The Compound and Friends - The Telehealth Revolution with Andrew Dudum (Hims & Hers Health) and Frankie Stella (Precision Pharmacy)

Episode Date: March 19, 2021

Josh here - On today's show, I practically beg you to stop crying over 10-year Treasury yields. The answer to rising rates is the same as the answer to falling rates. I will repeat it until it sinks in.  I talk to Andrew Dudum, the founder and CEO of Hims & Hers Health (HIMS, NYSE) about the massive opportunity in telehealth. My friend Frankie Stella of Precision Pharmacy joins the discussion. Andrew is 31 years old and founded Hims & Hers about four years ago. It is one of the fastest-growing consumer health plays in America today and I learned so much from this conversation. I hope you do too!  Make sure to leave us a rating and review, we appreciate it! Obviously, nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

Let me explain something to you. It's not a different answer. It's always the same answer. 500 people wanted to ask me this week, what do you do now with higher interest rates? First of all, overnight rates have not gone up, and the Fed just told us they're not going to go up anytime soon. Most likely not until the end of 2022,

which is almost two full years away, but even more likely, according to current expectations, not until early 2023. So if overnight rates are staying at zero and people are worried about rising rates, what are they worried about? They're looking at the 10-year treasury, which hit a high of 1.75 as of Thursday and have come a long way since 50 basis points in August. Okay. The rate on the 10-year is higher. So what do you do? It's not a different answer. The answer is diversification. I know it's boring. I know. It's like I'm recommending investing in the missionary position. I'm sorry. That's what the answer is. And if you look at how stocks have been weathering that rise in the 10-year treasury rate,

JP Morgan and Goldman Sachs went vertical. General Motors and Caterpillar and Dow Chemical went vertical. They're going straight up because rates are rising for a reason. Rates are rising because the economy is growing quickly. The recovery is getting stronger, as I've talked about here before. That's why rates are rising. They're not rising through trickery or some sort of artificial cause or some supernatural force. They're rising because the economy is improving. It's not great, but it's getting better.

And the bond market is responding. And when I say the bond market is responding, let's talk about what that means. It means people are less willing to lock up money for 10 years in something that's yielding less than 2%. The US GDP estimates that you're hearing now are in the 6% to 7% range. Okay, so that's a big difference from last year. Should interest rates be at zero? Does that make sense? Should the rate of the 10-year be under 1% if the economy is growing by 6% or 7%? Probably

not. So that's what it means when the bond market is responding. That's people deciding how they want to allocate trillions of dollars. And it turns out that if we're going to have more inflation than we've had historically, and if the economy is going to be ramping, and if employment is going to pick up, and wages are going to pick up, then people don't want to have their money locked up over the duration of 10 years at a rate that is lower than what we think the rate of inflation will be. Isn't that reasonable? Is that an anomaly? That's actually what should happen. And as is normally the case in the stock market, that produces winners and losers. The winners are the companies that are levered to that steepening of the yield curve. So you understand why Goldman Sachs and JP Morgan went vertical, why Bank of America

is selling at levels it has not traded at since 2008. You understand that. You also understand with rising inflation expectations, why you would see companies like Caterpillar that are reliant on global growth trading higher. Faster growing economy means more orders. Look at Boeing stock. Look at the airlines. Okay, so none of this is bizarre. None of this is strange. None of it is particularly remarkable.

I'm sympathetic to the concept that the speed of this has caught people off guard. Well, tough shit. What do you think? You wake up and people hand you consistent returns just for being you? It's not how it works. So you'll have parts of your portfolio that look amazing right now. Small cap value versus small cap growth. That ratio chart this week made a new 52-week high.

So hopefully you stayed diversified. Diversification is always the right answer. And you're enjoying the benefit of what's happening in various asset classes that you're invested in. And then some parts of your portfolio are not so hot. 40, 50 times revenue. That might've made sense in an environment of slow or even negative economic growth. These companies are growing on a secular basis and are not reliant on cyclical growth around the world. And in the absence of global economic growth, people were placing their bets on companies that would grow regardless. And as those stocks went up, more people bought them and they became popular and they became momentum and they attracted a lot of assets and a lot of fund flows. And that worked for a very long time and people made a ton of money. It doesn't go on forever. It changes. Attitudes change. Trend trends change. People change their minds about how they want to be allocated. And that is what produces the volatility that we've seen in that segment of the market.

Importantly, that shunning of high valuation growth stocks really is not a factor for most of the S&P 500. Most of the companies that we're talking about, electric vehicles, biotech, a lot of experimental stuff on the cutting edge of technology, a lot of SaaS, software as a service businesses, cloud computing stocks, either they're so new or they have yet to earn a profit. And as a result, there are very few of these companies in the S&P 500. Peloton's not in the S&P 500. Neither is Zoom. Neither is Teladoc. I can go on down the whole list. I'm not going to. So while there are individual stocks that are at 20%, 30%, even 40% drawdowns from their highs. First of all, if you pull back

the chart beyond just the last three months, you see that they're still up huge over the last year or two. And second of all, that's how it works. You don't get to win in everything that you buy every day. If your entire portfolio is at a 52-week high at the same time, you're not investing. entire portfolio is at a 52-week high at the same time, you're not investing. You're speculating on momentum, right? So I think for most investors, they're hearing about this tech wreck and all this hysteria over rising rates. And when they actually look at what's happening with their portfolio, it's pretty good. It's pretty good. The Dow Jones made a new all-time record high this week. And if you are repeatedly putting money into a diversified portfolio of assets, you're now buying bonds at triple the interest rate than you were buying them last summer.

