June 4, 2024

Hims & Hers Health: The GLP-1 Opportunity

Authored by Rahul Setty

In many ways, Hims & Hers Health is the quintessential example of The Little Engine That Could. Founded just seven short years ago, this DTC healthcare up-and-comer has defied the odds through crisp execution of its multi-product strategy. Hims & Hers has scaled to a >$1 billion revenue run rate with rapidly expanding operating margins by demonstrating several Foundational Frameworks for investment, namely (1) and (3).

  • Vertically integrated product capturing market share in stagnant mature industry: Hims & Hers fills a major market need as consumers are dissatisfied with (and untrustworthy of) the inconvenient traditional healthcare and insurance system. Additionally, consumers have no interest in disclosing treatment for stigmatized conditions such as hair loss, sexual health, or mental health. Hims & Hers streamlines this process with a brand that consumers have grown to love and trust for a monthly or multi-month subscription that includes the appropriate medication and 24/7 access to a physician.
  • Quality cultures that breed innovation within the larger conglomerate: Hims & Hers has expanded from its original two product categories (hair loss and ED medication) to include launch of the Hers brand, men's and women's dermatology, anxiety and depression, personalized & compounded solutions in various form factors and combinations, weight loss, and most recently, announcing GLP-1's on May 20, 2024.

The GLP-1 Opportunity

Hims & Hers unveiled its GLP-1 compounded offering at $199 (all pricing monthly), and its non-compounded oral tablet at $79, rapidly undercutting the competition from Ozempic (~$0.9k), Wegovy (~$1.35k), and Mounjaro (~$1.0k) and opening up weight loss drugs to the mass-market US population.

"The core of our business is to offer a truly personalized experience that customers can trust and rely on,” said Andrew Dudum, CEO and co-founder of Hims & Hers. “We’ve leveraged our size and scale to secure access to one of the highest-quality supplies of compounded GLP-1 injections available today. We’re passing that access and value along to our customers, who deserve the highest standard of clinical safety and efficacy to meet their goals, and we're doing it in a safe, affordable way that others can’t deliver."

An estimated 70% of US adults (~180.6 million) are considered overweight according to the FDA, and employer-provided health insurance typically requires patients to meet eligibility requirements for Wegovy/Ozempic (Mounjaro is not covered). 54% of insured adults reported difficulty paying for GLP-1 treatments due to high costs, with only 24% of respondents in a May 2024 KFF Survey reporting insurance covered all costs.

Assuming one-thirds of the 180.6 million target market is receptive to receiving treatment, sales skew towards telehealth due to the stigmatized nature, outsized cost, and reduced friction in accessibility of the product (50%), and Hims & Hers captures 40% of the DTC GLP-1 space (reasonable considering Hims' mass-market appeal and pricing).....Hims & Hers would have 11.9 million subscribers generating at least $79/mo or $941.6mm in sales every month

This would instantly 7x Hims' subscriber count, nearly 11x their revenue before even considering the 90%+ estimated gross margins, and provides some color as to why the market has doted on Hims since the announcement, sending shares up a whopping 40.6% (albeit still trading at 5-5.5x gross profit).

While the company was able to release this product due to widespread semaglutide shortages which may not persist, the announcement demonstrates Hims' resilience in fortifying their innovative multi-product strategy, ability to secure scarce distribution, and facilitate their customers to live healthier and happier lives.

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