Inside Curology: From Prescription-Only Telehealth to National OTC Retail Brand

Everybody, today we're diving into curology. We don't get to tell a story that often of a team that builds a $200 million brand not once, but twice. We're going to dive into their supply chain, their founding story, how they pivoted the business. So stay tuned.

Welcome to E Commerce on Tap, brought to you by Sourceify and Isba. I'm your host Nathan Resnick, joined by my co host, Aaron Alper. Before we dive into curology's story today, Aaron, were there any interesting tidbits that caught your eye the past week?

Yeah, I want to point to the Sydney Sweeney economy is what we're calling. Just seems that lately she's everywhere and everything that she touches seems to go up and to the right. And so you look at the partnership that she had with Dr. Squatch, famously selling bathwater. And Dr. Squatch sells to Unilever for almost $2 billion. A few weeks later, the most recent one is American Eagle announced a campaign with Sydney Sweeney. And the day of the campaign, their stock price jumped about 30%. Now, they had some bad copywriting. And so now it's a little bit unclear if American Eagle made the right decision. But it's also rumored that she is getting into her own brand and she's going to launch a lingerie line, apparently with the backing of Jess Bezos and Lauren Sanchez. And so she was famously seen at their wedding in Venice early in the summer. So I think it's just an interesting piece. We talk a lot about celebrity, celebrity brands, and this is an interesting example of someone being a celebrity first endorsing and then potentially launching their own brand.

Yeah, I think it makes a lot of sense. I mean, I think the Dr. Squash team just did an incredible job with that Bathwater soap launch. I mean, it just went so viral. I feel like a lot of brands have been trying to kind of mimic or copy that strategy. And I think at the end of the day, if you're a brand partnering with a creator, you need to make sure that it aligns with and that aligns well with your audience. I think it makes a ton of sense for her to go in and launch her own, you know, brand. I think it's going to crush. But at the end of the day, you've just got to make sure that there's product and audience alignment and copywriting goes, you know, hand in hand with that. On my eye, you know, we've been talking so much about the diminish rule, and President Donald Trump officially signed a presidential executive order that on August 29th that will be no more. So goods under $800 in value will now have to pay duties. And it's a big change for so many companies. We talked here about temu. We did a great episode around TEMU and Shein and just all this kind of fast fashion. And I think even for a lot of E commerce sellers that were warehousing in Mexico or Canada and shipping in individual products one by one to their customers, it's a big change for E Commerce across the board.

Oh, it's massive. And the interesting thing is like a month earlier they announced that it was going away, but it was going to go away in like two years. And so I don't know what changed in the last couple of weeks. Maybe it's a distraction from something else that they want to talk about. But the big thing here is that this is a monumental shift and it's going to happen all at once. And I don't know if customs is set up to handle it. I know that, you know, earlier in the Trump administration, they went back and tried to put something like this in place and Hong Kong basically just stopped taking any mail because of all the uncertainty around what they could do and what they couldn't do. So hopefully this is enough time for Customs to make sure it works properly. It was interesting in the executive order, they talked a lot about the reason here going back to fentanyl, which, you know, we'll see if that's, that's the real case or if it's more of a de chanification of supply chains, what they're looking for.

Yeah, time will tell. I just know a lot of E commerce founders that are having a challenge to, you know, move their supply chain because they were using section 3, 2, 1 and utilizing that, you know, ruling to not have to pay duties. And now they have to. So it's going to be a big change for the brand, that's for sure. Well, let's dive into curology. So our main founder is David Lord, who was a dermatologist and his mother was a dermatologist in San Diego. David completed his dermatology residence at Washington University and then worked at UC San Diego Health. In 2012, he joined a private practice and relocated in Mexico, which I think is really where he kind of really honed in on his purpose and what would become curology and the market for dermatology in 2012 was kind of, you know, relatively in the stone age. Right.