Arguably, the only way you're going to make money in bonds is if rates go up, even if that means there's a short-term drawdown in the price of those bonds right now. So it's not a different answer. The answer is the answer. You diversify. You set the rules in advance. You rebalance when opportunities come along or systematically, however you choose to. And you bide your time and you understand that this year's underperforming asset is likely next year or the year after's outperforming asset. And your job is to not run all the way from one side of the boat to the other, back and forth like a chicken with your head cut off. Your job is to stay cool. The answer is the answer.

All right. Let's talk about erectile dysfunction. I know that's a very All right. Let's talk about erectile dysfunction. I know that's a very hard pivot. I don't have erectile dysfunction, I swear. But if I did, I would not be walking into a doctor's office to sit down with another man to have a conversation about it. And you know why? Because I don't have the guts. And believe it or not, as extroverted as I may seem on television, I'm pretty shy in public and I'm easily embarrassed. And I'm not that atypical, right? So the erectile dysfunction pharmaceutical market is massive. And we're going to talk today on The Compound Show with Andrew Dudham, who was the founder and CEO of Hims and Hers Health,

which came public via SPAC in January. Hims and Hers Health is a company whose origin is in that conundrum that I just talked about. There are people who have things wrong with them who are either too embarrassed or too busy or too afraid to admit to out loud to another person in the room. This is human nature. It's also a huge market opportunity, especially coming out

of a pandemic where everybody has had to get used to being serviced by someone on the internet, getting some sort of service. People are doing their taxes on Zoom with their accountant. They're meeting with their lawyer on Zoom. And why not see a doctor that way? So there's been an overnight revolution in the willingness of most Americans to talk to a medical professional on the internet. Overnight, what would have taken a decade, the whole thing just happened in like six months. And Hims and Hers Health is a very interesting story as a result of that revolution that we've seen. Andrew is 31 years old. He came up with this red hot concept back, I think the company was founded in 2017. So it's a really fast-growing market of people who have male-patterned baldness, even women who are experiencing hair loss, people with rashes, people with all sorts of things that they just don't want to come forward and deal with.

Hims and Hers is answering that market segment, and that market segment is growing. So he hooked up with Alex Rodriguez and Jennifer Lopez as early shareholders. Then he hooked up with Oak Tree. Oak Tree is a massive asset management company based in LA, founded by and led by Howard Marks, one of the greatest investors of all time. And Howard Marks launched a SPAC, Oak Tree launched a SPAC, and that SPAC became Hims and Hers Health. So they closed the transaction in January. And the revenue growth of this company is off the charts so far. So we're going to talk with Andrew about why telehealth is the future of consumer healthcare, and why his company is

positioned to be a leader in telehealth. And it's a really, really fascinating story. So I'm so happy to bring that to you. I also asked a good friend of mine to join us for the conversation. So you're going to be hearing from Frankie Stella. Frankie is the president of the large independent pharmacy chain Precision. And Frankie also does custom compounding for a huge variety of doctors, major league baseball teams. He has NFL football teams, and he's just got a wealth of experience in this area. So I asked him to come and help me out just in case Andrew started talking about things that were above my pay grade. So we're going to get into that. I just want to do one quick housekeeping item.

For those of you who are on the Clubhouse app, we've seen a big audience turnout for The Boiler Room, which is a show that we're doing every Friday afternoon at 3 p.m. Eastern. On The Boiler Room, we turn the tables and let the audience pitch us their favorite stock ideas. It has been so much fun. My co-host is Jason Raznick. Raznick runs Benzinga News, and we also bring up guest judges too. I would say on a typical Boiler Room episode, we hear something like 10 or 12 stock pitches from the crowd.

And some of these pitches have been really awesome. So you got to experience it for yourself to get what I'm talking about. But we just, we bring people up. They tell us about their favorite stocks. We ask them questions. It's just a really cool experience. So follow me on the Clubhouse app.

My handle is at downtownjbrown. Or you could look for the Boiler Room and you can follow it. And either way, you'll hear us every Friday at 3 p.m. and we're having a blast. So you can come in and pitch or you can come in just to hang out and listen to everybody else's pitches. All right, let's dive right in with Andrew and Frank.

Dunk and hit the music. Let's go. The Compound Show with downtown Josh Brown. How you doing? What a fun financial podcast on Wall Street. We're helping millions of people to make smart decisions, grow wealth, and secure the bank. Welcome to The Compound Show with Downtown Josh Brown. Josh is the CEO of Ritholtz Wealth Management. All opinions expressed by Josh or any podcast guest are solely their own opinions and

do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. I'm here with Andrew Dudham. Andrew is the founder and CEO of HIMSS and Her Health. And I want to start by saying congratulations to Andrew, who is a young man who has accomplished quite a bit in a very short period of time. And I'm just in awe of what you've done. So I asked you this before, but how does it feel being a public company CEO? Yeah, thanks, Josh. I'll pay you on the side for the nice things you just said. So, you know, it's been a lot of fun. We've been public now just about two months.

