BofA Cautious on Hims and Hers (HIMS): 'HIMS to offer Lilly’s Zepbound, expect minimal revenue contribution'

BofA Securities analyst Michael Cherny reiterated an Underperform rating and $22.00 price target on Hims and Hers (NYSE: HIMS).

The analyst comments "The News: HIMS to offer Zepbound on its platform This afternoon, HIMS released a statement indicating it is adding branded tirzepatide (Eli Lilly’s Zepbound) and generic liraglutide to its platform. Recall, HIMS had previously listed Eli Lilly’s Zepbound on its website as “out of stock”. The company noted it is committed to bringing customers more treatment options that best suits their needs. Why it matters: don’t expect much from Zepbound We do not expect HIMS to sell a material amount of Zepbound on its platform given our previous conversations with the company and the relative margin profile of branded drugs. As discussed in previous notes (link to our note here), selling branded drugs through HIMS’ platform would generate typical mail pharmacy margins (2-4%). Not only are these margins significantly lower than the ~80% gross margins HIMS currently generates, publicly traded retail pharmacies like CVS and Walgreens have talked about generating negligible gross margins on GLP-1s, which are likely far below the 2-4% margins on traditional branded drugs. We view HIMS’ decision to sell branded tirzepatide as a way to provide more options to consumers, but would expect volume and revenue to be immaterial – even over an extended period of time. We do not know the list price HIMS will use for Zepbound (HIMS’ website currently says $1,899/month) and note the LillyDirect price is ~$500/month which is still much higher than prices for compounded semaglutide through HIMS. We find it incredibly unlikely a consumer would go to HIMS to buy any branded GLP-1 for $1,899/month. HIMS also announced that it will sell generic liraglutide, which we think is a much more relevant announcement. Generic liraglutide has had limited commercial success due to weaker outcomes, greater side effects, and a once daily injection relative to newer generation GLP-1s. We think monitoring HIMS’ liraglutide launch will be relevant over the next year. If HIMS is able to generate commercial success for liraglutide, it would represent a significant milestone and validate the strength of HIMS’ brand, in our view. We maintain our Underperform on HIMS, our $22 PO, and view today’s news regarding Lilly’s Zepbound as immaterial."

For an analyst ratings summary and ratings history on Hims and Hers click here. For more ratings news on Hims and Hers click here.

Shares of Hims and Hers closed at $29.55 yesterday.

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