Dr. Lorscher really experienced it firsthand. Being in New Mexico, how Difficult it was for some very serious acne patients to come get the care that they needed. And they would frequently drive for hours for this care, only to face high pharmacy costs or insurance barriers for fairly relatively common issues like acne. And he observed that the drugstore products didn't really work and there were clinical combinations of ingredients that worked nearly 90% of the time. And so he had been doing some volunteer work with an organization called AccessDerm. It was put on by the American Academy of Dermatology Telemedicine Group. And he realized that basically you could do a lot using photos and remote consultations to treat patients from really far. And so his light bulb moment was, how can I make this dermatologist level prescription skin care accessible to people nationwide? And so In March of 2014, he decided to put this idea into motion. And he brought in provider tested prescription formulas. There were three clinically proven active ingredients per formulation. He rooted this medical practice experience in the core of what he wanted to do. And so he enlisted his tech savvy brother Glenn and his dermatologist mother Nancy to formally launch the business. And initially the name was Pocket Dermot. They eventually rebranded it to curology in 2015. And so I kind of love this, this classic story of someone who is, you know, seeing a need in their day to day. You know, they're younger in their career, they're like, there's got to be a better way. I've seen this other thing. Working for a nonprofit, there should be a for profit solution.

Yeah. I mean, if we go back to 2014, Zoom and video conferencing for that matter was really not a thing. I mean this was, you know, to put it in context, Mr. Beast, I think had less than 10,000 followers there, which is kind of crazy to think about. And they were, you know, really just thinking about how do you send pictures back and forth efficiently. And it wasn't completely novel, but the real innovation was doing so in a regulated industry. And you know, if you think about Dermatology, there is a lot of regulation here. So regulation is on the state, by state level. U.S. medical practices, you know, really have to go through their states to get approval to practice, you know, whatever medicine, medical field they're, they're going through. And so Curology literally had to go to every provider treating a patient that was licensed in the state where the patient lived, not where the provider was located. So I'm in Utah, you know, I have to go through a provider here that's licensed here, you know, not wherever the Actual provider is itself. And so that meant that they had to build a provider network with multi state licensing or hire a staff across all 50 states, which you know, you can imagine is going to cost a lot and take a lot of time. And so they had to also register multiple medical entities in different jurisdictions for compliance. So you can imagine like instead of, you know, filing just one LLC or one C corp, you got to do it across a lot of these different states to, you know, just be compliant. And so there's a lot imagine how.

Much of a pain in the button that must have been for like tax season. And you've got all of these interdependencies. And just like their, their compliance bill had to be enormous.

Yeah. And I mean there's just so much compliance that goes into starting something like this. So even if you look at the formulation level, you know, formulas are compounded prescriptions which are regulated separately for mass manufactured drugs. And so curology had to set up a license compounding pharmacy that met FDA and state board of pharmacy requirements and that also was regulated oftentimes on a state by state basis. And then of course if you think about telehealth, there's then telehealth consent under state law. And that constitutes kind of out of the norm, you know, from typical consumer education around this. And because they were discussing medical conditions, they also had to build a HIPAA compliant infrastructure for storing patient photos, histories and provider notes. And so just to get curiology started, you can see the complexities that went into this. So to really meet these legal requirements that I think in general have prevented other people from even kind of exploring this type of business model because there's so much to do even to get your first sale, you've gotta literally set up multiple LLCs, you've gotta understand regulations across states, you gotta make sure your formula is state approved in each state that your customers are in. And I mean in general it sounds like a nightmare, right?

But it sounds like you started 50 companies instead of one.

Yeah, yeah. And I mean I was thinking about this and thinking about what experience that I have, you know, doing something like this. And I don't, I don't. But if I think about your experience, you worked with Hubble Contacts early on to get started. And so I would imagine contact lenses probably have a similar type of regulation environment.

Yeah, I was one of the founding team members of Hubble Contacts. And so as we were going through there were lots of questions and things we had to deal with. And so even on the fulfillment Piece of it. This is a good example because. So every state has their own opticians board, right. And they have their own regulations. And so in some cases, you can only have a licensed optometrist, you know, dispense the contact lenses. And so that might mean that being licensed could mean that you went to school for four years and you've got so many years of practice, or it can mean that you pay $20 to become licensed and you can ship things out. The other thing is, we had to look at how active the boards were. So if you had a really litigious board in a state, then they were really going to look at this from a letter of law. Other boards that were kind of like, yeah, you know, whatever, you know, don't do anything dumb, then you kind of look at those. And so when it came to figuring out where we wanted to put our fulfillment center, we actually ended up putting it in Indiana because of this. And it was something where it would allow us to distribute these contact lenses nationally. And we didn't need to have any special certifications or things like that for the people on the line. And so that was a real design decision that we forced into this. And there were lots of other things, too, that you had to think about as you went through it. But anytime you're in this regulated space, you can get upside down very quickly. I mean, I know a couple of infant formula startups that have advised over the years, and you want to talk about, you know, regulation, try dealing something with babies. And, you know, whether it be, you know, the love. Every episode of the Bihar episode we did, I mean, there's a lot of detail you have to go into just to stay compliant with our most vulnerable citizens.

