The Rise of subscription businesses

Recent years have seen hundreds of subscription-based businesses emerge across a wide variety of industries. Everything from Television to clothing and food to medicine; life is being simplified and streamlined with recurring subscription businesses. BPN found the fistfight for market share in the medical space to be particularly interesting. We have analyzed five different direct-to-consumer pharmaceutical subscription businesses in the past six months and more seem to keep popping up. One such company we recently analyzed, we code-named Project Remedy. 


Project Remedy is trying to become the “Virtual Front Door” to the healthcare system. The company operates a technology-enabled wellness platform under two consumer brands. D2C customers access Project Remedy’s platform from diagnosis to prescription fulfillment and consult with Project Remedy’s providers for treatment. Project Remedy’s providers can prescribe dozens of medications in all 50 states.


The company started with a focus on stigmatized conditions for men, specializing in sexual health and hair loss. Later, Project Remedy expanded into women’s health and dermatology. Now, the company is trying to penetrate adjacent markets of primary care, behavioral health, and other conditions.


Today, Project Remedy’s target demographic is social media savvy millennials with disposable income. The company provides treatment in 4 categories: 1) sexual health, 2) hair loss & dermatology, 3) primary care, and 4) behavioral health. The company offers doctor consults, prescription drugs, and OTC products in each of these categories. It’s a cash pay-only model as the company does not partner with health plans and accept insurance. Most offerings are on a subscription basis where a customer can select a cadence (every 1-12 months) and quantity of product.


Project Remedy’s valuation is ~$2.4B today. The company ended 2020 with ~312K subscriptions, ~$148M in revenue, 74% gross margin, and ($8M) adjusted EBITDA. Sexual health and hair loss, Remedy’s core business, represents >80% of revenue. The average customer spends ~$40/month, and the company sees a monthly subscriber churn of ~mid-single digit %. In its most recent earnings release, Remedy guided 2021 revenue of $195-205M and adjusted EBITDA ($35-45M).


Through analyzing the business, BPN shows that at a ~$2.4B equity value, we see a ~40% chance of losing money against 1/3 odds of >2x over 5 years, for a ~1.6x mean return. At the 1 year horizon, we see 25% odds of a >25% return against 25% odds of losing money, for a ~12% mean (see chart below).


Understanding both the draw and challenges of a recurring revenue-based model is key for investors and entrepreneurs alike. BPN’s software and team factors evidence-based judgments into a model of potential success and failure scenarios, enabling investors to make more confident decisions with probability-handicapped multiples and KPIs. If you’d like to see the full Project Remedy Analysis, please visit the BPN FEED (you will be prompted to enter a work email address to access it).