SPACInsider contributors Anthony Sozzi and Sam Beattie this week compiled their three favorite potential SPAC targets among telehealth firms. We look at why they are compelling and why each could be a fit for a blank-check merger.

It is a peculiar time for telehealth. With the pandemic waning, the acute demand for remote care appears to be fading – although variant fears continue to drive travel restrictions and market movement.

At the same time, investors are left to look for signs about how much of the consumer behaviors that were pandemic necessities will become long-term habits. Telemedicine pioneer Teladoc (NYSE:TDOC) saw its stock nearly triple at the height of COVID-19 fears, but it has already settled down to its pre-pandemic range despite beating third quarter earnings.

Meanwhile GoodRx (NASDAQ:GDRX) listed mid-pandemic in September 2020 and closed Thursday still up 24% from its IPO price. Doximity (NYSE:DOCS) last closed at $57.48 – down from its September high of $107.79, but still up 39.6% from its June 2021 IPO price of $26.

As such, newly listed telehealth/DTC medicine companies are doing just fine even if the market isn’t reflexively buying them based on the morning news. De-SPACs have been less fortunate, however. With yesterday’s close as our snapshot, SPACs’ most successful recent foray into healthcare is the Procaps Group (NASDAQ:PROC), which, as its name suggests, does the nuts-and-bolts work of manufacturing gel cap pills for the pharmaceutical industry.

Procaps closed Thursday at $10.24 while the broader field includes some chilly price performances. With the broader market headwinds against SPACs, breaking $10 is no great shame but both mobile talk therapy firm Talkspace (NASDAQ:TALK) and UpHealth (NYSE:UPH) – GigCapital2’s tie-up of three healthcare companies with a telehealth strategy – closed below $2.60.

This could be a counter-intuitive boon for SPAC teams. Hot sectors tend to have a snowball effect with each successive SPAC target in a given sector hoping to peg its deal valuation to the blazing post-deal price performance of its predecessors. If the winds of the market shift on that sector, teams can be forced to negotiate tricky deal revisions ahead of close.

As such, telehealth/DTC medicine is set up to potentially be a buy-low opportunity for SPACs and if the performance of IPOing companies in the space is any read, then good companies should get good bumps on the other side.

Ro Health

This potential is most clear for a company like Ro.

Its closest and most obvious public comparable is Hims (NYSE:HIMS), which combined with Oaktree I in January and has since slumped to $6.27. Despite this precedent, there is plenty of cause to view Ro differently.

While it got its start in a similarly Hims-way by sending erectile dysfunction and hair loss treatments direct to consumers (DTC), it has built out the hard infrastructure necessary to be a real healthcare player. It has established pharmacy distribution centers and has made a series of acquisitions expanding its offerings to at-home blood tests, women’s fertility services and tools for quitting smoking.

And, because you can’t throw a stone too far these days without hitting another SPAC target, Ro is also collaborating with Capstar’s (NYSE:CPSR) pending merger partner Gelesis to serve as a channel for its prescription weight-loss remedies.

What this all amounts to is more than a one-stop shop for over-the-counter remedies you’d rather not ask your doctor about. Ro has taken the DTC model and is gradually making itself an alternative to the traditional healthcare system for some common health issues.

Rather than seek coverage by insurers, Ro remains an out-of-pocket provider with subscription medication packages generally priced at $5 per month, virtual doctor’s visits at $15 and ongoing care and in-home services priced at $20 to $40 per month. Its products are also now in pharmacy aisle of 97% of Walmarts (NYSE:WMT).

Even if these prices are subsidized somewhat by the $876 million in venture capital it has raised, they nonetheless represent competitive price points to what consumers are normally shelling out in co-pays even with partial or full insurance coverage.

Ro also has a bench of investors highly involved in the SPAC scene. Its cap table currently includes Altimeter Capital, Dragoneer Investment, PROOF and FirstMark Capital, which collectively account for five SPACs searching or on file to IPO and one that has already announced a deal.

Thirty Madison

Thirty Madison is in this same game with its brand Keeps focusing on men’s hair loss, Cove for subscription migraine relief and Evens for digestive issues. In March, it also launched Picnic, a customizable allergy relief service. This hits at a real need market for allergy-sufferers usually forced to pick between a limited range of broad-based allergy medications or holistic non-pharmacy aids.

It has ridden $229.5 million in private funding to a $1 billion valuation as of June 2021, which could make now the ideal moment for a SPAC to give the unicorn the VIP lane to the public markets. Its last capital raise this summer also included the sorts of strategic investment one would normally look for in a PIPE with Johnson & Johnson’s (NYSE:JNJ) venture arm taking part alongside Greycroft and Polaris.

Last month, it put its hair-loss remedies in brick-and-mortar locations for the first time and it has its fair share of public company-ready executives. The company’s CTO, Matthew Mengerink, had former stops running the technology departments at Uber (NYSE:UBER), YouTube, eBay (NASDAQ:EBAY) and PayPal (NASDAQ:PYPL).

Its co-founder and CEO Steven Gutentag is also a former program manager at Google (NASDAQ:GOOGL) which may put him on a path with Healthwell Acquisition Corp. I (NASDAQ:HWEL). It is looking for tech-enabled healthcare companies and counts among its directors Ellen Levy, who has served as an executive at Apple (NASDAQ:AAPL), Walker & Dunlop (NYSE:WD) and LinkedIn, mirroring and complementing Gutentag’s resume.

Nurx

The early opportunities in the DTC medicine space can seem to be quite focused on men with their launches as better ways of getting sexual dysfunction drugs to consumers, but the bigger market may be with women.

Nurx works both with insurance and without to deliver birth control solutions to women in a DTC model. This encompasses the varying approaches with birth control pills for $15 per pack if uninsured to the contraceptives by injection, ring, patch or the morning after priced according to the method.

This is arguably a much bigger market than those targeted by any of the companies thus far mentioned as it covers half the population, most of which want some form of protection and would prefer to not have too many conversations about it. Major insurers Aetna, Anthem (NYSE:ANTM), Cigna (NYSE:CI), and United (NYSE:UNH) already cover Nurx with most plans fully covering its offerings for zero co-pay.

While Nurx has not publicly disclosed user figures since announcing 200,000 in April 2019, it is already in more homes than one would guess via its partnership with Amazon (NASDAQ:AMZN). The two paired up in September to integrate Nurx birth control reminders to Alexa, and Nurx has also worked with the company to provide better information for sex education and birth control-related questions that users may throw Alexa’s way.

Whether SPACs would be able to turn current market conditions into bargain valuations for the more impressive unicorns in this space is yet to be seen. But, past price performance shouldn’t completely dissuade the asset class given that the telehealth/DTC medicine market is still expected to grow at a CAGR of 26.5% through 2026 to $475.5 billion globally.