Odd timing, but the FDA reversed its obesity drug shortage decision from a couple months ago. Of course, Trump’s new FDA nominee is the CEO of a company who makes these very same drugs. Companies can still produce until March 2025, but I’d have to think this uncertainty will affect next year’s guide.
Thoughts from anyone else in it?
The most popular brands for GLP1’s are Novo’s Ozempic and Lilly’s Wegovy.
The change here is from Lilly’s tirzepatide, branded as Zepbound. I do not believe there is much interest in consumers from this one, so this removing the shortage news is basically a non-factor. Maybe some traders think this implies that either Ozempic or Wegovy would come off the shortage list in turn, but trading down 10% on this news seems like trading on the headline rather than the details of the story.
Additionally, liraglutide in becoming generic is 2025, a GLP that HIMS can sell without any worry for shortage or non-shortage.
Tirzepatide absolutely has interest; it’s just a lot newer and not known as well yet. It beats semaglutide head to head in weight lost.
https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2821080
Ro has recently partnered with Eli Lily for a lower cost drug. I searched online and the pricing is lower than what is currently offered by HIMS. I think there’s a lot of competition in this space with decreasing margins. VKTX and some other companies are also working on an oral version of semaglutide with great efficacy.
With the changes in regulation and lack of a moat, I decided to sell my position in HIMS a couple of days ago. HIMS is still a great company without the injectibles, but that seems to be the main driver of stock prices recently. As always, I could be totally wrong!
My thoughts are that whether or not any of these drugs are on the shortage list may not have a significant impact on HIMS business. Are existing customers going to stampede the exits? I tend to doubt it.
I have only a very small position and I have quite a bit of research yet to do. I admit, I’ve been a bit lazy as I felt no urgency, but I would assume that the next big issue for HIMS with respect to their weight loss business is how do they acquire customers in the first place? Do they advertise or otherwise make it widely known that they offer an alternative for the drugs on the shortage list? I don’t really know, but I would think that the manner in which they expand their customer base is pretty relevant.
What percentage of their revenue is attributable to weight loss therapy? And it is a therapy, not just an Rx isn’t it? Is there not associated counseling, meal planning and so forth?
I admit, I have more questions than answers, but my gut tells me that the market reaction is overblown. I expect the stock will recover . . .
But then there’s a looming government shutdown, so who knows what’s coming?
It looks like HIMS advertises injectables for compounded semaglutide, Ozempic, and Wegovy. They’ve said they were working on getting compounded Tirzepatide before, so it may impact that aspect.
They also offer four different oral/pill forms of weight loss drugs,
https://www.hims.com/weight-loss
That’s a good find that Ro started offering branded Zepbound through their platform,
https://ro.co/weight-loss/zepbound/
Seems like Ro is a more serious competitor than I assumed before as it seems like their private valuation is 7B.
The margins on the GLP products are a bit lower as HIMS is scaling the production, but it’s still at 79% gross margin overall. They benefit from owning the pharmacies as part of their business.
@brittlerock I believe they said growth without any GLPs would have been 40% this quarter. I haven’t backed out the numbers though to calculate what percentage GLPs make up. The rest of the business seems to be doing well, but if that other side of the business growth rate drops it could be cause for concern.
This was just posted on X - HIMS is reducing their pricing, most likely due to the competition.
Compounded GLP-1: Now starting at $165/month (down from $199/month)
Oral weight loss kit: Now starting at $69/month (down from $79/month)
This should be interesting.