December 5, 2023


The fine suplement crafters

Thorne HealthTech: Poised To Outperform Other Nutraceutical Companies (NASDAQ:THRN)

Vitamin Supplements

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The Opportunity

Nutraceutical/Supplements Market: Certain consumer-themed stocks may be able to serve as an inflation hedge this decade, yet some companies will likely still struggle to deliver growth as they are forced to increase prices. One area to consider is the nutraceuticals market, as the growth of many nutraceuticals has accelerated following 2020. Furthermore, the nutraceuticals market has delivered respectable growth (7-8%) in recent years. Although other consumer themes will likely struggle due to rising inflation and slower growth, nutraceuticals are more likely to be resilient. Western consumers are becoming increasingly health-conscious, and DIY health trends are on the rise. These trends will help to spearhead growth this decade. Industries like this have even been shown to perform well during a recession.

Thorne can outperform: Thorne HealthTech (NASDAQ:THRN) is one of the best stock options in this space in my opinion. The company is positioned to outpace the industry’s growth. While other nutraceutical microcaps are intriguing, Thorne has a strong portfolio of supplements and health tests and is better positioned to engage with consumers. Management is targeting 30% revenue growth moving forward.

Nutraceuticals Market Overview: The chart below provides the best representation of the term nutraceutical, which is used in many different ways. Furthermore, many people simply refer to these products as supplements or medicinal foods. In simple terms, nutraceuticals are a type of pharmaceutical alternative, which has medicinal value in some way. These types of products, as well as supplements and vitamins, are regulated as food due to the Dietary Supplement and Health Education Act of 1994. Nutraceuticals fall under the umbrella of dietary supplements and can include supplements such as garlic, spinach, turmeric, or beetroot capsules.



The annual growth rate of supplements has been around 7% per annum, and over half of the United States population consumes some type of supplement. This is an excellent opportunity for both food and pharmaceutical companies. Food companies may be able to increase sales by marketing health foods, while pharmaceutical companies could be attracted to the lower amount of regulations/lower R&D requirements. Large consumer companies may also branch into this space as well, as many are struggling to deliver 7% growth in a saturated market.

Capstone/Grand View Research

Capstone/Grand View Research

Other industries are growing much slower. For example, the beverages industry is projected to grow by only 1.7% this year.

Aged Population is a Catalyst for Growth

There is ample growth potential in this area. This growth can be spearheaded by increasingly aging and health-conscious Western countries. For example, the population aged over 65 in the United States represented 16% of the total population in 2019 (a 36% increase from 2009) and is expected to rise to 21.6% of the population by 2040. However, Asian countries, particularly Japan, can also be a key driver of growth moving forward. Japan has the highest aged population among any other country in the world. According to Credevo, the nutraceuticals market in Japan has been growing by 15%. Furthermore, other markets in MENA (Middle East North Africa) and Latin America offer solid long-term growth prospects as well, as healthcare spending per capita is positioned to rise. Notably, there has been a surge in the use of nutraceutical products for geriatrics, as many types of health issues stem from vitamin deficiencies.



Most elderly patients will have one or two of these health issues and may benefit from various types of common nutraceutical products.

Post-2020 Interest

The nutraceutical industry was already rapidly growing prior to 2020, but interest in this area has begun to take off in recent years. Some annual growth projections have risen as high as 9% recently, which is slightly above the historical norm. Notably, consumers have focused on supplements that can help to improve immunity, including zinc, Vitamin C, Vitamin D, and other multivitamins. These products can also help with issues such as sleep, gut health, high blood pressure, and brain fog. It is also crucial to note that vitamin/supplements still experienced favorable growth during the last recession.

Thorne HealthTech: Unique Industry Positioning

Thorne HealthTech has an interesting standing in this space. Consumers may continue to increasingly consume supplements, even if there is not enough evidence that they work or are not necessary. Thorne has the potential to disrupt the industry by introducing high-quality supplements backed by medical professionals and various sponsors. Thorne also works with organizations such as Cleveland Clinic, Duke University, Johns Hopkins University, Mayo Clinic, NIH, and Mount Sinai Health System to name a few. Thorne also goes to great lengths to educate its consumers and create custom test kits for various types of health issues. In doing so, Thorne is highly likely to create long-loyal customers who will engage with Thorne’s brand over other players in the market.



Thorne offers over 300 nutritional supplements and has new products in active clinical trials around the world. Its testing and education components are more interactive, which may allow it to take market share from other companies who merely sell supplements and include a brief description of the product on the website. There is certainly a rising DIY healthcare scene in Western countries, and companies need to engage with consumers in order to maintain relevance and ensure that these nutraceuticals are actually improving their health.

