Hims & Hers Health stock gains on Eli Lilly partnership

Investing.com -- Shares of Hims & Hers Health Inc. (NYSE: HIMS) climbed 8% after announcing its plan to sell Eli Lilly (NYSE:LLY)’s diabetes and weight-loss drug Zepbound on its telehealth platform. This move positions Hims & Hers alongside competitors like Teladoc (NYSE:TDOC) and LifeMD in offering the medication ahead of restrictions on compounded drugs.

The company’s stock rise reflects investor optimism following the news that Hims & Hers will provide both branded versions of Lilly’s tirzepatide, the active ingredient in Zepbound, and generics of Novo Nordisk (NYSE:NVO)’s diabetes drug, liraglutide. This expansion comes as Hims & Hers previously only offered less expensive versions of Novo’s weight-loss drug Wegovy.

In a statement, Hims & Hers expressed their commitment to offering more treatment options that cater to customer needs, now including access to generic liraglutide and branded tirzepatide through their platform.

Despite the positive market response, BofA Securities analyst Michael Cherny maintained an Underperform rating with a price target of $22.00 on Hims & Hers stock. Cherny remarked, "We do not expect HIMS to sell a material amount of Zepbound on its platform given our previous conversations with the company and the relative margin profile of branded drugs." He also noted that the margins from branded drugs are substantially lower than the current gross margins of approximately 80% that Hims & Hers generates and that the decision to sell branded tirzepatide is likely aimed at providing more consumer options rather than significantly boosting volume and revenue.

Cherny further explained that the announcement of selling generic liraglutide could be more relevant, as its commercial success has been limited due to various factors. He suggests that the success of Hims & Hers in selling liraglutide could be a significant milestone and a testament to the strength of the company’s brand. However, he views the news regarding Lilly’s Zepbound as immaterial to the company’s financial outlook.

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