Hims & Hers says its weight-loss business can grow as US market changes

Hims & Hers Health (HIMS.N) faces challenges in its weight-loss drug business as the FDA lifted semaglutide shortage restrictions, ending sales of compounded versions and causing HIMS shares to fall 14%. Analysts question Hims' strategy of selling "personalized" dosages and its refusal to work with insurers, suggesting it could miss its $6.5 billion revenue target by 2030 as competitors like CVS and Cigna offer lower-cost, insured alternatives; furthermore, Hims' continued sales of compounded semaglutide could jeopardize its partnership with Novo Nordisk.

Analysis

Hims & Hers Health (HIMS.N) confronts a significant strategic inflection point in its weight-loss business following the U.S. Food and Drug Administration's (FDA) decision to end allowances for compounded semaglutide sales by May 22, as supply shortages of drugs like Novo Nordisk's Wegovy have eased. This regulatory shift has contributed to a 14% decline in HIMS shares in the week post-deadline and an approximate 18% drop from its February peak. Hims is attempting to navigate this change by offering "personalized" dosages of Wegovy, starting around $165 per month, alongside liraglutide and branded versions of Wegovy and Eli Lilly's Zepbound, leveraging rules for clinical modifications. However, analysts, including Michael Cherny of Leerink, express skepticism regarding the legitimacy of these "personalized" offerings and question whether Novo Nordisk will permit their continued sale, especially given Novo's stance against mass-produced copies and its active litigation against companies selling knockoffs. A key point of contention is Hims's stated refusal to work with insurers, a strategy contrasting with competitors like Ro and Noom, and potentially disadvantageous as major players like CVS Health and Cigna introduce insurer-backed strategies that could diminish the cash-pay market. Leerink's Cherny cautions that expanding insurance coverage for these drugs could stymie Hims's growth targets, including its ambitious $6.5 billion revenue goal by 2030, especially if customers opt for insured alternatives. Hims CEO Andrew Dudum defends the cash-pay model, citing high insurance deductibles for many consumers and targeting this "under-insured" segment, alongside plans for new personalized products via a recently acquired diagnostic lab and expansion into new treatments (low testosterone, menopause) and markets (UK, Europe). Nevertheless, Hims's continued sale of compounded semaglutide, which began in May 2024 and is priced significantly below branded Wegovy (e.g., $99/month vs. ~$1,000 list price), could jeopardize a new partnership granting its subscribers access to Novo Nordisk's NovoCare direct-pay pharmacy, potentially inviting litigation or agreement termination, according to Truist analyst Jailendra Singh. While analysts forecast Hims's 2025 revenue at $2.4 billion (up from $1.5 billion in 2024) with earnings of $0.65 per share, and Hims projected at least $725 million from GLP-1 drugs in Q1 2025, the evolving competitive landscape, underscored by Cigna's $200 co-pay for branded Wegovy and CVS Caremark making Wegovy a preferred drug, presents considerable headwinds to Hims's current model.

Key Decisions for Investors

• Investors should closely monitor potential regulatory actions from the FDA or legal challenges from Novo Nordisk concerning Hims's sale of 'personalized' semaglutide, which could significantly impact its weight-loss segment revenue.
• Evaluate Hims's ability to achieve its $6.5 billion revenue target by 2030 against the backdrop of increasing competition from insurer-backed weight-loss drug programs offered by CVS and Cigna, and the company's reluctance to engage with insurers.