Yeah, I mean, it's pretty crazy just to get this started. You literally got to jump through so many hoops to, you know, just get the green light. It's pretty crazy to think about. And, you know, if I think about the time here. Right. So in 2014, telemedicine was a novel idea that, you know, it kind of felt like a large infrastructure hill to climb. Right. I mean, there wasn't, you know, a ton of infrastructure here set up for telemedicine. And it kind of makes me think, what was it that they thought was so revolutionary? Right? Because, I mean, most people weren't even using Zoom then. Right.

I don't even think Zoom was founded, but yeah, I mean, it was literally like you call and you talk to a doctor or you email some stuff back and forth. And so, you know, in 2014, most of these telehealth services were farm based. It was urgent care only and it was fully asynchronous. You really couldn't talk to somebody. And so the way that they were thinking about the dermatology platform first was it was going to be, you know, you send in a picture and then eventually somebody comes back and says, oh, this looks like poison ivy, this looks like acne, this looks like the bubonic plague or whatever it's going to be. And so then they would tell you what to do. And what was really interesting about this was that they wanted to do a direct to consumer model. So you weren't just focusing on selling to a health care system and saying, hey, you know, we'll provide the service, but we want to go directly to the consumer and connect them. And so that was the real innovation that they did is they flipped the traditional dermatologist patient dynamic by using a subscription e commerce model again, 2014, everything subscription for these prescription medicines. And this combining of two worlds was really phenomenal because it didn't. Those worlds didn't overlap at the time.

Yeah, I mean like you said, there's just so much that goes into this. You know, number one from the telemedicine angle, number two from the direct to consumer RX model. And then you know, you think about compounding. Right. Typically prescriptions are typically made on a case by case basis at your local pharmacy. And their idea was to centralize and automate this personalization at scale, at a national scale, which is really a first of its kind operational challenge and, and then do this with a consumer first design. So while other telehealth startups focused on B2B or hospital integrations, curology really went straight to consumers with this digitally native UX and E commerce funnel that kind of merged those healthcare playbooks with DTC Playbooks. That really was even before HIMS or RO and others had this personalized approach. So to build all this out, they raised a $1.7 million angel round to, to really kind of, you know, set that infrastructure in stone. And I mean they went through all this effort to kind of get to the starting line. What was it like when they got started?

Well, the initial product was very minimal. It was very simple. You basically had a simple intake form. You'd upload your photo and then you'd have a custom cream that was compounded and sent to you. And they really just focused on acting. That was the one symptom that they were going to treat. And so they got some Dermatologists that were really good at looking at acne in their state. And that's what they did. Again, this, this tech stack was built completely from the ground up and they had to handle these asynchronous consultations. Basically. Think of it as like an asana task where the doctor would look at your issue and get back to you is what I understand what they built in the early days and they leaned heavily on David and Nancy's clinical background and oversight to basically say, yeah, this is good, uh, this, you know, you are getting good advice as opposed to something that's just there. So the early messaging was really about dermatologist design, prescription strength, personalized those sorts of things. And they, they started with a very approachable pay per treatment model, but quickly moved into a $20 a month subscription model. And they did that mainly to stabilize their revenue and try to align with these ongoing treatment needs that, that they were prescribing to their patients.

Yeah, I mean, I can just only imagine Glenn trying to build this out from the ground up. I mean he's, he's basically building the infrastructure for telehealth. Right. But specifically for curology, which was, you know, just a huge undertaking at the time in terms of getting the word out. I think the, my favorite thing that I saw that they did early on is these kind of referral loops that they did. So they offered credits and free months for referring friends, which, you know, worked really well for college networks that were, you know, acne prevalent or high school networks. They also had a ton of content driven approaches, you think, you know, SEO investing around, you know, acne searches and skincare routines. They also leverage educational blog content which was oftentimes written by dermatology providers, to build authority, which I think is really unique, especially you know, in this industry and angle of, hey, how do we actually have kind of more scientific, educational approach to our content? And then of course they relied on influencer and YouTube partnerships so they would send free treatments to skincare YouTubers and early Instagram influencers. But you got to think, I mean this is like 2015 here. You know, the rise of influencers is growing, but it's not like a, you know, well known marketing strategy yet. And they then of course relied on PR and earned media. So they kind of positioned themselves as the war b Parker of skincare to get even tech press coverage and like TechCrunch and Allure. But you know, you think 2015, like there wasn't this huge, you know, influencer marketing engine that there is today. And so this was very kind of early on where you had more traditional pr, you had more traditional SEO strategies. And it makes me think, was this a national launch or did they just start in New Mexico?

