💉 Hims & Hers' peptide prescription

Hims’ margins, not unlike many of its customers, are getting slimmer. Can peptides help it get back to profit growth? 

Both Eli Lilly and Novo (formerly known as Novo Nordisk) reported sales numbers that beat estimates and hiked their outlooks. Earlier this year, both companies released oral GLP-1s that have by all accounts been flying off the pharmacy shelves without cannibalizing sales from its legacy injectable products. 

Over the years, Lilly and Novo have increasingly sold the drugs through direct-to-consumer channels, often through partnerships with telehealth companies like Hims & Hers. 

Hims used to sell knock-off versions of Novo’s injectable drugs, which were produced in compounding pharmacies (some owned by Hims, others through partnerships) and officially marketed as bespoke treatments. After more than a year of threats and a brief legal battle with Novo, Hims no longer sells those high-margin knock-offs. Now, it offers Novo and Lilly’s branded drugs on its platforms, which carry significantly lower margins. 

The company’s profits have taken a hit as a result. On Monday it reported a surprise loss for the quarter along with sales and subscriber count numbers that missed expectations. It also cut its outlook for the year. 

“We had, as you all saw in the last quarter or two, just a massive transformation of the business, moving from the compounding offerings to the partnership with Novo,” Hims CEO Andrew Dudum told analysts on Monday. 

Hims also said it will begin offering some unapproved peptide treatments this month after US regulators eased restrictions. Dudum said the new offering will include glutathione, NAD, sermorelin and B12, with BPC-157 and TB-500 potentially coming later, subject to regulatory approval.

For the unacquainted, peptides are under-studied supplements, usually injectable, that have grown in popularity in recent years because of their purported health benefits. As of now, consumers are bypassing the FDA by buying vials of peptides labeled “for research use only” and then conducting that research on themselves. 

Importantly for Hims: the company can sell these treatments while controlling much of the supply chain, from manufacturing to distribution. While it’s unclear how big the market truly is, peptides could offer the kind of attractive margins Hims enjoyed when it was selling compounded GLP-1s.

Hims has already acquired a peptide manufacturing facility in Menlo Park, California, and says it's seen a “tremendous amount of excitement” from customers on its waitlist, per Dudum. But the company isn't expecting the new business to contribute meaningfully to revenue in the current quarter.

The Takeaway

Hims does best when it behaves like a drugmaker, selling its own products versus made in an industrial pharmacy rather than serving as the sleek, neutral colored liaison between you and an actual pharmaceutical company. 

Selling compounded GLP-1s was very lucrative for Hims. Peptides could give it another shot at that business model. But the company is once again betting on a category where the regulatory ground is still shifting beneath its feet.

“In healthcare, whoever owns the customer relationship wins,” Dudum said. 

— J. Edward Moreno

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That’s how much consumer prices in the United States rose month over month, according to the most recent reading from the Bureau of Labor Statistics released Tuesday, coming in hotter than economists expected. 

The agency was unable to give a year-over-year figure because there was no reading last October due to the government shutdown. The New York Times calculated prices rose about 4% year over year, which is double the Federal Reserve’s inflation target. The central bank is widely expected to raise rates when it meets next month. 

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