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On Tuesday, BofA Securities maintained an Underperform rating and a $22.00 price target on Hims & Hers Health, Inc. (NYSE: HIMS). The company announced it would begin offering the branded tirzepatide, known as Zepbound, from Eli Lilly (NYSE:LLY), and generic liraglutide on its platform. Previously, Zepbound had been listed as out of stock on the Hims & Hers website.
BofA Securities commented on the update, noting that while the addition of Zepbound provides more treatment options for customers, it is not expected to significantly impact Hims & Hers’ sales. According to BofA Securities, the margins from branded drugs like Zepbound are substantially lower than the current gross margins of approximately 80% that Hims & Hers typically enjoys. The firm referenced the example of retail pharmacies such as CVS and Walgreens, which report minimal gross margins on GLP-1 drugs, suggesting that margins for Hims & Hers could be even lower than the 2-4% typically seen for branded drugs sold through mail pharmacies.
The analyst firm indicated that the decision to offer Zepbound might be more about consumer choice than a significant revenue driver, as the expected volume and revenue from Zepbound sales are projected to be immaterial, even over an extended period. BofA Securities highlighted that the price point for Zepbound on the Hims & Hers platform, currently at $1,899 per month, is significantly higher than the approximately $500 per month through LillyDirect, making it unlikely that consumers would choose Hims & Hers for this purchase.
The announcement of Hims & Hers selling generic liraglutide was noted as more pertinent. BofA Securities pointed out that generic liraglutide has had limited market success but monitoring its launch on Hims & Hers could be relevant over the next year. Success with liraglutide could validate the strength of the Hims & Hers brand, according to the firm.
In summary, BofA Securities reiterated their Underperform rating on Hims & Hers, with the news of Zepbound’s availability on the platform considered to be of little material significance to the company’s financial outlook.
In other recent news, Hims & Hers Health has announced a partnership with Eli Lilly to sell its diabetes and weight-loss drug, Zepbound, on its telehealth platform. This move signifies a significant expansion of the company’s pharmaceutical offerings, including both branded and generic versions of key diabetes medications. Hims & Hers now offers customers access to branded tirzepatide, the active ingredient in Lilly’s Zepbound, as well as generic liraglutide, enhancing their product lineup. Despite the positive reception from investors, BofA Securities analyst Michael Cherny maintained an Underperform rating, citing concerns over the material impact of selling branded drugs due to lower margins. Cherny also highlighted the potential risks associated with semaglutide, a crucial component of Hims & Hers’ sales, which could be removed from the sales model. The FDA’s recent update on enforcement timelines for drug compounding offers some regulatory clarity, extending the discretion for semaglutide compounding until 2025. Hims & Hers’ shares have reacted positively to these developments, reflecting investor confidence in the company’s strategy to diversify its offerings. The company’s financial performance and competitive standing will be closely watched as it navigates these regulatory changes.
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