Yeah. We listened beginning of January. And I think the, you know, the beautiful part about the Hims and Hers business is when you just tell people, you know, in 10 seconds what we do, it resonates. People get it, you know, and they're frustrated. What's the 10 second pitch? What's the pitch? Give you access to the best healthcare in the world from the comfort of your phone within minutes. You know, pick up your phone, go to a website, get access to a specialist, get anything you need directly sent to your house in the next couple of days. And people say, wait, that's an option?

That's what they said. If they wait, that's an option. That's safe. Does my doctor do that? I don't have to wait in lines. I don't have to go to a pharmacy. I mean, all of these questions. And so it's, you know, there's the story has been resonating really well with the market. I think people understand the healthcare system needs to get improved dramatically for people in the country. So we've been having a lot of fun in the last couple of months. All right. So I brought Frank Stella into the conversation. Frank's a good friend of mine and is the president of Precision Pharmacy, which is one of the larger independent pharmacy chains here in our region. And he's going to back me up on the healthcare stuff because I want to learn more about what makes your business tick and why you guys have been so successful. But for people

who are not familiar with hims and hers, let's back up. You came public this year via SPAC. You were acquired by Oak Tree, which is Howard Marks, which is one of the most respected investment management firms maybe in the world. And you started this business in 2017. And now you've received about 280 million in proceeds from the deal. You have a publicly listed stock on the New York Stock Exchange. You're worth like 2.3 billion in market cap, the company. And you've gone from zero to 150 million in revenue in four years.

And all of that is amazing to me. So not bad for a few years work. Tell us about the origin story of the brand you've built. Where'd you get the idea from? And when did you know it was going to work? Yeah, that's a great question. So I've been building companies for about 15 years. I started when I was in undergrad in Philly. I went to war in undergrad and I dropped out after sophomore year just because I was clearly not going to go Goldman, New York banking. That wasn't my dream. And I was trying to convince people to start

companies with me the whole time instead of showing up my dream. And I was trying to convince people to start companies with me the whole time instead of showing up to class. And so starting at that point for the last 10 years, I've been building companies out in the Valley, testing them, raising a ton of capital, and I think getting good at finding signal in what customers really want and what they need. And I think the combination of hims and hers was first, just like personal desire to want to change healthcare for myself, right? Like, as a man, the last thing I want to do is go to the doctor's office, take time off of work, have really uncomfortable conversations in person with a nurse or a doctor, wait in a line for two hours. I mean, it's just like, it's a system that

was built 50 and 60 years ago and hasn't changed. And especially for us, you know, we're spoiled by Amazon and everything being accessible from our fingertips. You click a button and you can get it. And healthcare just doesn't work that way. So, you know, as an entrepreneur, there's a huge excitement just to fix something that was clearly broken. And then from a human standpoint, you know, when you actually look at and talk to people in this country about how their healthcare system works for them, it's horrendous. I mean, you have half of the families in this country unable to afford the deductibles on their insurance plans, right? They literally can't

even pay the 50 bucks to go see the doctor. And then you have, you know, 80% of rural counties without a doctor within a two hour drive, right? So there's just, there's, it's like a desert for the majority of this country. So the system is broken. The opportunity to help a lot of people is real. And I think from an emotional and personal standpoint, it was just something I really wanted to see in the world. Telemedicine is a really big part of the story. So people that come to your website, the stuff that they're getting from you, the big categories that you currently address, erectile dysfunction is one of the big ones, is male pattern baldness or baldness treatments.

Okay. So these are prescription drugs. Oftentimes they're available off patent at this point. There are many ways to manufacture that, you know, this stuff with the compounds that you need, but you do need a doctor. So tell us about how you were able to arrive at that realization, like years before the pandemic even, and incorporate that into the process. Yeah. You know, we've been, we've been pushing regulation forward for the last four or five years. We've been going state by state because telemedicine laws are regulated on a state by state basis. And we've been going to them and saying, listen, the next generation of customer isn't going to go and wait in line for two hours to fix their acne or fix the anxiety and depression

they're suffering from. They're going to want to pick up their acne or fix the anxiety and depression they're suffering from, they're going to want to pick up their phone and click a button and then talk to a doctor live. And here's how you can do it safely. And here's some ideas. And we've talked to doctors and we've brought doctors on board. And then they show data to these medical boards and the state by state regulators. And over the last five years, we're showing the benefits and more and more regulations are allowing us to do this. And so you now live in this world and the pandemic really accelerated it. You now live in this world where you can use telemedicine in every single state in the country. Five, 10 years ago, couldn't do it at all. The insurance companies love it too, because a visit to the doctor's office for a diagnosis is extremely

costly to them. Right. It's more affordable to the insurance companies. It's better for the doctors. I mean, we have doctors, we have hundreds of doctors on our platform, right? We really are that connective tissue. A doctor comes on our platform, we connect them with a patient on the platform, and then they have their consultation. And then through our network of pharmacy partners, as well as our own pharmacy, we can get the patient whatever medications they need. But these doctors love it because instead of, you know, burning out in a hospital working eight to six, you know, every day, they have flexibility in their life, they can be working from home, they can be on a walk with their dog, and they can be on the phone with a patient helping them through, you know, let's say,

figuring out the best acne treatment. And so I think it's a it's a rare thing to see where an industry is being completely revolutionized, but everybody is winning. It's better for the doctors. It's better for the patients. It's better for the payers. You know, for the most part, it's really a win-win across the board. Frankie, what do you got for Andrew? You know, the insurance side. Do you ever have any consumers give you issues that you don't take insurance? Because on the community setting, people, they, you know, they have trouble paying a $10 copay. And they fight tooth and nail for that.