Yeah, it's a good question. So the business actually based in San Diego, so he went back and moved in with his mom, or at least was nearby there. You were in San Diego around this time, weren't you? Did you remember curology coming up and discussion?

Yeah, I mean, I had not heard of curology when I was in San Diego, but, you know, I was in San Diego at the time, so, you know, I must have crossed paths or should have crossed paths with him, that's for sure.

Well, you must have just had perfect skin. And that was why you didn't hear about it.

My skincare routine already dialed in, you know.

Yeah, I love it. Anyway, so the business was based in San Diego and they decided to launch in a handful of states to begin with. And as they added more licensed professionals, they started to meet these state by state requirements. And they really wanted to be national as quickly as they could. I think just with the value of the reach of the Internet, it was actually kind of hard to not be national at that point in time. And so this early traction came from really effective acne treatments. And so there was a strong word of mouth referral loop like you were talking about. And they decided one of the interesting design decisions they had was they went out and they built an in house network of licensed dermatology providers. They did this in every state. And so rather than using outsourced people or part time folks like, all right, we want these guys basically full time. And they did this to prioritize quality and consistency over the ease of outsourcing. This was a very expensive endeavor. And they, they tried to also outsource or experiment with outsourcing the compounding pharmacies to multiple small pharmacies. But they quickly realized that, hey, this is hard and I'd rather just have one that's doing it. So they moved into that. So they launched in 2014, 2015, they rebranded to Curology, and then they raised a $4.2 million Series A from Forerunner Ventures. And the goal was really to expand beyond acne. They wanted those funds to recruit more dermatologists and to start scaling their telemedicine infrastructure.

Yeah, and I want to double click on that. I mean, $4.2 million Series A today seems like a very, very small Series A. At the time, like that was what a Series A was Right. I mean, that was a great round for them. 4Runner, you know, was on top of their game with consumer investing. I mean, that's what a Series a was in 2015. It's kind of crazy. Today you see Series a's being like 20 plus million or more. I mean, it's, it's pretty insane. So just want to kind of paint that context here of, hey, you know, that's what their Series A was. And it was really incredible at the time. It wasn't like, you know, a small thing at the time. And I think too, like when we talk about curology, they did have initial focus. Right. So their initial focus was really just on acne treatment for teens and young adults. And they began in 36 states that they were able to get regulation in. And they ended up within the first four years serving tens of thousands of customers, which led to a $15 million Series B in 2016 to really scale user acquisition, expand their clinical capacity and invest in R and D. And you know, revenue we estimate, was in the low tens of millions of dollars and they continue to ramp up here really nicely. So then they raised about a 10 to $12 million round in 2018 from Forerunner as a Series C to really optimize their funnel, expand their operations and enhance that kind of compounding and fulfillment infrastructure. We estimate the revenue about 50, $50 million. And you know, what began as a small telehealth experience has now scaled to millions of patient consultants and coverage across all 50 states. So eventually they did get to all 50 states, which is a huge milestone here. And over time they' expanded into preventative anti aging. So there's like future proof. Rx is what they call as well as their hair loss treatment called hair Formula Rx. And so this was kind of, they launched those at a similar time when Ro and Hinge were expanding in different telemedicine verticals. And really we're just focused on acne in a few specific states that they had licensing in. And through that expansion into the other categories, you know, you really see Serology moving into, you know, a mainstream skincare brand here, right?

