After a dramatic legal battle with Novo Nordisk (NVO), U.S. low-cost healthcare services provider Hims & Hers (HIMS) late last month began selling approved versions of the Danish pharma giant’s GLP-1 medications. Analysts see short-term pressure but potential long-term gains from the move, which marks the company’s transition from compounded to branded weight-loss drugs.
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Hims & Hers Makes GLP-1 Pivot
GLP-1, or glucagon-like peptide-1, is a hormone that manages blood sugar and appetite and plays a key role in obesity and diabetes management medications.
Hims & Hers, which launched in 2017 as a telehealth company focused on men’s health issues, has recently made headlines by selling compounded semaglutide (the ingredient in Novo Nordisk’s popular weight-loss drug, Wegovy) and personalized oral medication kits containing non-GLP-1 drugs like bupropion and metformin.
As a result, the company attracted buyers seeking cheaper versions of the compounded weight-loss medication. However, Hims & Hers on March 9 announced a strategic shift for its U.S. weight loss business by limiting sales of compounded semaglutide and instead focusing on providing customers with access to GLP-1 medications approved by the U.S. Food and Drug Administration.
“By aligning [our] domestic and international models in weight loss, Hims & Hers will become the largest global consumer health platform for access to more affordable, approved medications,” Hims & Hers noted in a statement.
Analyst Sees Gains from International Expansion
However, with the company’s shares down about 40% year-to-date, questions remain about whether the bet will pay off.
This week, Bank of America analyst Allen Lutz, who earlier forecast a 31% drop in Hims & Hers’ GLP-1 franchise, returned with another gloomy prediction: GLP-1 contributions to Hims & Hers’ EBITDA could fall 50% this year alone.
Lutz trimmed his price target on HIMS from $23 to $21, implying about 8% upside. He also maintained his Hold rating on the stock. Despite his outlook, the five-star analyst also noted that his team now has a “slightly more optimistic” view of Hims & Hers’ international expansion.
Furthermore, Lutz noted that his team’s background research indicates that Hims & Hers has the potential to improve its margin over time by relying on the volume of its branded GLP-1 medication.
“Ultimately, the shift to branded may create a more sustainable platform, but with a margin headwind near-term as recent investments need to be repurposed or wound down,” Lutz explained.
‘Long-Term Tailwind to the Story’
Similarly, Canaccord analyst Maria Ripps recently reaffirmed her Buy rating on HIMS stock, noting that while the partnership with Novo Nordisk may bring short-term revenue headwinds, there is a “long-term tailwind to the story.”
Ripps further argued that Hims & Hers’ stock price underestimates the value of the company’s growing telehealth platform, subscriber base, portfolio of treatments, and increasingly durable GLP-1 offerings.
Is Hims & Hers Stock a Good Buy?
Across Wall Street, analysts generally recommend caution on Hims & Hers’ shares as they have a Moderate Buy consensus rating on the stock. This is based on four Buys and 10 Holds issued over the past three months.
However, the average HIMS price target of $26.36 implies about 36% upside from current trading levels.