Right. You know, so today we honestly haven't had people fight us and it hasn't even been a big feature request, to be honest. And the reason for that is our price points in aggregate, in total, are about $20 to $30 a month. That's what a patient pays. But what they get for that is that's cheaper than most copay. That's right. So for 20 to 30 bucks, they get access to a doctor 24 seven. They can have unlimited visits, right? Unlimited personalized visits with this doctor. They have a custom treatment plan that's made for them, updating the dosage change. Like let's say the patient is suffering from depression. They've got this psychiatric professional on call 24 seven, they can change their dosage, try a different medication. If it's not working, adjust it.

And for that 20, 30 bucks a month, they also get the medication prescribed and delivered to their door. So by moving, what we did was essentially moving the entire healthcare system to the cloud. We were able to get rid of all the costs that, you know, the brick and mortar hospital systems have and the brick and mortar pharmacies in a lot of situations and simplify the costs down so much, we could pass all that savings to the customer. So in total, they're paying 20, 30 bucks. And as you said, one copay just for one visit, maybe 40 bucks. And so patients, they all have insurance who are coming to us on our platform, but they're choosing to pay out of pocket because it's more affordable and it's better. And nowadays, deductibles are through

the roof. Yeah. Right now, I saw this stat. It's something like the average deductible is 2000 bucks a year, which means a patient has to be paying about a little under 200 bucks a month cash pay before they even get $1 of benefit from their insurance plan. Most people never even hit that. And so essentially you have a whole country that isn't insured at all, even though they have insurance, they never actually get the benefit of it. So the doctors on the network that are doing the prescribing for people that hit your site, they're not your employees. This is a network of telehealth. I'm sure you have dedicated networks that do a lot with you guys, given your volume, but you don't have doctors as employees. That's right. We partner with medical groups that are specialists in psychiatric care, dermatology, sexual health for men and women, whatever it might be. We work really closely

with their leadership to make sure that the quality, that they're hiring the best doctors. The average doctor on the platform has about, I think, 15 years of experience in a hospital before they even come onto our platform. So maintain really great quality. And then you also have independence. We are this middle person bringing them together, but the doctors do their job, which is evaluating patients and making sure they're treating them appropriately. And then we get to kind of be this intermediary to make it a beautiful experience. Do you have a responsibility for oversight of what these doctors are prescribing

or recommending to customers? Like, does that fall on your shoulders or how does that work? Yeah, so in the US, you know, liability for a prescription falls on the prescribing physician. This is, you know, good alignment, which is that the doctor who's actually prescribing the medicine, you know, bears the responsibility to truly incentivize them to treat the patient

correctly. On top of that, you know, we feel like as a platform that we want to make sure people are getting the highest quality care. So we, for example, have a chief medical officer, Dr. Patrick Carroll. He was the chief medical officer of Walgreens for five years before joining us. He's one of the leading kind of provider managers and leaders in the country. And he works really closely with those groups to make sure that they're using the best clinical protocols, groups to make sure that they're using the best clinical protocols, that they're using the most up-to-date information to make sure that the doctors are sticking to appropriate guidelines,

that there's no misprescribing happening on the platform. And so we have a lot of essentially advisors and medical expertise built in just to make sure that it really is the highest quality. Because that's the goal. Like my goal is if you live in rural Nebraska and there's no doctors near you at all, and you're suffering from depression, you get the best, highest quality, most researched treatment as if you live right in the middle of New York City. And I think that's the goal is to standardize care. So anybody, no matter their zip code, color of their skin, how much money they have in their wallet, they can get the best care. So I want to ask about how you're making the drugs and where they come from, but I want Frankie to ask it because he'll ask it more intelligently than I will. I don't know anything about this area, but I'm curious. Before we jump

on to that, can I ask about telemedicine in each state. Is there different regulations? Do some states require face-to-face video or phone? Is that all run through your company or is that through the telemed companies that you outsource? Yeah, so that is entirely run through our company. We have the telemedicine platform and the EMR that doctors use. We've built from scratch internally. And so based on the state that the patient is coming from, they're connected to a licensed doctor in that state for whatever specialty they're talking about. And then based on the regulation in that state, there will be different options for how they can communicate. So some states have been quicker to move in accepting telemedicine.

They allow synchronous, which is something like a Zoom call, but they also allow audio calls in a lot of states. They also allow asynchronous. It's called asynchronous store and forward telemedicine, which what that means is a patient can input a tremendous amount of information, let's say, take pictures of their skin, talk about all the symptoms of the acne they're experiencing, and then submit that. And doctors are able to review that information, maybe an hour later, you know, talk to the person back and forth on messaging or, you know, through texts or something like that and prescribe appropriately. So the states are all handling it slightly differently. From what you've seen, what's the optimal version of that? Like if you

could wave a wand, what would you have all 50 states do? You know, to be honest, it really, it really depends on the patient. You know, some, some patients love jumping on video because they want to see that doctor's face and they want to like see the doctor's reaction to what they're saying and, you know, make them like, is it this bad? Is it this, am I okay? Or they like want to, they want that human touch. Right. So it's, it's really not about, you know, the best as much as I think the preference of the patient. You know, we see a lot of the younger people, you know, those in their teens and 20s, who are really accustomed to DMing and messaging, like iMessage and Snapchat and WhatsApp, these types of things, like,

they much prefer in a lot of situations, text based back and forth, send a video, send photos, because they just are so quick and on demand. So it really depends on who it is and usually the condition that we're talking about. Frankie and I used to have to, when we liked a girl, we used to have to call the girl's house and not even a cell phone, the dad would pick up. And then obviously you had to hang up the phone really fast and pretend it was the wrong number. But your generation, Andrew, and this is credit to them, they don't have to do that anymore. They don't have to sit face to face with a doctor and talk about an embarrassing problem.