Yeah. And yet it's still prescription. And so, you know, it's kind of in this weird spot where you can't go to Target to pick this up. You are going to go online, you're going to, in most cases sign up for a subscription and it's personalized. And so I don't think at this point they were a mainstream skincare company. I think that they were a mainstream prescription provider. Right. And so that's where it was. And so, you know, you Fast forward to 2019, it seems like everything's going well. And revenue was estimated to be around $100 million, which, you know, despite being prescription only, made them one of the largest CDC skincare brands in the world. And their telemedicine was still very niche and it wasn't widely accepted. You know, broadly speaking, there were, you know, fewer people who were still comfortable. A lot of people still wanted to go in person and talk to a dermatologist. And you've got different age groups that just weren't interested in this at all. And so as a result, their growth was a little bit more slow and steady as opposed to this explosive J curve that you're looking for. And, you know, they were, they were kind of stuck in trying to figure out, like, how do we bend the trajectory of the business here? Because there was a big gap between the number of people that they could serve and the number of people that you're actually serving.

Yeah. And that really all changed during COVID Right? The global pandemic really, I mean, just kind of skyrocketed telemedicine adoption. And so in 2020, the revenue climbed to about $180 million. I mean, really, that's kind of that J curve that they hit there just really, I mean, Covid really was a catalyst for their growth because, you know, at home, dermatology really aligned perfectly with pandemic constraints. And, you know, they really seem to be at the right place at the right time here. So in 2021, their revenue surpasses 200 million, with reports later indicating they achieved profitability for the first time. They raised an additional $50 million in a series D and reached that unicorn valuation, about a $1.15 billion valuation tied to that revenue scale. And it really looked like they were unstoppable. But as kind of the post Covid reset happened, I think demand normalized for in person care, and it kind of revealed the high fixed cost of Curology's model. Right. So they had to, number one, maintain a network of licensed providers. Number two, you know, you gotta remember this was all custom compounding for every prescription. And, you know, there was an elevated CAC here when there was a rise of DDC competition, when, you know, telehealth just went kind of crazy during COVID And so the core RX revenue, you know, here did start to decline after kind of this post Covid reset. And I think I want to take a second to like view this from Geology's lens, you know, from their team. Because it must have been extremely painful for everyone there who kind of saw their revenue and their paper net worth plummet, really, after Covid. Right. And you think about telehealth valuations during COVID like, it was pretty insane, right? I mean, this was when hims IPO'd at $7 billion and it was kind of just peak telehealth. And it makes me wonder, you know, was this their exit window that they didn't, you know, that they didn't sell during? Right. I mean, you've got to think they explored an exit. And I'm not sure what the board, you know, thought at the time. And, you know, I'm just curious, I mean, do you think they knew they had entered their exit window and explored that, or what do you think kind of the team's rationale and thoughts were during this time as they kind of saw this huge uptick during COVID and then kind of start seeing it level out?

Yeah, it's a great question, Anthony. I think that the reality is that you can't force an exit, right? So these guys were probably chugging along and thought, hey, we're going to get to this revenue eventually and that's when we'll start to prepare. But the reality was is that their exit window came very quickly because the world changed. And if they weren't prepared, if they hadn't, you know, put the infrastructure in place, if their team wasn't set, if the incentives weren't there, if they weren't ready to go to market to do this, there's no way that they could have forced it. And so it's quite possible that they looked at this and wanted to make it happen. But the reality being that as they, you know, at the same time, you've got this explosive growth and you got to run the business to keep things going, and this is a big deal, right? And this is a lot of what ISBA does, you know, is helping people be ready for your exit windows comes through. And so it's possible that they said, hey, they looked at hims, they looked at ro, they said, man, this would be great if we could do it. And by the time they got to a point where maybe they could do it, perhaps the market had cooled a little bit and their exit window had closed. And I also just want to say, like, I don't believe that there is only one exit window for a company. I think there are multiple exit windows. It just depends on the return and the size and, you know, what you're looking for what your investors are demanding for. But I do feel like in retrospect, this was a peak area where if they had IPO'd in the fall of 2020, they would have had an enormous valuation and the investors would have cashed out. Well, would the business have done well afterward is a different question. But I think that this retrospect was a very clear window that they could have taken advantage of.

I mean, clearly, I think this is a critical moment of reflection for the business, and I think it created this perceived value and brand trust. But there was also a ton of operational costs here. And if you kind of compare curology's path to hims, which was more standardized and by heart, you know, which was a high touch product with operational complexity, you know, it makes you kind of wonder, was this complex, you know, cost structure limiting some of their growth here? Right. And I, I, I just wonder, you know, what would you do in this situation? I mean, what, what comes to mind here, really?

