access to healthcare specialists at Hims & Hers, but you can also get products and treatments you can’t get anywhere else that are more personalized to you that treat multiple categories and conditions you’re worried about all at prices that are in most situations more affordable than you can get in other competitors.

Jonna Kim:

You touched on this a little bit. You recently launched Heart Health by Hims. Could you just talk about the significance of the launch and how do you see this offering benefiting the overall platform and the customer experience?

Andrew Dudum:

Yeah, this is a really exciting expansion for us because it is so clearly an opportunity for us to address head-on one of the leading causes of death in the country. Heart disease kills more men in the United States every year than any other condition, which is an incredible concept when you realize that the underlying ways to prevent heart attacks and stroke are actually really quite simple. A healthier lifestyle and in situations where people are at risk, really standardized protocols with medications such as Lipitor and Crestor that have been around for decades now, that have very little side effects and meaningfully reduce your chance of death in a heart attack. But people don’t actually take these medicines. People don’t proactively go get treated. They don’t proactively feel that they have symptoms. And so ultimately people are having heart attacks and strokes, and they’re building up this cholesterol in their arteries for decades without knowing.

And so what we have done is I think a really innovative approach, which is bringing people to the Hims & Hers platform for conditions again that they’re concerned with, such as sexual dysfunction. And on the women’s platform, this could be things like hair loss or it could be mental health, but then also treating a lot of the underlying conditions. So on the Heart Health side of the house, this could be cardiovascular health. On the women’s side, it could be menopause, it could be underlying issues such as weight loss, issues such as obesity, or insulin resistance. And this ability to seamlessly and beautifully combine therapies into a product that tastes great, looks great, and encourages you to adhere to the medication, I think is actually going to change the outcomes for tens of thousands of people.

So I think with this Heart Health category expansion with Hims, we treat thousands of men a day at risk. So the ability over the course of the next few years to actually prevent quite literally hundreds of thousands of heart attacks, I think is a really real opportunity. So this is us doing what we do best, which is a brand personalized experiences, custom treatments, clinical excellence, but delivering it in a innovative approach that actually is going to result in millions of people, I think ultimately getting access to it at an affordable price and getting better sooner.

Jonna Kim:

Another area of category expansion is weight loss, as you mentioned. Why does it make sense for Hims & Hers to enter this category and how will you differentiate the experience in weight loss versus some of your competitors?

Andrew Dudum:

Yeah, it’s a great question. I think similar to heart health, obesity in this country is to no surprise to anybody, one of the largest opportunities in helping people feel better and live healthier lives. I read something recently where it was nearly 95% of the country at any given point has tried to lose weight before. And in this moment right now, nearly 60 to 65% of the country is actively trying to lose weight. That’s an incredible number. That means that at any given time, the majority of the country is actively trying to lose weight and struggling. And so what we offer here is something that we believe is going to be meaningfully impactful. It’s mass market, leveraging the specialties and expertise of obesity individuals that have been really working in this field, in the clinical setting for a very long time, usually at very high-end obesity clinics, giving customers highly personalized experiences, treating essentially the underlying conditions that are resulting in weight gain.

So this can be things like binge-eating dynamics. It could be things like mental health and compulsive eating. It could be things like an over-aggressive appetite. It could be the pace at which your stomach digests and empties food. It could be things like metabolic issues or hormonal issues or insulin resistance. So obesity is not a disease of the lazy, it is a disease because there are biological dynamics in your body making it hard for you to lose weight. And so we are going to go after that, I think directly. We’re going to treat with safe products that have been on market for a very long time and used in very unique specialist situations to treat those underlying dynamics but deliver it in a way that is affordable. We’re talking about everyday prices that the mass market can afford, similar to our other offerings, 30, 40, $50, not thousands of dollars, and leverage what has been used in the boutique clinics in Hollywood or LA and bring that to the masses in a way that everyday people can get access to that level of information, expertise, and ultimately personalized treatment.

Jonna Kim:

And going back to personalization, as you see a shift towards more personalized offerings, what are the potential implication in terms of customer behavior and retention and spending trends and also on margins in your opinion?

Andrew Dudum:

I think it’s a huge component of this next phase of the company because we believe it can deliver truly better outcomes. People are willing to pay for it more. They’re engaging with the platform more. They’re adhering to their treatments more because these things are in form factors that they enjoy, flavors that they enjoy, they have combination therapies, so they have two or three reasons to take their medicine every day as opposed to just one. And ultimately what that means is stick to your customers. When we think of the ability to build a very large company over the next decade, the ability to retain these customers for decades is key. And so being able to drive and plow more value into the offering, into the treatment and solution that you are engaging with us daily, all at a price point that is still affordable compared to the competitive dynamic, but is far superior than the generic options available in mass, we think that’s going to have really compelling implications for our marketing, really compelling implications for the brand, for our trust, and ultimately the longevity of the consumer platform.

