HIMS looking attractive today

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I bought an initial tranche of HIMS yesterday at $18.87 to get my toe in the water. Ouch! Down 10% today. But I usually start a new position in a stock this way and wade into it. Well not the down part :slight_smile: just a small position. So I may have a bloody nose, but I now feel the kind of punches this stock can throw with its volatility. And I have been forced into a deeper dive. With today’s pullback ~10% on top of a 30+% pullback in August, I think we have another opportunity to add here. HIMS overshot last summer at $23+ with GLP hype and now IMO has overcorrected down. The bad news today is that Eli Lilly’s CEO saying the “tirzepatide” shortage is past. (https://www.reuters.com/business/healthcare-pharmaceuticals/lilly-ceo-says-weight-loss-drug-shortage-end-very-soon-bloomberg-news-reports-2024-08-01/)

So concerns around the durability of Hims’ GLP-1 business have jumped. Investors/traders have been selling off HIMS stock since that piece of news came out. My view is these fears are overblown for multiple reasons:

  • Hims & Hers’ business, excluding GLP-1s, grew +46% y/y in Q2 2024

  • Hims & Hers’ weight loss existing offering is broader than GLP, without factoring in GLP sales.

  • Hims & Hers is currently offering “semaglutide” based compounded GLP-1s (not tirzepatide yet).

Hims & Hers is set to broaden its GLP-1 offering by bringing tirzepatide and liraglutide to its weight loss offering. So yes, there probably is a hit of some unknown magnitude by today’s announcement, but HIMS should still have a solid weight treatment offering even if it looses tirzepatide,

Hims & Hers’ will continue to use the “personalization” to continue selling compounded GLP-1s to consumers who need specialized treatment.

HIMS has $230M in the bank and is profitable. The risk is the growth rate in 2025 which I think could be as high as 60+% and as low as 20%. This create a squishy forward PE. Existing organic growth of conservatively 30% should continue even without the GLP stuff. Add in a conservative 20% from GLP and weight loss treatments, it seems like the growth bar should easily exceed 50%. Sounds like a worthy investment to purchase a full position.

-zane

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When I saw HIMS was down over 10% and there was a mention of the GLP shortage designation being removed I assumed it was semaglutide which the popular Ozempic and Wegovy brands are built from.

However looking on the FDA website, it is tirzepatide which is the one that got removed from the shortage list. That corresponds to Lilly’s “Mounjaro” branded drug, which I’m not sure is even that popular right now.

Here’s the FDA changes,

FDA ruling
FDA ruling1478×534 35.3 KB

Since semaglutide is still in shortage I believe this means HIMS can continue on selling it’s compounded semaglutide which is the Ozempic generic equivalent. I’m not sure if the market got mixed up on the ruling with semaglutide vs tirzepatide, or if the market is assuming semaglutide will soon be removed from the shortage list.

Noted above is that revenue for HIMS grew 46% yoy without any GLP additions and I don’t believe the success of the business primarily depends on GLPs alone.

HIMS recently acquired their own 503(b) facility for producing GLPs to not rely on a third party. They also mentioned they were selling to 21 states in the second quarter, are up to 30 states now, and will be in all 50 by year end.

Here’s what the HIMS CEO said about the GLP shortages on the last earnings,

I think this will exist and expand beyond the shortage dynamics. I think there’s really established precedent with regard to the compounding exception, which allows for this level of personalization that we’ve spoken about for patients that need it. And I would expect that the clinical necessity of that will be really clear with these medications as people know, there are real side effects. There are really no one-size-fits-all dynamic. But we think there’s a really robust platform that extends well beyond the shortage across a number of these avenues.

Also, the management indicated that if the Ozempic shortage no longer exists and the FDA no longer allows compounded semaglutide, they can sell Ozempic from their platform. It would have a much higher cost than the generic compounded semaglutide but still an option for users.

When they’ve discussed other categories of medications they said there is a very wide variety of customers needs, some want brand names, others want cheaper generics, and others want personalized form factors with varying doses.

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