Yeah, you know, this, this telemedicine piece, this network that they had built out, all of those things were perfect for when the world changed. And telemedicine was the only option. But as that retreated back and we got a sense of what the demand was, those costs were just untenable. Right. It kind of reminds me what's happening with Walgreens right now. You know, Walgreens 10 years ago was worth $100 billion. Today it's worth 10 billion. And it's, you know, there's rumored to go bankrupt. And there were a lot of reasons for that. But one of the big things that they had that was their asset in the 90s and early 2000s was they had this great real estate portfolio, right? Every, every corner street, every Walgreens is right there. So it's very convenient in a car centric model to go get your prescriptions. Well, fast forward, you get like, you know, Amazon buying pillbox and stuff like that, where you've got prescriptions being delivered to people's homes now, that real estate is, is not helpful anymore. It's, it's actually a liability. And so I think it's just really important to recognize that you could, you could make the right decision at the time with the information you had. And then as the facts on the ground change, it's the wrong decision. So you need to change. Doesn't mean that you made a bad decision, you know, 10 years ago. It just means that you've got to change now to survive the next 10 years. Next 10 years after that.

Yeah. And so it seems to me like they opted to pivot the business from a primary, you know, prescription lens to OTC products. And interestingly enough launched, you know, this in retail instead of dtc. And so they had launched some products OTC as kind of add on products in 2018 and 2019. You think about non prescription cleansers they had and moisturizers that are kind of routine companions compared to their custom RX creams. And these were primarily only available to subscribers as add ons, not a separate retail line. And I think the move was framed as improving patient outcomes by providing a full regimen, not necessarily a shift in their business model. And it makes you wonder like why OTC and retail. And, and I think there was definitely built up existing customer demand for preventatives and maintenance products beyond prescriptions. I think there was some subscription fatigue at the time in the industry that created high friction for acquisition retention. And I think just in general, a lot of DTC brands realized that retail channels are awful. A lot of D2C brands realize that retail channels offer discovery and scale without the same regulatory overhead. And so this was, I think a huge unlock for them and they start really leaning into to retail.

Yeah, you're right. And so this really started in December of 2022 where they launched a curated OTC set with Target. And so to their credit, this was already in motion prior to the telemedicine correction, you know, in, in the market. And so the management team I think sensed that they needed to change something. Maybe telemedicine was starting to peter out a little bit. So this was a intentional plan as opposed to something where they're just desperately grasping at straws as revenue started to collapse and the high fixed costs from their in house provider network made diversification really, really urgent. So this was a priority for the business. And by the time they launched OTC and retail, overall telemedicine had slowed down, which made this hedge even more important. So In January of 23, just a month later, they hit Target stores nationwide. And so this was the first time that curology products were available outside of the prescription subscription model. And they had a gentle cleanser, they had gel moisturizer, they had emergency spot patch and basically a starter acne kit. And I think what's really interesting here is that they chose not to launch their own DTC site first, but they went directly with retail. What are your thoughts on this?

Yeah, I mean I think to me during this time, if I think about the time that this was happening, you Know, to acquire a customer directly on your e commerce channel was very expensive. There was tracking issues, there was rising cac, there was, you know, subscription fatigue that we mentioned. And so I think that was kind of the main reasons for why they didn't go DTC kind of themselves at first. And they saw Target as a great acquisition channel to expand their customer base. That's really what comes to mind in terms of, you know, why strategically they probably made that decision during that time.

Yeah. And it's probably a completely different supply chain and team, you know, being able to set up the infrastructure to not just do compounding but to, you know, have the fulfillment. So there's probably some work that need to be done. And in July of 23, so just, you know, half a year after they launched in retail, they did launch their own D2C storefront which they called the Curality Shop. And this allowed those customers to buy those non prescription cleansers and moisturizers and sunscreens without a subscription or without a prescription. And they wanted it to be a separate E commerce experience from the personalized prescription flow. And so that was an interesting design decision that they made with the website. And the intention was to capture all the new customers who weren't quite ready for a full telemedicine service. And so it's interesting because I think even at this point they were still thinking of themselves as a telemedicine dermatology company. And that really kind of being the core. And I'm sure that's why they probably delayed doing any sort of OTC stuff. But you start to see this transition over time. You know, January 24th, they expand into Amazon. They've got 18 different products in Amazon and they really get into mass retailing in August of 2024 where they get full chain distribution in CVS and in Walmart with their acne care kit and clean skin essential set.

