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Hims CEO Andrew Dudum did his best Monday to reassure investors that the digital health startup’s growing business prescribing compounded weight loss drugs won’t be stymied by better access to brand-name shots.
Despite signs that supply shortages of GLP-1s may be easing, Hims is doubling down on copycat versions, striking a deal to buy another compounding pharmacy to bolster its business.
Dudum told investors during the company’s second-quarter earnings call Monday that Hims’ broad portfolio of weight loss treatments “is very durable, and this will exist and expand beyond the shortage dynamics.”
Hims, best known for prescribing drugs online for conditions like erectile dysfunction and hair loss, started providing treatment for weight loss in December with oral medications and expanded to offering compounded versions of the GLP-1 semaglutide in May. Shares of Hims soared almost 30% on that move. Compounded drugs can be cheaper than brand-name drugs but aren’t tested or approved by the FDA.
Yemi OkupeSo far, it’s been a booming business for Hims. CFO Yemi Okupe said during the earnings call Monday evening that it’s signed up 100,000 customers to its weight loss program, which is generating annual recurring revenue of $100 million.
That fast growth led Hims to hike its revenue guidance for the year to as much as $1.4 billion, from previous guidance of about $1.2 billion. It now expects to report 2024 adjusted EBITDA of $140 million to $155 million, an increase from $120 million to $135 million.
But there are questions as to just how sustainable Hims’ weight loss success is. The FDA allows compounded versions of brand-name drugs when there’s a supply shortage. Normally, pharmacies can’t make large amounts of copies of commercially available drugs.
And the shortages may be nearing an end. Last week, the FDA listed Eli Lilly’s weight loss drug Zepbound and diabetes drug Mounjaro, both of which contain the main ingredient tirzepatide, as “available” in all doses, though the drugs remain on the agency’s official shortages list. The change came a day after Lilly CEO David Ricks told Bloomberg that the drugs would come off shortage imminently, sending Hims’ shares down 16%.
Hims doesn’t yet prescribe compounded versions of Lilly’s drug, and some doses of Novo Nordisk’s competing drug Wegovy remain in shortage. But even if supply opens up, Dudum said he expects that Hims legally can continue to prescribe compounded GLP-1s through an exemption.
“This is an exemption for which we operate the entire business under and have for the last six or seven years, and there’s really established precedent where everybody in the market really respects the need of personalization and realizes that often these personalized dosages augment what is commercially available and are not directly cannibalizing large pharma,” Dudum said.
Novo and Lilly each have sued several businesses for how they marketed compounded GLP-1 drugs, but Dudum said there are few examples of pharma companies going after “legitimate, clinically necessary compounding.”
Hims will pay $31 million for the pharmacy it has agreed to buy, and the deal was made in July, according to the company’s financial filing. The transaction “further enhances the durability of our supply chain for compounded GLP-1s,” Dudum said. (Hims already owns a 503A compounding pharmacy.)
At this point, most of Hims’ weight loss revenue seems to be coming from patients on oral medications. Truist analysts estimated that compounded drug revenue generated about $12 million in revenue for Hims in the second quarter. That’s expected to increase as Hims expands the offering nationwide from about 30 states today.
The company also plans to expand its weight loss drug offering to include compounded tirzepatide, generic liraglutide, as well as branded medications “when supply allows.” It’s betting that the variety of weight loss medications as well as personalized care and dosages will keep customers coming.