Shares of healthcare company Hims & Hers Health (HIMS) surged on Thursday after a Texas court temporarily paused a case involving the FDA’s decision to end the shortage status of Eli Lilly’s (LLY) diabetes and weight loss drug tirzepatide. The FDA is now reviewing its decision, which means companies like Hims & Hers can keep making alternative versions of the drug for now.
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A report from the Outsourcing Facilities Association said that patients are still having trouble getting branded versions of tirzepatide, like Lilly’s Zepbound and Mounjaro. As a result, demand for compounded (custom-made) versions has remained high, which has led to a growth in their production in order to meet the medical needs that brand-name drugs can not fulfill.
Both the FDA and the association agreed to keep the case on hold for now, with an update due by December 19 or earlier if the FDA reaches a new decision. This all started when the FDA said in October that tirzepatide was no longer in short supply, which sparked the lawsuit. Normally, compounding brand-name drugs is only allowed if there’s an official shortage of the original product.
A Win that HIMS Stock Needed
There is no doubt that today’s news about compounded drugs was much needed by Hims & Hers. In fact, shares recently plunged after Amazon (AMZN) launched its Amazon One Medical Pay-per-visit telehealth service. This worried many investors and analysts, including those from Citi, who said it directly competes with Hims by targeting cash-pay patients who value affordability and convenience.
Amazon’s service offers treatments for common health, beauty, and lifestyle issues, like hair loss, with upfront pricing as low as $16/month for Prime members. Unlike Hims’ subscription model that bundles provider visits, Amazon separates consultation fees, which makes its pricing more attractive for those who need longer prescriptions but fewer visits.
Citi sees this as a significant threat to Hims’ core business and emphasized the importance of Hims’ focus on personalized treatments through compounding to stay competitive.
Is Hims and Hers Stock a Buy?
Turning to Wall Street, analysts have a Hold consensus rating on HIMS stock based on four Buys, seven Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 200% rally in its share price over the past year, the average HIMS price target of $24 per share implies that shares are fairly priced.
