Healthycell is offering equity at a $15.4 million valuation. That valuation represents just over a seven-times revenue multiple from the company’s 2020 revenues of $2.1 million, which seems a bit steep for a consumer packaged goods business. Publicly traded supplement companies typically see revenue multiples anywhere from one time to four times. However, Healthycell is pursuing patents on its unique supplement gel delivery method, which may add more intrinsic value to the company.

The vitamins and supplements industry is large simply given the quantity of Americans who regularly use these products. The more than 170 million US adults taking vitamins generate a lot of demand in this industry. As a result, the US vitamins and supplements market was measured at $35.7 billion in 2021. This is not an industry with significant growth, though. Revenues are expected to grow by just 2.2% this year, far less than growth rates in trendier markets. A majority of American adults already take supplements, so the industry doesn’t have significant room to expand. 

In addition, Healthycell is contending with a crowded market of many competitors. The vitamin and supplements aisle is long, and incumbent players like Nature Made already take up significant shelf space. New players like Olly and Ritual are also competing for consumers’ attention. Healthycell is unlikely to capture significant market share anytime soon, implying relatively low revenue projections even if the company continues to grow.

Douglas Giampapa, CEO, founded Healthycell in 2015. Giampapa graduated from Cornell with a degree in business and hospitality management. Shortly thereafter, he moved to Costa Rica and embarked on a long project to build a resort-style community. Giampapa has been working on this project for almost 15 years. It appears that he started Healthycell in the midst of work on Costa Rican development, seemingly in collaboration with Dr. Vincent Giampapa. The elder Giampapa is a well-regarded doctor, surgeon and anti-aging expert. His research into cellular restoration technology was nominated for a Nobel Prize. Dr. Giampapa now serves on an advisory board for Healthycell but is not involved in day-to-day operations.  

Investors should note that the Giampapas seem to have founded the business, then stepped away, and then returned to more active management in 2015 when the company was apparently “insolvent.” CEO Giampapa offers no further clarification on what that means. This raises some questions about the Healthycell team’s commitment and operational abilities, despite their relatively deep and well-rounded expertise.

Beyond the Giampapas, the Healthycell executive team includes CFO Joe Rolston and Vice President of Retail Sales Jill Oliver. Rolston is a career controller with more than 40 years of accounting experience. Oliver has more than 20 years of experience in the wellness industry. She served as a former sales director at New Hope Network, founded her own powdered drink supplement brand for kids and acted as a consultant to natural foods brands. The Healthycell team also includes seven lower-level employees and advisors who cover marketing, inventory management, customer success and more.

Key leaders at Healthycell do not work full time for the company. CEO Douglas Giampapa appears to still be working on his Costa Rican development project, and Rolston and Oliver have separate consultancies as well. But overall, the Healthycell team is relatively well-rounded, with medical expertise, business experience, senior financial leadership, marketers, salespeople, and more.

Healthycell’s entire pitch is rooted in revolutionizing dietary supplements. The company’s gel products are intended to be easier to swallow and better tasting than existing pill-based vitamin options. Plus, Healthycell argues that most pill-based vitamins aren’t designed for maximum absorption. Healthycell’s MICROGEL formulation supposedly delivers vitamins and minerals in smaller particles, which are more thoroughly absorbed into the body for greater health impact. 

Healthycell’s gel supplements already stand out in a crowded market of vitamin pills, and future product introductions could set Healthycell even further apart from competitors. Healthycell will soon introduce testing kits meant to assess a baseline of nutrient deficiencies. When customers subsequently begin taking Healthycell, they’ll theoretically be able to measure steady progress toward improving their health. Healthycell argues that most people don’t recognize the impact that their daily vitamins make on their system, so this method of providing clear evidence that Healthycell is working could be another major differentiator for the company. 

But while Healthycell’s product stands out, it’s not clear whether customers will prefer its gel-based method. Luring customers away from established brands like Nature Made may be challenging for the Healthycell team.

In recent years, Healthycell has been growing steadily. In 2019, the company generated $1.3 million in revenue and posted a net loss of $1.1 million. In 2020, results were much stronger. Revenues grew significantly to $2.1 million, and Healthycell’s net loss improved to roughly $792,000. Healthycell is on track to continue growing revenue and minimizing net loss, leading toward a more sustainable business. 

In addition, Healthycell’s key performance indicators for customer retention are excellent. An impressive 94% of Healthycell subscribers are retained on a monthly basis. Customers make an average of 4.8 purchases per year, and Healthycell has a more than 67% gross profit margin from online sales through its website. Plus, customer reviews are strong, with an average of 4.5 stars across Healthycell’s website and Amazon. 