They can do this in a text format. Some of these things are easier to talk about than others. That's right. that than others. That's right. And I think a lot of people, you know, Josh, miss that, you know, when you talk about giving people access to great healthcare in this country, it's not just about location and price. It's also about normalizing the fact that whatever you're dealing with is common. Okay. Stigma, something like, let's say, you know, anxiety or depression, a huge portion of patients will never even go and get treated for depression because they feel like it's shameful that they're depressed and they don't even want to talk about it to a doctor. I think young men, especially,

it's almost like a wounded pride to have to admit that you're struggling mentally. That's totally right. You know, and so even you think about something like erectile dysfunction, which, you know, people laugh about, but, you know, at the age of 40, about 40% of men suffer from EED. Nobody wants to talk about that. Nobody wants to admit that that's- Is that the number? That is a huge number. That's the number. It's about, it's almost half of the population by that age. And so it's massive, but no one wants to talk about it. And so a big part of what we do is use technology to make people more comfortable sharing what's happening. some humor and some irreverence to spark up some, you know, some giggles and some laughs to also break the ice to encourage these people to go and have these conversations as well. It seems so obvious that this would be a hit with consumers. Why aren't more people chasing

this opportunity? Why have they given you this runway to get from zero to 150 million in annual revenue? Who knows what you'll be doing next year? How have you been seeded this wide open field to play on? I know of Roman's and I know of you guys. I don't know of others, but- Yeah, there's only a few, right? There's only a couple of companies. And what's crazy is what we are building in five and 10 years from now

will be the US healthcare system. It's be the U.S. healthcare system. It's not a part of the U.S. healthcare system. It's not a little small section of it. I truly believe that 80 plus percent of the reason you would go to the doctor in the past will be done through a platform like hims and hers over the next five to 10 years. And that U.S. healthcare system is $4 trillion. So, you know, you're talking about the biggest market in the country. So, you know, the reason that people aren't jumping in is, you know, to be honest, it's really hard. You are rebuilding, you know, as Frank knows from the medical side, you're rebuilding the whole health system in the cloud. You need pharmacy,

pharmacy distribution, you need hundreds of doctors licensed in every single system in the cloud. You need pharmacy, pharmacy distribution. You need hundreds of doctors licensed in every single state in the country specialized with all of these conditions. You need a telemedicine platform that based on the state you're in has different capabilities to allow safe, compliant medical care. You need to have clinical oversight to make sure these doctors are doing it the right way. I mean, it's a big effort. So we've probably deployed a couple hundred million dollars and hundreds of thousands of people hours in the last three, four years to do it. So I think a lot of people just choose to go bite off something a little bit smaller? The system is so broken. In essence, I'm filling prescriptions, you know, in regards the same way my grandfather filled them in 1935. Besides for

e-scribe, if e-scribe didn't come out a few years ago, we're getting the prescriptions electronically. It's almost identical. You go to the doctor, you get a prescription, you go to the pharmacy. So you have to wait, wait at the doctor, wait in the pharmacy. Right. It's it's a great idea. It's just getting the elderly to use a computer. Yeah, it's hard. And and also like a crazy you know, this is a crazy stat that I heard a couple of years ago. One of the biggest costs, if not the biggest cost in the US healthcare system, is people not adhering to their medication. So they got prescribed, let's say Lipitor for high cholesterol. They forgot to pick it up at the pharmacy. So they didn't take it for six months. And then they forgot to take it for a couple of years, or they're taking the wrong dose, or an elderly

person, you know, can't go to the pharmacy because they forgot their coupon card. All of these issues that actually happen with the existing system have real consequences in people's health and real costs to the system. So in this type of a world, you know, you can be on your couch, you click a button. Let's say you're talking about sleep. You're connected to a're talking about sleep. You're connected to a doctor talking about sleep. They recommend some OTC products or pharmaceutical products. You think

it makes sense. It's safe. They prescribe it to you. It's at your door the next day, right? It doesn't work or you're having side effects. You pick up your phone, you message your doctor, they change it, they adjust it, they send you something else, right? It's just like, it's so easy that I think, you know, all of the loss that happens in the existing system is kind of just recaptured in this type of a streamlined experience. When did you know that the pandemic was not only not going to be a negative for you, but would be this acceleration in new customer adoption? Like what was the moment where you said, oh boy, this is a wave? You know, I think it's when, to be honest, the president in his daily briefings was talking about telemedicine. Like literally he was saying the word telemedicine

every single day for weeks. Which means people were saying it to him because he didn't read it. Yeah, yeah, yeah, exactly. People were telling him that word. If you think about it, two years ago, less than 10% of people had ever tried a telemedicine experience. I think it was like 5%. At the end of last year, I think it was north of 80%. So a transition that was going to take probably 10 years took 12 months, right? It's like a crazy acute moment in time. And it's the type of thing where once you, again, experience the ease of telemedicine, it's not like you're going to go jump to wait in line at the doctors again and go wait in

line at a pharmacy. You're going to want to do it again because it was so simple. So tell us how you're filling these scripts. And we could use erectile dysfunction as an example. So a telemedicine professional doctor tells somebody, okay, I know what your issue is. Here's how we fix it. And your meds are on the way.