Yeah, I mean, I think it goes to show they really kind of had to pivot here in terms of distribution and lean into mass retail and Amazon, which in my mind was the smart move here. Right. You know, you want to get more eyeballs on your products, you want to expand your retail footprint. It makes a lot of sense. I think it, you know, differs from their core thesis when they started. But you've got to change with the market and that's what the team executed on here. And so I respect that a lot. I think the outcome here was interesting. Right. In 2023, OTC products accounted for just over 6% of total revenue target. Alone generated roughly $19 million in revenue for curology. And then 2024, that share roughly doubled to 12%. And that was primarily fueled by Target, Amazon, CVS and Walmart distribution. And so 2025, you know, the current run rate with expanded retail presence and dtc, OTC shop that we discussed, you know, the industry analysts estimate OTC revenue of about 25 million annually. And assuming total company revenue is about around 200 million and the legacy RX business, you know, probably around 7 to 80 million annually. So, you know, I think it's pretty remarkable that the team really pivoted from just this kind of telehealth business to more of a OTC nationally rolled out, you know, skincare brand. If you think about it, I mean, it was kind of a reinvention of the business here.

Oh, completely. And I think this is, this team should be committed. I don't know of many management teams that could have made this transition because, okay, on one hand, if you're pessimistic, you can say, well, the business really hasn't grown since COVID but the quality of that revenue is so much better. And they allow their legacy business, the RX business, to decline by over 50%. And they diversify their product line and their sales channels. And now that they, those channels have close to $200 million in their own right.

Yeah. And it makes me think, right, are they gearing up for an exit now? And you know, in my opinion, I would say yes, because they've reinvented themselves. They have, you know, a stronger kind of platform to grow now. And in 2022, David brought in Heather Wallace, that was previously from Revlon as the CEO and he stepped into to the chairman role, kind of as he says, After 10 years at the helm of Curology. I decided to make this transition because the skills you need to successfully found a company are very different than the skills you need to grow and establish a company to its full potential. So that happened in 2022 and Heather led the business until July of 25. And now Kathy Savitt was just named the CEO. And it looks like the leadership team is kind of in the process of being reset here. But I mean, what do you think? Are they preparing for an exit here or kind of what's going on?

I mean, completely. I mean, we saw this a lot in the Athleisure series that we did last year, whether it be Gymshark or Adenola or some of the ones where, you know, the founders are still involved, but they're stepping back a Little bit. And they're bringing in full time management and I think that, you know, there is a lot that they need to do to prepare to exit. And so Kathy's kind of got her work cut out ahead of her. I think right now this is all about demonstrating they have predictable and profitable business. And they need to show that the RX business in the OTC revenue split is stabilized. Probably like a 70, 30 or 60, 40 blend with healthy margins on both sides. I think part of what they need to do is really solidify in the eyes of the market and in the eyes of potential acquirers or investors what this business is. So is it a telemedicine company with a retail arm or a CPG skincare brand with the telemedicine differentiator? And people are going to value these very differently depending on how they go about doing that. And I think that if I were them, I would probably lean into this, you know, broad skin care brand first and just say that we've got proprietary data for millions of patient consultations that make you a data driven skincare company. I think there's a real opening for them to own that space. And, and so, yeah, there's just a lot, a lot of other stuff here that they need to do.

Yeah, I mean, like you said, I think first and foremost they need to clarify the core business model. I'm, I mean off the top of my head, I'm honestly not sure what trades at a higher multiple. If it's a kind of Otis OTC generalized skincare brand or kind of a more telemedicine health driven brand. I'm not sure what the multiple.

I think it's got to be the OTC thing. Just looking at, it's more broad. Telemedicine is great, but we are, you're always going to compare it to when it was like Covid and you can only do telemedicine. So I think that's a hard part. You know, they're not far away from being able to have all this data and slapping an AI something on top of it and just adding a zero to the end of their valuation.

Yeah. And I think in general, if you compare margins and that profile around margins, the optimized OTC approach is going to have a higher gross margins, typically 60, 70%, which is most attractive to a lot of PE buyers out there. But if you look at telemedicine, those margin profiles are lower in general. And, but then on the flip side, you could argue that there's increased LTV on the RX side. Right. I mean, I think most people that, you know, have a custom formulation and prescription, they're going to be subscribed for a longer period of time versus, you know, potentially repeat buyers that are just buying, you know, your product over the counter. Right. So I think there's arguments on both sides of the table in terms of, you know, what's going to have a better outcome for the team here. But you know, at the same time, they kind of have a lot of potential internationally here too. You know, they haven't done much internationally yet, but there's definitely, I feel like a lot of room to grow outside the US that they could capitalize on as well.

