Online pharmacy Ro has acquired Dadi, a sperm collection and testing startup, for approximately $100 million, say people with knowledge of the deal terms. The acquisition comes on the heels of a recent $150 million fundraising round from existing investors at a $7 billion valuation. It’s also happening during a transitional period for telehealth companies, which are having to figure out their main value proposition as the pandemic winds down and people are no longer confined to their homes.
Ro got its start prescribing medications that patients may have been too embarrassed to ask their physicians for, most notably generic Viagra. Fertility challenges can be similarly difficult to talk through with a provider, making them a natural extension of Ro’s core business. Prior to the Dadi acquisition, Ro purchased at-home fertility testing for women company Modern Fertility. Marco DeMeireles at the Chernin Group, an investor in both Dadi and Ro, introduced the two companies.
Dadi was founded in 2019 to reinvent sperm collection, testing, and storage. For $199, the company will send a home collection kit that lets clients take their own sample and send it off to in a temperature controlled and tamper-proof container to a lab where it will be processed and stored. Sperm storage and analysis at a more typical sperm bank can cost around $1,000 per year.
Under Ro, Dadi will become part of a growing suite of services that in some way bring Ro back to its initial product: sexual health. Since its beginnings in 2017 treating erectile dysfunction, the company has expanded into a hodgepodge of offerings including dermatology, smoking cessation, and mental health care. It’s also tackled primary care replete with blood work and other diagnostics, thanks to the acquisition of Kit, an at-home diagnostics company, and Workpath, a company that deploys in-home medical workers for at home treatments. In its first five years, Ro has worked with 1.5 million patients and conducted 8 million online visits. It’s also facilitated 100,000 in home visits, including a COVID-19 vaccination program in New York. With Modern Fertility and Dadi, the company is getting a little more focused.
Ro’s new expansion into fertility comes amid a shift in telehealth. Before the pandemic, the technology was a mere idea: more health care could happen online. Theoretically, this would lower overhead costs. Online forms might also do some of the intake for physicians thereby increasing the amount of time a patient could meaningfully spend with their doctors. Then the pandemic tested the limits of online health care, at least as it currently operates.
In 2020, under pandemic restrictions, all telehealth companies saw a giant increase in the use of their services. As people have gotten vaccinated however, they’ve largely returned to seeing their doctor in person. Now online care platforms are charged with figuring out where they fit into the greater healthcare landscape. The Center for Medicare and Medicaid Services have found value in using telephone visits to help doctors manage patients with chronic illness outside of regular in-person check ins. But beyond that utility, it’s not totally clear how much care can or should be done online.
As with many in this space, Ro seems to be undergoing a transition. As reported by TechCrunch’s Natasha Mascarenhas last week, two executives recently departed the company: COO George Koveos and head of pharmacy Stephen Buck. A very meaningful chunk of the company’s revenue still comes from treatment for erectile dysfunction, though CEO Zach Reitano says it is no longer the majority money maker. Ro has placed some long-term bets on the future of health care being online and in home, but that will take a long time to catch on.
Through its erectile dysfunction business, Ro has a ready audience of men who may have questions about fertility. With Modern Fertility, Ro can make itself a destination for couples. Rather than being everything to everyone, the company seems like it wants—for now—to develop itself as a destination for sexual health. Already the company provides medication for birth control, herpes, menopause, premature ejaculation, and testosterone supplements. CEO Zach Reitano says he moved into the fertility space, because clients were asking for it.
“We see a massive opportunity in reproductive health,” says Reitano. “Our mission is to build accessible, impactful, and trusted care that people want and that last part—what people want—this has been reproductive health and information around fertility.”