Consumers are increasingly looking for a holistic approach to their health and are also focusing more on preventing health issues during earlier years. At the same time, digital health is beginning to emerge and become more normalized since Covid. Companies like Thorne, which have a strong digital presence and offer a variety of nutritional supplements, can exploit these trends.



Deloitte recently noted that three of the main trends in the new DIY health scene included at-home devices and wearable devices.

At-home testing devices: Covid has accelerated the trend of remote physician services and at-home testing kits for relatively simpler health issues. Thorne is well-positioned to profit from this trend.

Wearable Devices: Wearable devices may become more popular in the future, to help track and avoid serious health issues.

More likely to disagree with their doctor: This report mentioned that over 50% of people were likely to push back against their doctor’s recommendations. Others may want to incorporate natural solutions with traditional forms of treatment.

It is clear to see that DIY health trends are accelerating and that traditional health services will have to change. Patients may also cooperate with their doctors to discuss various types of supplementation options (i.e., magnesium/zinc), which would be a win for the nutraceutical industry.

Younger Generation

Thorne is also positioned to capture consumers from younger demographics, who currently spend less on vitamins and supplements relative to other age groups. Thorne’s emphasis on athletics will also help them to capture a more youthful audience.

Average Spend Per Visit at a Supplements Store



Growth Prospects and Valuation

Growth/Marketing: Thorne HealthTech is well-positioned to deliver 30% revenue growth in the coming years as its innovative and customer-centric approach will easily allow it to outperform the industry. Thorne is also heavily committed to investing in marketing in the long term, which can help drive additional growth. Marketing expenditure as a % of revenue rose from 10% in 2019 to 15% during Q1-Q3 2021. Its long-term target is 16-17%. This is an extremely positive trend, as the results have been positive, and it displays the level of confidence management has in the future growth potential.

Favorable Q1 Results: Extrapolating the Q1 results would result in annual revenue of $218.7 million (1.4x PS) and a net income of $18.84 million (PE ratio of 16). Thorne is currently on track to deliver 20-30% revenue growth this year, so the current valuation is relatively attractive given its long-term growth prospects.

Thorne SEC Filing

Thorne SEC Filing

As seen below, these results represent a considerable improvement from its performance during 2020 and 2021. Furthermore, foreign sales only currently account for around 6-7% of its total revenue, so there is ample growth potential in this area during the next decade. Thorne already has two trademarks in Japan and three pending trademarks in China.

Thorne 2021 Annual Report

Thorne 2021 Annual Report

Entry Point: I have been accumulating Thorne at $4-6/share this year and think that this is a solid long-term hold.


Thorne’s PS ratio is also relatively attractive given its historical average and also after considering the company’s long-term revenue growth prospects (30% target). I plan to take advantage of any dips to accumulate more shares.


Key Risks/Outlook

Some of the main risks to this investment thesis are as follows:

1) Valuation/Performance: Thorne’s stock price has decreased substantially since its IPO and shares could trade at a lower P/S ratio if the company misses its 30% growth targets. Slower-growing microcaps that sell nutraceutical products can trade as low as 0.5x sales.

2) International Expansion: Thorne already sells its products to around 37 countries in the world. However, healthcare expenditure per capita/consumption in many international markets such as South America and Asia is still low relative to the levels seen in the United States. While this can be seen as a huge benefit in the long run (i.e., rising incomes can drive further growth in the future), it may take years for this to deliver meaningful results.

3) Highly Competitive: This is a very high-growth industry, but it is also extremely competitive. Thorne needs to deliver revenue growth that exceeds 10% per annum in order to command its relatively higher valuation. Major competitors include Nestle Health Sciences (OTCPK:NSRGY) (OTCPK:NSRGF), Metagenics, Hims (HIMS), and Livongo. Thorne also faces competition from smaller nutraceutical companies, even though they are not as advanced in terms of product offerings, testing services, and other services.

4) Strong investment required: Thorne is planning to invest heavily in marketing. Its previous efforts have been successful, but any downturn in macroeconomic or industry trends could result in a decline in financial performance.

I think that accumulating anywhere between 1.0-1.5x sales this year is an acceptable entry point, given the strong growth opportunity coupled with the industry risks. Thorne appears to be focusing very strongly on Japan and China, which are both very favorable markets with strong consumer trends. Management is committed to investing heavily in the brand, both in the United States and abroad, to help fuel continued growth.