It’s worth noting that Healthycell has a previous history of insolvency. According to Giampapa’s LinkedIn page, he stepped away from active management after founding the company that would become Healthycell in 2012. He supposedly returned as CEO in 2015 when the company was “insolvent,” then relaunched the company as Healthycell. Giampapa touts the company’s turnaround on his LinkedIn page, but Healthycell’s raise page doesn’t offer any details about this murky part of the company’s history. While Healthycell seems to be performing well these days, investors might want more information about the company’s past struggles and how they may impact current operations. 

Healthycell is a relatively high-risk investment because there are open questions that aren’t well-addressed in the company’s raise materials. First of all, it seems that Healthycell’s founder and CEO Douglas Giampapa is not committed to the business full-time, as he also works concurrently on a large Costa Rican development project. There are also prior performance problems that aren’t clearly addressed. According to Giampapa’s LinkedIn page, he stepped away from active management after founding the company that would become Healthycell in 2012. He supposedly returned as CEO in 2015 when the company was “insolvent” and relaunched the company as Healthycell. It’s unclear what happened with the business between 2012 and 2015. There are meaningful liabilities on the balance sheet totaling more than $550,000, and it is unclear if this relates to that difficult period. Additional team risk comes from the fact that other team members also have side consulting businesses and additional commitments. 

It’s also worth noting that Healthycell doesn’t offer any indication of 2021 results, though the year is nearly over, which may indicate slowing growth. In general, these open questions result in higher risk for prospective investors.

Healthycell appears to be a growing business with a decent brand and well-differentiated product. However, prospective investors may have serious questions about Healthycell’s past. This isn’t a company with a straightforward trajectory. Healthycell was apparently founded by Douglas Giampapa and Dr. Vincent Giampapa, neither of them full-time. Then, at least Douglas Giampapa stepped away, the company became insolvent, and Douglas Giampapa stepped back in (but still isn’t full-time). None of this is addressed in Healthycell’s raise materials. It’s unclear if these past issues will impact Healthycell’s future. 

In addition, it’s not clear yet that Healthycell can contend with traditional vitamins in pill form. There may be a market for people who don’t like swallowing pills. But slurping down a gel packet might not be an appealing alternative to some consumers, and mixing Healthycell into a drink or blending it into a smoothie takes a lot more time than swallowing a pill. Healthycell does seem to have a loyal direct-to-consumer audience, but it’s not yet clear that Healthycell can become a widespread product. That uncertainty could be fatal in the highly competitive and slow-growing vitamin and supplements market.

Healthycell’s strengths are differentiation and performance. The company has honed its pitch to address three main pain points: many people don’t like swallowing pills, pills aren’t absorbed by the body very well, and vitamin-takers aren’t sure what their vitamins are doing for them. The company is addressing each of those points with gel-based supplements and, soon, test kits to measure product impact. With patents pending on its MICROGEL technology, Healthycell’s competitive moat is widening quickly. 

In addition, Healthycell’s performance data is strong. Healthy retention rates, impressive revenue growth between 2019 and 2020, and decent gross profit margins are all positive signals. Plus, Healthycell hasn’t even scratched the surface of additional product distribution opportunities. Retail partnerships are in the works, but Healthycell has more creative plans too. MICROGEL packets could appear alongside water or soda dispensers, and single-serve packets have promising potential for the travel and hospitality industry. Healthycell has potential to continue spreading its product to a growing number of customers and achieve even stronger revenue growth.

Healthycell offers single-serve packets of gel infused with vitamins and minerals, which are intended to replace traditional pill-based supplements. The company’s MICROGEL product is patent-pending and offers two key benefits: It’s easier to swallow than pills, and the vitamins and minerals it carries are more easily absorbed by the body. Healthycell is well-differentiated from existing supplement options and has been growing steadily since 2019. The team seems well rounded, including a reputable plastic surgeon and anti-aging expert as an advisor. And customers are responding positively to Healthycell.

But investors should also note that Healthycell was apparently insolvent before founder Douglas Giampapa regained active control of the business, and he and other members of the team are not fully dedicated to the company. Healthycell is also competing in a crowded market with relatively slow growth and hasn’t yet secured major retail distribution. It’s also too soon to say whether enough consumers deem gel as an effective alternative to pills. Therefore, Healthycell has been rated a Neutral Deal. 

For questions regarding the KingsCrowd analyst report or ratings for this company, please reach out to support@kingscrowd.com. 

Analysis written November 4, 2021.