Online health brands company Eucalyptus is putting the $50 million it recently raised to use acquiring the online assets of the Australian Jenny Craig brand from its administrators as the rest of the weight loss business looks set to be liquidated.
Voluntary administrators FTI Consulting were appointed on May 9, but a month on, have been unable to find a buyer for the Jenny Craig stores, which have ceased trading immediately, with all employees made redundant. Around 73 stores in Australia have closed, with the loss of 306 jobs, alongside 18 stores and 71 roles in New Zealand.
Administrators Vaughan Strawbridge and Joseph Hansell from FTI Consulting said it was “an unfortunate outcome” they sought to avoid as they tried to sell the Australian and New Zealand operations of the Jenny Craig Group as a going concern. They had 15 interested parties during the bidding and sale process, with four submitting non-binding indicative offers.
The only bid accepted by the administrators was from healthtech startup Eucalyptus, for the online capability of Jenny Craig, which will continue to offer online weight loss solutions to customers.
Eucalyptus already has traction in the weight loss market, selling medical products online in four key demographic-focused brands. They are Pilot (men’s health, including weight and hair loss, erectile dysfunction and premature ejaculation), Juniper (women’s weight loss and menopause), Kin (fertility), and Software (prescription skincare). The business also started a sex toy brand, Normal, which it has since offloaded.
ABC TV’s Media Watch recently featured Eucalyptus and Pilot after TV station Seven aired a story about former AFL player Dale Thomas, a Pilot ambassador, on its news bulletin in a story about his weight loss that viewers criticised as an infomercial. The company said it does not sell the controversial drug Ozempic in Australia and was “misrepresented” on two programs on Seven.
The Royal Australian College of General Practitioners has raised concerns over Juniper, the women’s weight loss program, involving daily drug injections that are prescribed following a quiz and text-based consultation with a doctor.
The program costs $13 a day for prescription medication, Saxenda, which is approved by the TGA to help with weight loss.
Advertising medicines to consumers is banned under Australian law and the Therapeutic Goods Administration has been checking social media for potential unlawful advertising of therapeutic goods, but recently told SBS it could not confirm if was taking a closer look at the likes of Juniper and Mosh.
Over the past 9 months, the TGA has asked for more than 3,500 weight loss ads to be taken down. There’s no suggestion that Eucalyptus or Mosh have been involved in any of those incidents.
Last month the Medical Board of Australia, which regulates GPs, revised its telehealth guidelines to ban what’s know as ‘tick and flick’ online prescribing from September.
It prevents doctors from prescribing without real-time direct consultation, either in-person or via teleheath using video or phone.
The problem, the MBA said, is “asynchronous requests for medication communicated by text, email, live chat or online that do not take place in the context of a real-time continuous consultation and are based on the patient completing a health questionnaire when the practitioner has never spoken with the patient”.
Medical Board chair Dr Anne Tonkin said: “Prescribing medication is not a tick-and-flick exercise. It relies on a doctor’s skill and judgement, having consulted a patient, and recognises that prescription medication can cause harm when not used properly.”
Eucalyptus has been offering products via online applications that are reviewed by a doctor. The company has stated it will comply with the new guidelines.
Eucalyptus was founded in 2019 by Tim Doyle, Benny Kleist, Alexey Mitko and Charlie Gearside. It has raised nearly $150 million in VC funding over the last three years, with Blackbird, the Woolworths VC fund W23, US investor Mary Meeker’s BOND Capital and Airtree among its backers. In April Eucalyptus banked $50 million on a $520 million valuation. Previous rounds include an $8 million Series A in May 2020, $30 million in a Series B in July 2021, and 15 months ago, $60 million in a Series C in Jan 2022.
Startup Daily contacted Eucalyptus for comment and we’ll update the story if the company responds.
Cheap acquisition trend
Picking up distressed assets is the new black in scaling for Australian companies in the current economic climate, with several failed startups and other companies acquired by former rivals.
Most recently Woolworths nabbed the Milkrun grocery delivery brand for a rumoured $10 million – a small fraction of $86 million from VCs such as Tiger Global and Airtree poured into its brief 19-month life.
After Sydney rival Voly shut down November last year, having burnt through $18 million in Seed capital, the brand sprang back to life in February after meat subscription service Our Cow bought the assets from the administrators.
Melbourne ready-meal company Efoodz. acquired the gourmet food marketplace CoLab from its administrators after it shut down last month.
ASX-listed online retailer Kogan has also made a habit of buying failed brands, most recently acquiring the online assets of furniture retailer Brosa for $1.5 million. It also snapped up imitation designer furniture retailer Matt Blatt failed in March 2020, paying $4.4 million and $2.6 million for retailer Dick Smith Electronics after it collapsed way back in 2016.
Meanwhile, a second meeting of creditors for the ANZ arms of Jenny Craig Group will be held on Wednesday, June 14, where the recommendation of the Administrators, given the absence of deed of company arrangement proposal, is for the companies to be placed into liquidation.