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Shares of Hims & Hers Health (NYSE: HIMS), the online, direct-to-consumer pharmacy, were pulling back this week as investors feared that pharmaceutical companies could start encroaching on its territory.
In particular, Eli Lilly (NYSE: LLY), the maker of popular GLP-1 drugs like Mounjaro, said on Tuesday that it would discount single-dose vials of its Zepbound GLP-1 weight loss drug in response to high demand.
The news was seen as a competitive threat to Hims & Hers, and a number of other pharmacies, and shares of Hims & Hers fell 9.2% on Tuesday and lost 12% for the week as of Thursday's close.
Competition is heating up
Big pharma companies are starting to go direct-to-consumer with drugs like Zepbound, and that could be a problem for Hims & Hers.
Lilly's discount seems to be a competitive move to push back on GLP-1 compounders like Hims & Hers or those who sell off-brand versions of the GLP-1 drugs. Citigroup predicted the move would take market share from competitors like Hims & Hers, which launched a new weight loss program featuring GLP-1 drugs last December.
How much of a setback is this for Hims & Hers?
Hims & Hers tends to focus on lifestyle treatments like antidepressants, weight loss, birth control, and hair loss, but its competitive advantage has never been fully clear.
The company has used clever advertising and benefits from the convenience of at-home ordering and shipping. It's also growing quickly, with revenue up 52% in the most recent quarter.
However, Lilly's move shows that pharma companies easily undercut telemedicine platforms like Hims & Hers, making it look like a middleman. The Zepbound move alone shouldn't do much damage to Hims & Hers, but if this type of competition becomes a pattern, it could be a big risk for the growth stock.
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