Hims & Hers (HIMS) stock is sinking 20% today after Eli Lilly (LLY) unveiled significantly cheaper versions of its popular weight-loss drugs today. Additionally, the FDA last week hindered the ability of compounded drugmakers, including HIMS, to sell lower-cost versions of semaglutide, the weight-loss drug that has proliferated widely.

The news about the weight-loss drugs appears to have overshadowed the generally strong fourth-quarter financial results reported by HIMS yesterday after the market closed.

News About the Weight-Loss Drugs Is Pressuring HIMS Stock

Eli Lilly disclosed today that it had started selling 7.5 milligram and 10 milligram vials of Zepbound, its popular weight-loss drug, for $499 per month. That represents a discount of $150 compared to the injector pen versions of the drug that it sold previously.  Additionally, the drug maker has decided to reduce the price of its 2.5 milligram dose to $349 per month.

Hims sells semaglutide for $165 per month if patients pay for a 12-month supply of the drug in advance. Zepbound utilizes a different active ingredient, tirzepatide.  The latter drug has been found to be superior to semaglutide for inducing weight loss in multiple studies.

HIMS Will Be Hurt by the FDA's Decision

On Friday, the FDA declared that the shortage of the major weight-loss drugs had ended. As a result, companies, including HIMS, that offer compounded versions of semaglutide could be penalized for doing so. However, the agency disclosed that it would wait two more months before imposing the penalties.

Still, HIMS' CEO noted on the company's Q4 earnings call last night that the firm would have to move away from selling semaglutide.

HIMS' Overshadowed Q4 Results

The company reported that its Q4 revenue had jumped 95% versus the same period a year earlier to $481 million, versus analysts' average estimate of $471 million. The firm's free cash flow climbed to $59.5 million in Q4, up from $10.8 million in Q4 of 2023.

While we acknowledge the potential of HIMS, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than HIMS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ ALSO 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock

Disclosure: None. This article is originally published at Insider Monkey.