The stock price of telemedicine platform Hims & Hers (HIMS) has experienced fluctuations over the past few years. The stock is currently down 65% from its all-time high, but rose 50% in March due to the latest cooperation agreement between the telemedicine platform and a weight loss drug manufacturer that had previously sued it. Now, Hims & Hers is joining forces with its former adversary. Following this latest movement in Hims & Hers’ stock price, two S&P 500 component stocks are worth watching, and what this deal means for the future of the weight loss drug market is equally thought-provoking.
The agreement reached with Hims & Hers highlights the dominant power that weight loss drug manufacturers currently wield in the market. This field was initially led by Novo Nordisk (NVO), while the market is now dominated by Eli Lilly’s (LLY) Zepbound product. This has helped Eli Lilly’s business achieve rapid growth in recent quarters, concurrently with Novo Nordisk’s business stagnating. However, over the past decade, both companies’ revenues have grown by approximately 200%. Eli Lilly has established a partnership with Ro, a competitor of Hims & Hers, while Novo Nordisk has struck a deal with Hims & Hers. Both pharmaceutical companies likely hope that consumers can more conveniently receive these weight loss drugs at home, thereby stimulating customer demand.
These partnerships indicate that the core strength of the industry still lies in the hands of pharmaceutical giants like Novo Nordisk and Eli Lilly. They have invested billions of dollars in the research and development of these drugs and in obtaining regulatory approvals. Regardless of whether these drugs are sold through Hims & Hers or other telemedicine platforms, the majority of the profits ultimately flow back into the pockets of the pharmaceutical manufacturers. This also explains why both pharmaceutical companies can achieve over $15 billion in net profits annually, while Hims & Hers, as a drug reseller, barely turns a profit. Weight loss drugs might be the fastest-growing drug category in history, with potential impact so profound that it could alter the trajectory of global obesity, thereby significantly improving the health of hundreds of millions of people. These two pharmaceutical giants, leveraging their industry leadership, have long been top-performing stocks and are poised to continuously benefit from the momentum of weight loss drugs for years, or even decades, to come.
Eli Lilly’s stock price fell 5% before midday Tuesday Eastern Time, a fluctuation attributable to analysis by HSBC. HSBC has just downgraded Eli Lilly’s stock to “Sell.” To be precise, HSBC used the wording “underweight,” but the sentiment conveyed is identical. Most analysts predict that the total addressable market (TAM) for obesity drugs, represented by Novo Nordisk’s Ozempic and Eli Lilly’s Zepbound, will exceed $150 billion. However, HSBC analyst Rajesh Kumar believes this figure is overly optimistic. Even looking ahead to 2032, he estimates that the annual revenue for GLP-1 weight loss drugs will only reach between $80 billion and $120 billion.
One issue with other analysts’ predictions is that, despite the current high pricing of GLP-1 drugs, their prices are declining, and future “price competition could be very fierce.” Another issue is that not all patients who start taking GLP-1 medications will adhere to the regimen, as indicated by discontinuation rates in clinical trials. Entering 2025 and 2026, multiple rounds of price reductions have already occurred between the two GLP-1 giants. Eli Lilly’s guidance suggests that the company plans to compensate for the impact of price cuts by expanding sales volume to sustain growth.
