Shares of Hims & Hers (HIMS 3.45%) fell as much as 8% on Tuesday and closed at their low for the day after news broke that Eli Lilly (LLY 1.96%) lowered the price for a key weight loss drug.
Eli Lilly's shot at Hims & Hers
The big news on Tuesday was an announcement that Eli Lilly will sell the weight loss drug Zepbound through its direct-to-consumer website at a 50% discount to the previous price. A 2.5 milligram single-dose vial will cost $399 for a month's supply, while a 5 milligram dose will be $549 per month.
This is the first name-brand GLP-1 weight loss treatment to be this inexpensive without using the shortage exemption Hims & Hers uses to sell a compounded version of the drugs. Today, investors think that's a threat to a key growth avenue for the company.
Good news for Hims & Hers
As much as the market sees this as bad news, I think it's the opposite. Hims & Hers is just as much a customer acquisition platform and distributor of name-brand products as it is a compounder of treatments under its own brand name. So, the company would likely be happy to offer the Zepbound treatment at this price point.
The GLP-1 Hims & Hers currently makes sells for $199 per month, so it's still significantly cheaper than this offering. And we are only a few months into Hims & Hers even offering a GLP-1, so this won't be a big loss for existing sales, even if some customers move to Eli Lilly's direct site.
The market reacted strongly to this news today, but I don't think it will have much impact on Hims & Hers growth long-term.
