Whether it's from a subscription service or from a chronic disease treatment taken for life, recurring revenue is an investor's dream.
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This podcast was recorded on Nov. 15, 2016.
Vincent Shen: This one is something that's pretty new, and that's also developing in the consumer space. That's with subscription business models. We've seen the success with some of those. I don't know if you're familiar with Dollar Shave Club, but they were recently acquired by Unilever, a really big company in the consumer retail space, for about $1 billion. In my opinion, very much proof of concept of how lucrative this can be.
Then, some other big ones that people are familiar with, think Birchbox, Blue Apron. The main idea on the consumer retail side is, you can very quickly build loyalty with customers, because they've signed up to get something every month, every two weeks, whatever it might be. And they can sample a lot of new products without being overwhelmed with the very many choices out there now. How is that playing out on the healthcare side?
Kristine Harjes: You wouldn't think there's an obvious connection here, but I'm going to draw the parallel between a subscription business model on the CG side of things with chronic disease treatment in healthcare. It is very lucrative for these consumer goods companies to have customers that are signed up, and are basically signed up for life. If you sign up for Spotify, and all of the sudden that's where all your playlists are and your friends are on there, you're not leaving. You're going to keep paying that $9.99 or however much it is indefinitely.
You can kind of see a parallel business model with chronic treatment. If you're taking a drug for the rest of your life as a treatment rather than a cure, that money comes in day in and day out. And I think that's actually a fairly nefarious part of the healthcare business model, but I will point out that its one saving grace is, if a disease could be treated -- some people will criticize healthcare companies, saying that they are making these treatments because they want you to have to take the drug for the rest of your life --
Shen: Instead of making a cure?
Harjes: Yeah, that they could make a cure and it would be one-and-done. That's not the case. If that was possible -- that you could make something that could cure it -- somebody is going to do that, because as soon as you make a cure, you have stolen all of that market.