And given these proprietary products are being manufactured and fulfilled through overwhelmingly our own affiliated pharmacies, we have this scale advantage that others don’t. And you saw in this last quarter, gross margins have risen eight points since the beginning of 2022. Even as we start to reduce prices, all of this ability and scale is something we can give back to the customer and price advantages while also making the valuable products even more personalized and more custom to their needs.

Jonna Kim:

As you noted, you recently lowered pricing for longer-duration offerings. Could you just walk us through the rationale behind lowering pricing and what are potential benefits as well as risk you see from lowering pricing?

Andrew Dudum:

I think the benefits are really incredible for us. As a mission, our aim is to be in every household in the country. We believe Hims & Hers can offer services and products that literally every single household relies on. In order to do that, you have to drive mass market pricing. What is happening under the hood is that we have true competitive advantages. We are operating at a scale truly unlike anybody in market. We’re fulfilling tens of thousands of packages through our affiliated pharmacy a day. We’re treating tens of thousands of patients a week. This scale is allowing processes and systems to ultimately deliver a real outperformance in margin. As we were sharing, you’re north of 80 plus percent gross margins last quarter, while also reducing prices. Very few companies can say that over the last year in the face of inflation, in the face of macroeconomic noise and headwinds, that they are lowering prices, but they’re driving margins higher.

So all of this is delivering what we think the ability to offer something truly differentiated. Products that continue to get better over time, continue to have more value in them, such as the multi-action heart health treatment, continue to have more form factors. You’re going to see more innovation in form factors and flavor in the coming year, unique formulation compositions, but also better pricing. And not only better pricing across the entire offering but better pricing strategically for the products and offerings that we think deliver much longer commitments to the platform. So we expect to have, as a result of all of these pricing changes, more customers on the platform for longer periods of time. As price is removed as a barrier, and we make the longer duration skews more advantaged, it’s going to get people to understand the commitment that they can have with Hims & Hers, the longstanding relationship that they can have with Hims & Hers, and ultimately be with us longer, see the benefits more quickly and have happier and healthier experiences.

And so ultimately, we think the precision of these pricing strategies is something really only we can deliver. And this ability to not only funnel margin back to the customer but also make the product itself simultaneously better is going to allow for truly unprecedented competitive dynamics that will deliver really powerful tailwinds for the business in the next few years.

Jonna Kim:

Data and technology are also another area of core competencies of yours. You recently highlighted that you filed multiple trademark applications for MedMatch. What are the core capabilities of MedMatch and how do you see your AI capabilities helping to improve the customer experience as well as other areas of the business?

Andrew Dudum:

It’s a great question. When we started this company, the core offering was about access. You come to Hims & Hers to get access to a great clinical provider, and your experience and your clinical outcomes are dependent on that provider’s individual expertise. And what we are aiming to do with MedMatch is to expand the capabilities of that provider and to inform them and to give them the tools such that your experience with a provider at Hims & Hers is better than you could get from any provider anywhere in the country. And the way we do that is by leveraging the collective knowledge of millions of historical clinical decisions on the platform, millions of patients that have come through the platform, who have been treated in different ways, who have had different varying outcomes, and put that all through machine learning and AI models to be able to intelligently provide support to the provider to give more precise prescribing indications.

So ultimately, this is allowing our doctors to make more intelligent decisions to identify the specific medications and the specific dosages that we think are going to result in the best outcomes for you the quickest. And things like this really matter. You take an example like psychiatry. If you go to a psychiatrist today in the United States and you’re suffering from let’s say depression, and you tell the psychiatrist everything about yourself, they’ll look at you for the most part and say, “Well, there are five medicines that usually work for depression, and of those five different patients react differently to them. So let’s start on one of them and if it doesn’t work, we’ll go to the next.” And to me, that concept is crazy. The fact that it takes on average four to six months to find the right dose and the right medicine that’s actually going to drive a better outcome for you, especially in a time of need in psychiatry when you’re already struggling with mental health issues.

So what MedMatch aims to do is speed up that time to find the right medicine and the right dose by leveraging all of the historical data we have on the platform, identifying customers like you from the past. Maybe your BMI, your symptoms when they started, other indications of you as an individual, and figure out for people like you, what specific medicine and what specific dose resulted in them feeling better the fastest. And we’re going to start you there. So we’re going to level up this information to the providers. We’re going to give them these tools, and ultimately coming to Hims & Hers is not just going to be about getting connected to a doctor, but it’s going to be able to come to Hims & Hers to get connected with better clinical decisions and ultimately more precise treatment options that you really can’t get anywhere else.