Then what happens in your business model? How does it go from that conversation ending to the patient getting their medication? Yeah. So as Frank knows, there's now this concept of, you know, an e-prescription. So our EMR, which is the technology that the doctors are using every day, they click a button and say, we think, let's say sildenafil 60 milligrams is appropriate for this patient. So they prescribe this medication. That's the active compound that's in Viagra? That's Viagra, right.

So they prescribe a prescription. It then gets sent digitally through a verification system to our network of pharmacies. We have a network of pharmacies across the country. We also launched our own pharmacy in Ohio this past year. It's a 300,000 square foot pharmacy. So depending on where the patient lives, depending on the product that the patient has, it will go to a number of different locations. And then that pharmacy on the ground will receive the order, as Frank knows, verify it, make sure it's appropriate, fill the bottles, have the pharmacist review the bottles, and then send it next day air or two day air to the patient. Most of these shipments are going out the same day that the patient, or even within a couple of hours from a patient actually getting that prescription sent.

Andrew, how many of your products are compounded products? We have a lot of compounded products when it comes to dermatology. So we do on the platform allow patients to come and have personalized treatments for things like aging, melasma, acne, you know, skin related products. So these are compounded versions of trinoin, clindamycin, azelaic acid, where based on the patient's skin, the hormones they experience, the types of acne they have, the types of, you know, bacterial breakouts they're experiencing, all of that goes into what the doctor will prescribe. And so most of the compounding is taking place on the skin side of

the house. Why did you choose compounding and not just going with like generic commercially available product? It's really about the personalization, right? What we found is, and this kind of goes back, I think, to the mission, right? If you're really wealthy and you live in LA and you're experiencing acne, you can go to a dermatologist and they're going to really get to know your skin. They're going to understand it perfectly. And then they're going to give you something that's truly custom. We're not talking like off the shelf, just here's some trinoin or here's some like proactive, which is just like water and soap, right? It's like real medicine that's actually made for you. And again, the goal is to be able to broaden that personalization and customization to the masses. And so for us, we've really seen that patients very much appreciate and actually have much better

clinical outcomes with the dermatologists when the dermatologists have the flexibility to be able to compound really unique personalized treatments for each person. Does the patient get to see that same doctor again or not always? They do. So they can open up the app and just start talking right back to that doctor. Or if they want to, let's say the doctor is off that day or is slow to respond, they can also have it set up so that any other dermatologist can pick up right where the doctor left off, can read all the notes and start moving forward. Andrew, we have a compounding lab in Delmore, Long Island, and we've been doing it for 10 years. And our whole marketing strategy was to, I like how you left Josh thinking I'm plugging. No, I just saw it. I just saw the lab last week. That's why I'm laughing. Oh yeah. Okay. So we've been marketing. Our marketing was always direct to the doctor because they're the ones

prescribing your marketing now is direct to consumer, which is a whole different animal, because now the consumer can read about this, click onto a telemed and have it at their door the next day. That's fantastic, because my marketing campaign was so pinpoint, you had to get into the doctor, give you a spiel, and hopefully they write a prescription for it. You can market to the consumer. they write a prescription for it you can market to the to the consumer yeah and i think this you know this change is also what you know when you think of eval you think about those tv commercials about you know drugs right yeah it's like 10 seconds of you know this drug is going to change your life for the better it's amazing it's amazing amazing and then it's like two minutes of but your leg might fall off you might die it also might kill might kill you. Yeah. It's going to kill you. And like, by the end of that commercial, you're like, oh my God, I don't,

I don't want this at all. We on our platform don't sell drugs. We don't sell drugs. We don't like, doesn't matter the treatment you get. You know, we, we want to just provide you access to the best doctor and encourage you to ask the doctor questions about how to treat this issue you're dealing with, and then let doctors figure out what's the best, safest treatment for you. And so it's totally different. You're not pushing a drug name or anything like that anymore. You're talking about specifically an issue somebody's dealing with, and then just trying to encourage them to get teed up with that doctor. Is there an area within that medicine where what you guys do just doesn't isn't suited for it? Like where you would where the doctor on the network would basically say, look,

this is away from our area. You should actually go see somebody in person right now. I guess that would come from the doctors themselves making that call. That's not your call as the head of the company. That's right. So that happens a lot. That happens probably 10, 20% of patients that come through the door. And we see thousands of patients a day on the platform. We've powered millions of visits in the last couple of years.

So realistically, when people are coming through, a lot of the times it's not safe from the doctor's perspective to treat this patient. Maybe they've got uncontrolled diabetes, uncontrolled hypertension. They've got some type of historical background that they feel requires more in-depth awareness. Maybe it requires personal, like in-person examination, right? As opposed to a digital examination to really get a sense of what's going on. And so what we've done as an organization is we've partnered with large brick and mortar health systems across the country and are continuing to partner with more such as Ochsner and Privia and Sinai and just, you know, big brick and mortar systems. So if you live in New York City, you and Sinai and just, you know, big brick and mortar systems.

