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The pandemic-driven growth of telehealth services and online shopping, combined with a trend toward consumers taking a more proactive interest in their health has Thorne Healthtech Inc. embarking on its most ambitious expansion since moving its operations here in 2018 from the Pacific Northwest.
The life-sciences company that focuses on nutritional supplements research and manufacturing is building a 360,320-square-foot warehouse in the Omni Industrial Campus off Interstate 26 to give it more room to store and process materials for the dozens of products it makes targeting issues like bone and joint pain, heart and brain health and metabolism.
The new building, which will add about 50 jobs to Thorne’s 450-person workforce, is near the company’s headquarters and is part of a plan to grow Thorne’s share of the highly competitive yet fragmented supplements market. No single manufacturer has amassed more than 5 percent of the supplements market, according to Thorne’s calculations, and that market is set to almost double to $271 billion by 2028.
A recent $70 million initial public offering — the company now trades on the Nasdaq under the symbol THRN — is another key, giving the supplements maker extra money to manage supply purchases and develop the marketing heft it needs to capture consumers where they live.
“Our conviction is that health care is moving to the home,” Paul Jacobson, Thorne’s CEO, told analysts during the company’s earnings call in November. “We are leading a trend that transforms health care from a disease-centric approach to a wellness-centered model focused on providing customers the tools to better manage and maintain their health long before they would traditionally enter the health care system.”
That includes beefing up the company’s website with science-based quizzes that analyze gender, age, diet and lifestyle factors to recommend specific Thorne-made supplements. Depending on the answers, someone taking the website’s stress support quiz, for example, might get a recommendation for a vitamin-and-chemical trio that improves adrenal function. Or that person might be directed to a hemp oil blend to reduce stress and fear.
Customers seeking more in-depth analysis can opt for one of nearly a dozen home health tests. For stress support, the test would use saliva to measure hormone fluctuations in the adrenal gland. Once a home test is submitted and then analyzed by the Thorne’s Onegevity artificial intelligence platform, the company will respond to the consumer with a targeted recommendation.
“To deepen our relationship with our customers, we focus on getting high-quality data to offer more personalized solutions tailored to their needs,” Jacobson said.
Growth in Thorne’s direct-to-consumer sales model depends largely on offering those personalized solutions on a continuing basis through online-based subscriptions, in which supplements are delivered to customers’ homes at regular intervals. Thorne has more than tripled the number of such subscriptions since 2018 — from roughly 61,000 then to 218,935 by the end of the third quarter this year.
The company has managed to avoid the supply chain problems other manufacturers face because most of its sourcing comes from within the United States, said Tom McKenna, Thorne’s chief operating officer.
Jacobson said the testing and personal engagement offered through Thorne’s website are “the on-ramps” to a lasting relationship — in other words, subscriptions — with consumers.
McKenna said the company’s online sales growth mirrors the wider e-commerce trend and “the change in how we all behave right now in terms of gathering information and making purchasing decisions.”
The pandemic has put health and wellness at the forefront of many consumers’ thinking, he said, and — like someone might do online research to buy a television — consumers are using their smartphones and other technologies to research health problems and manage their own solutions.
“Our customers continue to trust us to guide them on their journey to healthy living,” Jacobson said.
Thorne is also working more closely with physicians — both on telehealth and in-person office platforms — to let them know what products are available that might benefit their patients. There are now about 42,000 doctors and alternative practitioners in Thorne’s physician network.
“We’ve never seen more physician interest in the work that we’re doing,” Jacobson said, adding much of that is being driven by the pandemic.
“During COVID, we believe that we’ve seen the tipping point occur … whether it’s because the doctors themselves have seen that preventative health techniques actually work or their patients are playing Dr. Google and coming in armed with a bunch of questions about supplements and wanting to know what works and what doesn’t work,” he said.
The work with physicians lends scientific credibility to Torne’s products, Jacobson said, which is important as the company tries to expand its share of the market through mostly online purchases rather than through big-box retail stores or pharmacies.
Credibility has long been a concern for the supplements industry, which has seen instances of overhyped claims and manufacturing missteps. That started to change during the pandemic when the Department of Homeland Security included supplements as part of health care’s essential critical infrastructure. The recent surge in demand is also a sign of growing consumer confidence in supplements.
But skepticism still remains, and Jacobson said that’s one of the reasons Thorne’s IPO only raised about half of the $135 million the company was hoping for.
“The way you prove to people that your products work is through data,” Jacobson said on Dec. 2 during a presentation to the Evercore ISI HealthCONx Conference. “We have the data that shows the things we do actually work. We have the long history with physicians’ offices that shows us the feedback that they get from their patients. So, we know what works and what doesn’t work.”
The investment community appears to be warming up to Thorne since the IPO, with analysts at Cowen, RBC Capital, Evercore and Bank of America taking a bullish stance on the company’s stock and giving it a target price of between $11 and $13 per share. To date, the stock has traded between a high of $10 and a low of $6.65. It was trading at the lower end of that range last week.
While Thorne hasn’t turned a net profit on an annual basis — it lost $4 million last year — it was in the black as of Sept. 30 by a margin of $5.3 million. Meanwhile, net sales continue to climb sharply, rising 32 percent from the same period a year ago to $135.4 million. RBC Capital said Thorne has the potential for 30 percent annual revenue growth over at least the next three years due to its recent marketing investments.