Hims & Hers Health (HIMS) has blazed a red-hot streak, helped by the growing popularity of weight-loss drugs. But after a massive rally sent Hims stock catapulting more than 200% over a month, its future now looks as uncertain as its semaglutide-making days.
The compounding pharmacy has gained notoriety over the last few years for its role in making less expensive versions of semaglutide, the chemical backbone behind Novo Nordisk's (NVO) diabetes and obesity drugs Ozempic and Wegovy.
↑ X NOW PLAYING The Weight-Loss Drug Market Is Hot. Which Medical Stock Will Win The Battle For Supremacy?But the Food and Drug Administration has determined semaglutide is no longer in shortage, meaning Hims and other compounders will soon have to stop making it. This shift will rattle the entire industry, says Jayne Hornung, chief clinical officer for health care technology firm MMIT.
"This is going to cause some of the compounding pharmacies to close, but hopefully they have a good business model and they have expanded" to other products, she told Investor's Business Daily. "This was a great revenue source for them, but it can't be their only."
Hims stock hit an intraday record high at 72.98 on Feb. 19, skyrocketing about 203% over the first few weeks of the year. From that high point, shares crashed spectacularly, falling about 45% over the course of five days. In the wake of that swan dive, Hims stock has marched ahead almost 11% as of midday trades on Thursday.
The popularity of weight-loss drugs can't be overstated.
Wegovy gained FDA approval in June 2021. Just nine months later, Wegovy hit the shortage list. Ozempic joined it five months later. The move opened the door for compounders like Hims & Hers Health to fill the semaglutide gap.
Since then, Hims sales and stock price have climbed astronomically. The company's sales nearly doubled in 2022, soaring 94%. In 2023 and 2024, sales rose a respective 65% and 69%.
But compounding pharmacies will have to stop making knockoff versions of semaglutide in April or May, depending on how they're structured. So, they'll have to pivot.
Hornung, of MMIT, compares the weight-loss drugs market to hormone replacement therapy, or HRT. Many compounding pharmacies have moved into the hormone replacement therapy space, focusing on different doses that avoided side effects for some patients, and gels vs. creams.
"It's more of a boutique, high-touch form of medicine than we're used to today," she said.
This is where Hims stock could retain some of its strength.
Hims guided to $2.3 billion to $2.4 billion in sales this year, including $725 million from weight-loss drugs that mimic the GLP-1 hormone. That means Hims expects drugs like semaglutide to bring in about 31% of sales this year, up from 20% in 2024.
The company's current GLP-1 drug is semaglutide. But Hims & Hers expects to add liraglutide to its portfolio this year. Liraglutide is a type 2 diabetes treatment that Novo sells as Victoza.
Hims also launched an oral weight-loss regimen in late 2023. These pills combine bupropion, metformin, topiramate, vitamin B12, and naltrexone. Three of the four are treatments for other diseases that are used off-label for weight loss. Naltrexone is an obesity treatment that privately held Currax Pharmaceuticals sells under the brand name Contrave.
But where Hims stock took its biggest hit was with its semaglutide guidance. The company won't be able to offer the same doses as Novo Nordisk after the first quarter. Instead, it will focus on personalized doses.
This is very similar to the HRT market, MMIT's Hornung says. The current weight-loss leaders, Wegovy and Zepbound from Eli Lilly (LLY), are infamously tied to gastrointestinal side effects, including nausea and diarrhea. Smaller and incremental doses could help avoid those, compounders argue.
Tirzepatide, the active ingredient behind Zepbound and diabetes drug Mounjaro, was removed from the shortage list last year.
"There's a tremendous amount of personalization with these medications with regard to actual goal weight loss," Hims Chief Executive Andrew Dudum said on the company's Feb. 24 earnings call. "No individual body is the same. No individual person has the same ideal health outcomes."
Still, Hims stock fell by double digits the day after reporting its fourth-quarter earnings. The compounder earned 11 cents per share on $481.1 million in sales. Earnings skyrocketed 1,000% year over year while sales jumped more than 95%. Both metrics easily beat expectations.
BTIG analyst David Larsen expects Hims to easily navigate the FDA's decision through personalized semaglutide.
Eventually, though, the prices of all weight-loss drugs will have to come down, making it more difficult for compounders to compete with less expensive options.
Under the Inflation Reduction Act, the Centers for Medicare and Medicaid Services will soon negotiate lower prices for Novo's semaglutide-based drugs. Those new prices will hit the market in 2027. That will undoubtedly prompt a price cut from rivals trying to stay competitive.
The new Trump administration could also play a role here. Dr. Marty Makary, President Donald Trump's pick to lead the FDA, is the chief medical officer of telehealth company Sesame. Sesame connects people with doctors to access low-cost drugs, including weight-loss meds.
"We believe Dr. Makary will have influence over the enforcement of semaglutide compounding and personalization efforts," Hims CEO Larsen said in a client note. "Since Dr. Makary has an interest in Sesame, we believe his views on compounded GLP-1s may be different from those of the current FDA administrators."
Notably, despite the recent fallout, Hims stock still has perfect Relative Strength and Composite ratings of 99, according to IBD Digital. This means shares rank in the top 1% of all stocks when it comes to 12-month performance and fundamental/technical measures.
Hims shares also rank first on the IBD 50 list of elite growth stocks.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
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