Hims ($HIMS) – Short Report – June 29, 2024
There was a short report published on Hims this past week. The piece centered on the company’s push into GLP-1 weight loss drugs. The broad issues highlighted were its ease of prescribing these medications and the quality of its supply chain partners. It cited some patients who had grown ill from taking its prescribed medications, but as many pointed out, it neglected to mention these consumers took impermissible dosages. It’s disingenuous that this tidbit wasn’t included by the publisher and I do think the short report was intellectually dishonest. Still, it did highlight some of the issues that I see with the HIMS bull case that I wanted to discuss.
Regulation will remain a key risk for Hims. Current FDA loopholes allow for GLP-1 knockoffs to be manufactured and produced, but that could quickly change if regulators see any issues with this and/or are motivated to do so. GLP-1 is a key piece of its future growth engine. Not the only piece… but the most incremental piece by far. It’s worth noting that GLP-1 producers like Eli Lilly are very deep-pocketed, have deep benches of lobbyists and will naturally try to block players like Hims from selling alternatives. This has not yet resulted in Hims or other knock-off players pausing sales. It’s still possible.
At the same time, I still think Amazon is the biggest threat to what I view as a moat-less business. At the end of the day, this company sells men’s and women’s health medicines online. It doesn’t do anything that Amazon Pharmacy can’t eventually do; it doesn’t boast the logistics network that Amazon does; it doesn’t have countless other value-add products to cross-sell into an overarching subscription to drive differentiation. It has none of that. Amazon has essentially killed once powerful pharmacy chains (check out the price chart on Walgreens WBA). It has effectively killed Teladoc and other telehealth players too. These companies had larger subscriber networks, more data, larger revenue bases and larger budgets than Hims. I think it’s somewhat likely for Amazon to dismantle this business model too.
I hope I’m wrong. I hope shareholders can tell me “I told you so” in a few years. I’m just not confident in this playing out. There are better places to invest, in my opinion. Based on highly popular demand, I will begin covering these earnings reports going forward.
