BofA views news of Lilly selling Zepbound through Ro as ‘mixed’ for Hims & Hers

BofA analyst Allen Lutz notes Ro Health, a direct competitor to Hims & Hers (HIMS), announced that the company is working with Eli Lilly (LLY) to offer access to Zepbound single-dose vials through the Ro platform. The firm views this morning’s news as “mixed,” noting that on the positive side, the announcement may be validating the direct to consumer channel and indicates that drug manufacturers may be more willing than previously expected to leverage such pharmacies. However, on the negative side, selling branded drugs would make Ro or Hims effectively a drug distributor and retail pharmacy, and the margin profile for selling the branded drug would be much lower than the compounded versions they currently offer. The firm, which believes the news validates the strength of the DTC model as a new distribution channel while acknowledging that the economics of a brand distributor/pharmacy are less appealing, maintains its Underperform rating on Hims shares.