In the battle for weight-loss supremacy, Hims & Hers Health has emerged as a dark horse candidate shaking up the market, first, with its knockoff drugs and, now, with a "groundbreaking" partnership with obesity kingpin Novo Nordisk.
The deal allows Hims to bundle a membership on its telehealth platform with Novo's branded obesity drug, Wegovy, for $599 a month.
Needham analyst Ryan MacDonald called the deal "groundbreaking."
Hims & Hers Health soared into the limelight at the height of an obesity drug shortage. The Food and Drug Administration allows compounding pharmacies to make knockoffs of branded drugs that are in short supply. Hims owns several. But the FDA determined the shortage for obesity drugs was over this spring. That meant Hims and other compounders could only make personalized doses of the branded drugs.
"The partnership alleviates investor concerns around HIMS' ability to hit its $725mm weight loss revenue guidance for FY25, making the company less reliant on generating revenue via its interpretation of the (compounding) personalization exemption in a post-shortage world," MacDonald said in a client note.
Hims & Hers Health's Start
San Francisco-based Hims & Hers Health was founded in 2017. The telehealth giant got its start peddling sexual health and dermatology products for men. In 2021 and 2022, Hims added dermatology products for women and mental health products. The following year, weight-loss drugs entered the picture.
As a result, Hims' revenue has skyrocketed. The company notched its first sales in 2020 at $149 million, according to FactSet. Sales grew nearly 10 times over the next three years, hitting $1.48 billion in 2024.
In the first quarter this year, Hims' sales skyrocketed 111% to $586 million, easily beating projections for $538.6 million. The company also reported 2.4 million subscribers, up 38% year over year. On average, each subscriber pays $84 a month, a marked increase from the $55 monthly fee subscribers paid in the first quarter of 2024.
This year, the company plans to add menopause and testosterone products. Analysts expect revenue to surge about 59% to $2.35 billion this year. The company recently reaffirmed its outlook for $2.3 billion to $2.4 billion in 2025, including $725 million in sales of weight-loss drugs.
In addition to the Novo deal for Wegovy, Hims sells Eli Lilly's obesity drug Zepbound on its platform. The company also sells liraglutide, the generic version of Novo's Victoza, as a weight-loss option, and has a suite of oral treatments. For patients with type 2 diabetes, Hims & Hers Health offers Novo's Ozempic and Lilly's Mounjaro.
Hims & Hers Health doesn't break out specific revenue sources, but says it has 47.5% market share of its four key specialties: dermatology, sexual health, weight loss and mental health. Better Help and Roman Health Ventures follow distantly at a respective 23.7% and 13.5%, according to a May presentation.
"HIMS estimates that it still only has single-digit penetration for its core conditions like sexual health, mental health and dermatology, and HIMS expects to launch testosterone and menopause support offerings later this year," BTIG analyst David Larsen said in a recent report.
Hims Stock Skyrockets
Shares have climbed 150% this year, as of midday Wednesday, riding the enthusiasm for its weight-loss offerings.
The company recently offered a lackluster view for the second quarter, but shares reversed from an early loss that day, rebounding more than 18%. For the June period, the company guided to $530 million to $550 million in sales, missing forecasts for $565 million.
Analysts say the projection is likely conservative.
Needham's Ryan MacDonald continues "to see the weight loss segment as a source of beat & raise momentum throughout the year."
Part of the challenge is that Hims & Hers Health is still transitioning patients who were receiving compounded versions of the commercially available products. Hims can no longer sell those. But it can make tailored doses for patients experiencing side effects, or set patients up with its Wegovy/membership bundle or other similar offerings.
"We believe this creates an attractive buying opportunity for investors as HIMS' expanding portfolio of weight loss offerings positions the company well to better retain and grow its base of subscribers in the category," MacDonald said.
BTIG's Larsen says Hims & Hers Health could continue collaborating with Novo Nordisk down the line. The company is seeking FDA approval for a weight-loss pill, the first of its kind.
Acquisition Bolsters Europe
Needham's MacDonald expects Hims to notch $6.5 billion in 2030 sales. Broadly, analysts call for $6.05 billion, according to FactSet.
To that end, Hims & Hers Health recently announced its plan to acquire Europe-based telehealth player ZAVA. The deal gives Hims notable scale in Germany and France, and its first market exposure in Ireland. The move also bolsters existing U.K. operations.
"Longer-term, ZAVA is expected to serve as a beachhead to expand across Western Europe," according to MacDonald, the Needham analyst.
He estimates adding ZAVA could expand Hims' total addressable market by $52.1 billion.
"While the healthcare ecosystem in the U.S. is quite unique relative to the rest of the world, HIMS management believes that consumer demand for personalized healthcare does not differ materially internationally," he said. "As a result, the company sees an attractive opportunity to use ZAVA as a starting point for replicating the HIMS model globally."
But Leerink Partners analyst Michael Cherny said ZAVA only had about $25 million in 2023 sales. This means the acquisition is more about strategy and less about adding a built-in base with revenue. It will be key to watch how fast Hims can grow the business from here.
"HIMS' ability to scale so far has been impressive — now let's see how having at least some semblance of a built-in international user base works across the pond," he said in a client report. "We note so far feedback is much more skewed doubting than believing on how easy/fast it will be."
Highly Rated Hims Stock
In addition to its strong upward trajectory, Hims stock is on one key list: the IBD 50. This list includes the top 50 growth stocks on any given day. Hims & Hers Health ranks fourth.
Shares have a perfect IBD Digital Composite Rating of 99 and a nearly perfect Relative Strength Rating of 98. This means Hims stock ranks in the top 1% of all stocks when it comes to fundamental and technical measures, and the top 2% of all stocks in terms of 12-month performance.
Hims stock is currently trading easily above its 50-day and 200-day moving averages, MarketSurge shows, though it remains well off its record high at 72.98, achieved intraday on Feb. 19.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
