The FDA has announced that the shortage of Eli Lilly and Co’s tirzepatide injection, a glucagon-like peptide 1 (GLP-1) medication marketed as Mounjaro and Zepbound, has been resolved. This shortage, which began in 2022, was driven by an increase in demand for the drug. While the FDA has resolved the tirzepatide shortage, another popular GLP-1 medication, semaglutide (marketed as Wegovy and Ozempic) by Novo Nordisk A/S, remains in short supply.
The FDA’s announcement regarding tirzepatide has sparked renewed investor concerns about the long-term viability of compounded GLP-1 treatments. This is due to the fact that Hims & Hers Health Inc., a company offering compounded GLP-1 treatments, relies on semaglutide as its active ingredient. A Truist analyst has pointed out that, once the supply shortage ends, compounded GLP-1s may face challenges due to legal restrictions surrounding the copying of FDA-approved drugs.
Despite these concerns, Hims & Hers Health remains optimistic about the future of its weight-loss service. The company believes that demand will remain strong even after supply shortages ease, as long as they operate within compounding regulations and respect branded drug patents. This optimism is supported by their third-quarter card data analysis, which suggests that their Q3 2024 revenue is expected to exceed their guidance range of $375 million to $380 million by $5 million to $10 million. Their average transaction price also saw a sequential increase of 14% to $126.9, up from $111 in the second quarter. Net orders for Q3 2024 experienced a 3% sequential increase from Q2 2024.
Despite the positive signs, Truist maintains a Hold rating for Hims & Hers Health with a price target of $23. HIMS stock was up 0.18% at $17.16 at the end of the trading day on Friday.
The demand for compounded GLP-1s can be attributed to several factors, including their lower cost compared to branded versions and the hesitancy of some primary care physicians to prescribe branded medications. This highlights the complex dynamics within the pharmaceutical industry, particularly in the weight-loss sector, and the ongoing challenges of balancing accessibility, affordability, and regulatory compliance.