Jonna Kim:

Obviously, you’re known for the Hims platform, but you also have the Hers platform as well. What are key strategies around growing the Hers platform and what are key offerings and innovation you see on the Hers side?

Andrew Dudum:

On the Hers side, it’s just such a wildly underserved market. And it’s massive. Everybody knows that women in the household control the budget, they control the wallet, the stigma around spending on health and wellness is just not there. The ability to build this business into a massive business is real. And we’re seeing those signs. Some of our fastest growing categories, we’ve talked about dermatology, we’ve talked about women’s hair loss, we’ve talked about women’s mental health. These are truly some of the fastest growing business, mid-triple digit growth businesses. And we expect that to continue.

So I think how you accelerate that, you continue to offer really innovative solutions. Women are exceptionally well-educated with regard to what is in market. Men sometimes they’re not spending a ton of time doing research. They see a product, their friend said it works, and they jump into it. Women are different. They do the diligence and they know the landscape. And so we think the personalized, holistic approach that we are offering with these new capabilities, the ability to custom tailor specific treatments, but specific treatments that are clinically effective. We’re not talking about just things you can get at Walgreens or Sephora, we’re talking about true medicine personalized to you that treat a whole bunch of things that you’re likely struggling with at an underlying level, we think is going to be a really popular option, and we’re already seeing that take shape.

Jonna Kim:

Marketing is an important vehicle for driving awareness and reaching new customers. Could you provide some color around your current marketing strategy and how do you ensure you drive high ROI on your spending, and what is the most effective channel for you at the current time?

Andrew Dudum:

Yeah. We have a really tight philosophy on capital allocation, which is across all of our marketing, we aim to very comfortably have true payback in less than one year. And we’ve been able to maintain this for the majority of the operating experience of the business. And what it allows us to do is flexibly deploy a very omnichannel presence in market. And I think this omnichannel presence, you’re talking about social media, mass market TV like the NFL or the Bachelorette, brand ambassadors such as Kristen Bell, DR but also physical channels such as Target, Walmart, CVS, Walgreens. This omnichannel presence allows us to build a really trusted brand and market as we show up in the different places that our customers are. And we think that all of that compounds on itself in a way that makes each of the individual channels more efficient.

And this is something that really at scale, you’re able to leverage the benefit of that is more challenging to in the past when you’re smaller. But at this scale, when you’re deploying this level of dollars across this range of categories, it really does snowball on itself. Because an individual can say, I was at Walgreens this morning and I saw the Hers shampoos on the shelf, and then I jumped on social media and I saw that Kristen Bell is doing a podcast or an interview about mental health. And then I was watching a TV show tonight, and there was a Hers spot about all the other categories.

And so that combination of marketing has always been part of our DNA. We believe long-term that this brand is one of, if not the most important assets of the company. And telling the story of how you can feel better, how you can live a healthier life, how it’s affordable, how it’s easy, and with how Hims & Hers we can make getting started simple, we think is a really powerful message, and it’s really important to us that that message is showing up in a lot of different avenues.

Jonna Kim:

As a final closing question, what are some underappreciated aspects of the business and where do you see the platform going over the next three to five years?

Andrew Dudum:

Yeah. I think a lot of people are still uncovering the reality that Hims & Hers is going after probably the largest untapped market in the country, which is healthcare. And we’re going directly at it. And I think often people don’t realize, actually the fact that we truly are going directly at it. Because it’s wrapped in an experience and a set of products and a brand that is beautiful and it’s seamless and it’s affordable, and all of these words usually aren’t associated with traditional healthcare, they’re associated with traditional D2C brands or lifestyle brands. But truly under the hood, we are treating tens of thousands of patients. We’re fulfilling tens of thousands of pharmaceutical personalized treatments compounded for patients from our affiliated pharmacies every single day. And we’re driving incredible outcomes with patients that are sticking with us for a very long time to treat chronic conditions.

So we think there’s an incredible opportunity here where we’re capturing leadership positions through innovation and through scale. Very few companies have been able to do this like Netflix and Amazon or Airbnb. And we believe we have the opportunity to do it in healthcare and delivering something that consumers love and is truly unique in the market. This is a clinical excellence you can’t get anywhere else and a level of precision products and proprietary treatments that treat you at a level that is really hard to compete with all at very affordable price points. And so we’re going after that mass market approach. And ultimately, like I was saying, Jonna, I think this is an offering that is going to resonate in the masses and be a part of every household in this country over the next decade, and that’s very much the ambition of the company.

Jonna Kim:

Thank you for joining us, Andrew. We are excited to see what’s ahead for Hims & Hers. And to our audience, thank you for listening.

Speaker 1:

Thanks for joining us. Stay tuned for the next episode of TD Cowen Insights.

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