So if you live in New York City, you're coming through the door, you're struggling from something and the doctor says, listen, there's something else here. I think you should go get this taken a look at in person. We can really quickly say, here's a referral to a local place. We can connect you directly in. Let's get that appointment set up so that they can figure out what's happening in person. Right. So you're not washing your hands of that person. You're making a referral that would be helpful to them. And hopefully that leads to them remaining a customer of yours. That's right. Our goal is to be kind of your sidekick in healthcare, right? You've got an issue, you come to him's and hers, we're going to help you figure it out. How much do your businesses repeat? 90 plus percent of the revenue is recurring revenue. That's amazing. So these are people that get prescribed something, but it's an ongoing

condition. So they'll continue to need the medication. That's right. They need the medication. They want the ongoing doctor consultations. You know, they want to be able to adjust their treatment. They want that on-call dynamic. It's really chronic condition management is what people are paying for on the platform. How many customers do you have now? What's the way to think about it? It's probably not active users would be an inappropriate way to say it or not necessarily. You call them patients. Yeah. You talk about, you talk about patients, you know, we're seeing thousands of patients a day, you know, we've got hundreds of thousands of subscriptions. You can think of kind of like a monthly recurring. Like keep

sending me my thing. Right. Yeah. Keep sending me the thing I'm trying to get treated for this one issue. So, you know, hundreds of thousands of those. And, and it's been, you know, it's been fast. The company, again, it's, it's really just only three years old, this business. And so it's been pretty consistent from the day we launched. Frankie, what else do you have for Andrew? Primary care. How are you going to attack that? Yeah, we launched that actually last year during COVID, where, you know, instead of, you know, say you're worried about acne or something, it's an ongoing chronic condition. But what if, what if one of our patients has a bug bite and they just want to talk to a doctor, right? Or maybe they have like a migraine and they, they're,

they're worried about it, or they have a rash and they're trying to figure out what's going on. So we launched primary care last, last year where any of our patients can just come and talk to a doctor for 30 bucks, period. For any issue they're worried about, all the major issues that you go into the doctor to talk about. No insurance, just put in the credit card. No insurance, just put in the credit card. Give us the Bitcoin. Yeah, we haven't done that, but we could probably do that pretty soon. You know, and then if you have a prescription that gets written and let's say you need it fast,

let's, let's say if you're a woman on the, on the hers platform and you have a UTI and you need, you know, medication fast, you know, you can't wait two days, you know, if you have UTI, the doctor will then send that prescription to your, your local pharmacy, Walgreens, CVS, whatever it is so that, you know, she can go pick up that prescription to your local pharmacy, Walgreens, CVS, whatever it is, so that she can go pick up that prescription right then and there. So it's just really simple, on demand, you click a button, you get access, it's fast. And it's really not, it's not the bread and butter of what we do. The bread and butter of what we do is helping people manage real issues on an ongoing basis, but it's a requirement to be able to give people a comprehensive place to talk to investors, they probably immediately think of Teladoc

and Teladoc's got a massive valuation and they've been able to use their stock as currency to make acquisitions and related things like diabetes. So I think you probably, I'm not giving you financial advice, but you probably would prefer to be positioned as a telemedicine play rather than a consumer health play. Not that one is better than the other, but just in terms of like what it would do for

your share price long term. I don't know how much you spend your time thinking about that versus just trying to run a great business. But that's my unsolicited take on. I think it's sound and logical feedback, right? The reality is, I think it's 80, 90% of all of our revenue is pharmaceutical telemedicine revenue. It's real healthcare, right?

This is not people just coming in and buying something off the shelf, right? This is not stuff you can buy at Walgreens for the most part. So the company is a telemedicine company. Now, do I want to go from a consumer standpoint, be known as a telemedicine company? Like, does the average Joe, you know, on the street care about the word telemedicine? I don't think so.

So when you think about our marketing, our marketing to customers isn't screaming, tell them the best telemedicine company in the world, right? No, it's saying, hey, man, we think you're worried about X, Y, and Z because we know there's a 50% chance you're worried about it. And here's a great way to get some care. Oh, no, I'm with you. I think you got to talk to the customers one way and talk to the hedge funds the other way. Yeah, right. You're acquiring customers with the brand. That's what gets them excited. But when you really explain the business to the street and you explain it,

and we've done a couple hundred roadshow meetings in the last few months, it's clearly a telemedicine healthcare company. So I have to ask you about A-Rod and J-Lo. It's almost obligatory, but I'm genuinely interested. It strikes me that Alex Rodriguez, who's in addition to being a Yankee legend, actually a great investor and has been investing. He was invested in Snapchat before it was cool. He's been a celebrity investor before being a celebrity investor was the wave. And of course, J-Lo, who maybe has one of the world's greatest celebrity brands. So how important have they been to get buy-in from not just consumers who

are familiar with them, but other investors, like on a go forward basis, like how involved do you think celebrity endorsement is going to be in the story? Yeah. So both Jennifer and Alex are wonderful people. And as you said, have been ahead of the curve pretty consistently for a really long time. So they made very substantial investment in the company. I think probably the largest investment that they had ever personally made. They wrote you guys checks. You weren't like, here, take stock. Yeah. They wrote checks. That's important. And that's different, right? Most people don't do that. And it was a great move for them. And from an endorsement standpoint,