Yeah, completely. And I think that they're going to have options when they're ready to exit. I think that there are three main vectors for them. The first one would be like a strategic acquisition. Think of somebody who sees this as an opportunity to bridge telemedicine and deep research with mass beauty. And so I could see like a l', Oreal, an Estee Lauder, a Johnson and Johnson kind of folks that have this CPG tech D2C hybrid interest could be a really interesting play. This could also be part of a private equity roll up. And so in order to do that, they've got to have a really clean P and L, you know, EBITDA positive. Really, you know, they're going to trade on those multiples or they can decide to ipo. And if they do that, they've got to maintain profitability, they've got to have a strong cohort retention. You know, they're going to be compared to hims in that case. And so I think that there's a lot that they need to do just to make sure they're prepared. But you know, the good part about this is 90% of the prep work they need to do for each of these outcomes is roughly the same. And so they just need to keep. Keep things kind of in front of them, be very methodical, make sure they don't make any enforced errors. And they got to get to that seven quarters of clean, consistent growth and financials to really be evaluated the way they want to.

Yeah, I mean, I love this episode and story. I mean, I feel like it's very rare that we come on here to E Commerce on Tap and showcase a brand and a company that really reinvented itself. Right. You look at the history of curology versus what it is today and it's a different business. You know, really, it is a different business. And I think for Me, from a founder lens, it reminds me, you know, don't confuse those temporary spikes with sustainable demand. You know, you saw the COVID boom that they had and how they, you know, then transition to their retail expansion and you know, selling across other e commerce channels too, like Amazon. And I think you need to be honest around personalization, right? Because I think in the past decade we've seen so many businesses launch with this personalized angle and that's what's going to separate themselves from the competition. But then you kind of take a step back and you wonder, wait, is that a margin trap or is that a moat? Because, you know, personalization, let's be honest, it's very sexy on the kind of grand scale of things, but it can be a margin trap, right? And if you compare OTC margins versus personalized, you know, dermatology margins here, they're completely different. And so telemedicine in general is a channel, it's not the entire business model. And so I think even if you look at like himss as a comparison, right, Himss really started more direct to telemedicine before they had retail over the counter rollout. You know, now you can go to, you know, CVS or Walgreens and you know, buy hims, you know, bottle of shampoo. Whereas before, you know, their business was solely telemedicine. And you look at, you know, how big and impressive that business has gotten. And so I think from a founder lens, I would ask every founder or even marketer or, you know, operational executive here to kind of double click and kind of ask yourself, is that personalization a margin trap or is it a moat? I think that's kind of a key question that I'm taking away from this episode. And I think last but not least, you know, curology here was at a large scale with its telemedicine business. And the executive team and their team as a whole had the foresight and the wherewithal to pivot, right? I mean, you think, okay, we've already got this successful business that's doing, you know, a hundred plus million revenue, now we've got to pivot our business. Most teams wouldn't be able to accomplish that, right? I mean, you've really got to, I think, give recognition where it's due here because not only did they pivot, which typically signals failure of their other business, but it kind of became the key to where they're at today. Which, you know, in my mind is this new chapter of growth with another potential outcome here, you know, in terms of exit strategy. So, I mean, I really have been impressed by Curology and just I would love to speak to someone on their team. I mean, I think, you know, for anyone listening, if you know someone at Curology, share this episode with them and have them reach out to Aaron and I on LinkedIn. Because it's just such a fascinating story that we rarely see on E Commerce on tap in terms of this kind of reinvention, right?

Completely. I mean, very few teams get to build a $200 million business and I can't think of another one that did that twice. And so this is a very interesting, unique story. I think, you know, a lot of good lessons that founders can learn.

Well, I think this was a great episode of E Commerce on Tap brought to you by sourceify and Isba. If you're tuning in for the first time, we greatly appreciate you and we've got one big ask. You've got to leave a review and comment on Aaron and I's LinkedIn post. We greatly appreciate you tuning in and thank you again to listening to E Commerce on Tap brought to you by sourceify and Isba.

Sam.