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Surprise quiz: What is the most successful anti-obesity drug in the last 12 months? The obvious answer would be Novo Nordisk or Eli Lilly. But that would be wrong.
The two companies that dominate the class of GLP-1 weight-loss drugs have done well. But Hims & Hers Health, a telemedicine company that began selling compounded – or copycat – versions of those drugs, has done even better. Shares of the San Francisco-based startup have risen more than 120 percent since last August. Eli Lilly has gained 67 percent and Novo has gained 44 percent.
Admittedly, Hims, which started out selling drugs for erectile dysfunction and hair loss, is a much smaller company with a market value of less than $3.5 billion. Its shares also came from a low level. Eli Lilly is worth $876 billion, while Novo is a company valued at over 3 trillion krone ($443 billion).
Nevertheless, the sharp rise in Hims’ share price underscores that explosive demand combined with a supply shortage of Wegovy, Ozempic, Zepbound and other GLP-1 drugs has created tremendous business opportunities for manufacturers and sellers of prescription drugs.
Prescription drugs are not generics. They are copies. They are made from the same basic ingredients as brand-name drugs, but by a specialty pharmacy rather than a pharmaceutical company. They do not have approval from the Food and Drug Administration. And as rival digital health start-up Ro explains in a disclaimer on its website, “they are also not required to undergo review for safety, effectiveness or manufacturing.”
However, they may be manufactured when there is a deficiency. This is the case with GLP-1 weight loss drugs, which mimic a hormone produced in the gut to suppress a person’s appetite and regulate blood sugar.
Hims was founded in 2017 and went public just four years later via a SPAC deal. The company has yet to turn a profit. Last year, it reported a net loss of $23.5 million on revenue of $872 million. The stock has traded below its initial price of $10 for most of 2021-2023.
But shares rose after the company announced in May that it would begin selling a version of Wegovy. This month, it followed up with news that it would buy a pharmacy to secure supply. Investors eagerly embraced the news. Demand for GLP-1 drugs seems insatiable. Hims’ version is much cheaper, with a starting price of just $199 per month, than the $1,000 or more you’d have to pay out of pocket for the brand-name version.
This is a controversial issue, with safety and efficacy being the main concerns. Both Novo and Lilly have filed numerous lawsuits to stop the sale of compounded versions of their drugs. Then there’s the question of what happens when the shortage of brand-name drugs eases. Investors who bid up the stock this year could be left with the cost.