what really matters, I think, is empowering customers to realize what they're dealing with is normal, right? When you talk about the barriers to our growth, that's the biggest barrier. It's not some other competitor. It's not Teladoc. It's not anybody else in the public markets. It's that you have somebody at home who is worried about acne or worried about depression or isn't sleeping and isn't doing anything about it. That's the problem, right? That's what you have to fix. And then J-Lo is like, this is normal. Yeah. And so you have somebody like Jennifer talking about hair loss, most 50 year old women, north of 75% of women post-pregnancy have pretty meaningful hair loss. None of them are talking about it. They're not getting treated for it. There's no products for it, but there actually

are ways to counter it. And there are ways to make it better. So having somebody like her talk about that openly, all of a sudden empowers all these women at home to say, wow, Jennifer's dealing with it and she's figured out a solution. I can too. Going by each market we're in, every category, finding people that have really authentic stories when it comes to these conditions and having them be a part of the brand we think is a pretty big asset. Well, from where I sit, you're kicking ass. You seem to have a lot of the right people talking about you. And I mean, your growth rate is like absurd.

I don't know how much longer it can continue for. I would imagine that's what you think about all day and night. And that's your focus. And of course, the stock has been fairly well received. You're lumped in with a lot of these recently public de-SPACed companies. And so the last thing I want to ask you about is how did you make the decision that rather than wait a little while and have a traditional IPO, the way many great brands have done, how did you know that the right thing for you would be to just say, you know what, let's do this back. These are some great backers and it is what it is.

And we'll figure it out from there. Like what was that decision-making process like for you? Yeah. We've been planning a traditional IPO for the last couple of years, prepping for it, getting ready for it. And then, you know, DraftKings went public via SPAC early last year. Then we started to learn about it. Like, what is this structure? Right. There's all these new structures. There's direct listings. There's traditional IPOs.

There's SPACs. So we started to get to know the structure, understand the benefits and the cons. And ultimately, we actually just felt like it was a better structure in aggregate. From a timing standpoint, it's a process that could take six months instead of 12 to 18 months. And when you're talking about distraction time for your management team, saving six or 12 months of distraction time and having them focused on growing the business instead, that's a huge amount of money saved, right? From my perspective. You could also say a lot more to investors. Yeah. I mean, we're a three-year-old company being able to tell the vision,

right? Talk about this vision of what's happening and the flexibility to do so, huge advantage. You talk about the flexibility in the structure of the deal. We raised a $75 million pipe, which was anchored by Franklin Templeton, which is one of the deal. We raised a $75 million pipe, which was anchored by Franklin Templeton, which is one of the best institutional long funds. That's a team we'd gone to know really well. We wanted them into the deal. With a traditional IPO, it would have been the banks running the show. Who knows what allocation? So with the SPAC, we had more flexibility. Thirdly, I think the pricing in a SPAC is much more appropriate. When you look at the fact that IPOs pop 80, 100% on their first day. That's all money left on the table.

That's a lot of money. And people don't realize that. They're like, oh, this is amazing. This IPO went up 100%. Well, if you're the CEO of that company. That was supposed to be yours. Yeah. You're looking at Goldman and whomever, and you're saying, why the hell did we price? How did you price this so wrong? Why'd we price at 30 when there's all this demand at 60? How much money did we just leave on the table? Right. And who made that money? And when you really figure that out, it's the clients of the banks that are getting that benefit. The trading clients, right?

Yeah, it's their trading clients. And so there's a lot of real perverse incentives with IPOs that are actually very, very costly to companies. And I don't think they realize it. And so that was something I really thought about. And then lastly, as you mentioned earlier, I've really benefited in my career by surrounding myself with the smartest people I can find. I want to be the dumbest person in every meeting. And being able to work with somebody like Howard Marks and his team, have their expertise, their capital markets resources, be a part of helping us get into the public markets and helping us navigate it correctly.

I think that's a real asset. Are they sticking around? Are they still in the stock? I haven't looked. They're still in the stock. They actually have really long-term incentives for the company's success. And so you're able to actually, in the structuring, align their best interests with the company's best interests. And frankly, that's an alignment that you don't have with the banks taking you public and a lot of the other processes. So, you know, net net, we looked at it just from a first principle standpoint, and felt like it was better for us. You know, I think there's a lot of SPACs, it's probably

inflated, there's probably going to be a lot of them that blow up. But the structure is here to say stay, right. And the amount of CEOs that I talked to a really big, amazing companies, every week that are thinking about the SPAC versus traditional IPO gives me some clarity that I would bet that they're not going anywhere. So you're going to report your first quarter as a public company, I should say, this week, I think between now and when this comes out. So don't say anything about it. We don't want to know anything. But I think by the time you've done that, the idea that you were originally a SPAC will not matter anymore. Now you're a public company. Are you New York Stock Exchange?

Yes. Yes. I mean, but by then it's like, look, we're in the game now. Doesn't matter what gate we came in. We're here. So I want to wish you the best of luck. Thanks for talking with Frankie and I. We really enjoyed the conversation. Thank you, Andrew. We shall follow your career with great interest. Thank you, guys. I appreciate you having me on.

You're killing it, man. Congratulations. Thank you. Thanks for listening. Check us out at thecompoundnews.com for daily investing and market insights. for daily investing and market insights. You can watch all of our videos at youtube.com slash the compound RWM. Talk to you next week.