By Josh Nathan-Kazis

The rapid rise of GLP-1 weight-loss drugs has come with a raucous side show -- a wave of copycat drugs unbound by drug patents. The knockoff surge was led by Hims & Hers Health, the telehealth firm that began selling the drugs last spring.

Cheap, compounded versions of the weight loss drugs have been a cottage industry for a few years, but it was the arrival of Hims, a multibillion-dollar public company, that brought the knockoff medicines into the mainstream. Hims stock soared in the months that followed, while the GLP-1 patent holders, Eli Lilly and Novo Nordisk, saw their stocks come under significant pressure.

Now the whole shake-up is coming to an end, even quicker than it began. And Hims shareholders could be left in an unhealthy state.

U.S. drug laws allowed compounding pharmacies to manufacture semaglutide and tirzepatide, the GLP-1 drugs sold by Novo Nordisk and Eli Lilly, as long as they were considered to be in shortage. The Food and Drug Administration recently declared an end to the shortages, though, meaning the compounding pharmacies need to stop making the drugs in bulk.

The abrupt end to the copycat business isn't a surprise; the GLP-1 shortages were always bound to end. But in the interim, Hims & Hers spent untold millions ramping up its weight-loss business, mounting a marketing blitz that culminated with a minute-long Super Bowl ad in February.

Now that the products are on their way out, Hims & Hers faces a dilemma -- justifying a stock price that soared on the massive opportunity in weight loss. Shares peaked near $73 in February. Today, Hims stock is trading around $41, with a market value of roughly $9 billion.

Before the company's pivot to weight-loss, shares of Hims traded around $15, for a market value of $3.1 billion. Without the ability to sell compounded semaglutide in bulk, those $6 billion in market value gains are at risk, as the company is forced to look elsewhere for growth, including older weight-loss treatments.

Hims says it still expects overall weight-loss sales of "at least $725 million" in 2025, or 30% of its overall projected revenue. The company wouldn't say what that same figure was in 2024. What it has said is that GLP-1 sales were $225 million last year. Most of that amount seems likely to go away in 2025 with the shortages ending.

Hims executives had repeatedly said the company would sell personalized doses of GLP-1 drugs to a large number of patients after the shortages ended, an exception allowed under laws that regulate compounding.

In late February, though, Hims and Hers seemed to describe that opportunity as far smaller. "Personalized semaglutide dosages will supplement these core offerings for the subset of consumers for whom it is a clinical necessity," Chief Financial Officer Yemi Okupe said on the company's Feb. 24 earnings call. Shares fell 22.3% the following day.

A Hims' spokesperson didn't directly address questions about the change in strategy , instead directing Barron's to a post from CEO Andrew Dudum about the company's opportunity in personalized medicine.

On the call, Okupe said Hims' "steady state weight-loss offering" would be "primarily composed" of generic weight loss pills -- not GLP-1 medicines -- along with a generic version of an older GLP-1 injection called liraglutide which it hopes to launch later this year.

In other words, the company plans to accelerate its weight-loss sales with less effective drugs. That could prove challenging.

A company spokesperson told Barron's that continued difficulty in getting GLP-1 drugs could make Hims' treatments necessary for some patients.

Beyond that, Okupe has said Hims' weight-loss consumers "value the benefits the platform brings beyond the medication."

Hims is playing the long game. "Our capabilities allow us to be a leader today, while ongoing investments will position us to serve millions more Americans once semaglutide is off-patent in the coming years," the spokesperson said. Novo Nordisk expects its Wegovy patent to expire in 2032.

Hims has reason to stay focused on weight loss. It has spent heavily on the opportunity. It paid an estimated $16 million for the Super Bowl ad that seemed targeted squarely at Robert F. Kennedy Jr., the new secretary of the Department of Health and Human Services, casting its cheaper GLP-1 weight loss offering as a Trump-era answer to high healthcare costs.

Hims' overall marketing costs were up sharply in 2024, to $678.8 million from $446.6 million, while its total operating expenses climbed nearly 50% to $1.1 billion. The company also bought an FDA-regulated compounding pharmacy in the fall, called MedisourceRx, for an undisclosed sum.

Lilly and Novo, meanwhile, are targeting the weight-loss customers that have used Hims and other telehealth firms. In new ads, Lilly and Novo both call out compounded treatments as unproven. This past week, Novo also launched a new website selling Wegovy directly to cash-paying customers for well below the drug's list price. Lilly has a similar offer for Zepbound. Meanwhile, insurance coverage for both drugs is expanding, further reducing the out-of-pocket cost for many patients.

Aside from the GLP-1 mess, Hims' core business selling generic treatments for hair-loss, erectile dysfunction, and other conditions looks healthy. Excluding GLP-1 sales, its revenue was up 43% in 2024 to $1.2 billion, and the semaglutide surge has likely grown the company's brand recognition.

But at the recent price of $41, investors are pricing in much more than the core business. Wall Street expects Hims to grow earnings 9% this year to 58 cents a share, according to FactSet, giving the stock a price-to-earnings ratio of 70 times. It's a pricey bet built on very optimistic scenarios.

If the weight-loss business slows, Hims investors could be left with a much slimmer stock.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 06, 2025 03:00 ET (08:00 GMT)

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