HIMS GLP-1 Shortage: The End is Nigh
An update on the semaglutide shortage + what happens after?
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Preview
On January 12th, we shared our note regarding our concerns with Hims and Hers Health (HIMS) stock post-shortage GLP-1 re-rating perhaps coming sooner than anticipated.
If you’ve been following our research last year, we’ve done incredibly well navigating the multiple sell-offs and effectively hedging our position while still delivering targeted data on the ongoing situation of compounded GLP-1s.
While the former administration did not resolve the semaglutide shortage, we believe that the end is still much closer than it appears and it will potentially be a function of when Trump confirmations get done.
Based on our data collected from speaking to 40 pharmacies in 30 cities across 17 states, our findings support both
Why semaglutide was marked available by NOVO at the end of October and,
That pharmacies are not having issues getting supply.
Our research below also highlights the 503a exemption rule and why we reiterate our point of view that post-shortage, the compounding GLP-1 side of the business will not be able to scale under this exemption.
We’ll also break down how we view revenue impact in a post-shortage world.
To get our full list of research, click here to access our table of contents.
Cheers.
The Gravity of the Situation
There’s a reason we flipped bearish on HIMS and there’s a reason we felt that taking profits sooner rather than later was warranted. While we were not trying to time a “top”, the issue comes from the market “discounting” the severity of GLP-1 risks the longer it goes on.
A risk that we’ve consistently tracked, highlighted, and provided commentary for you all on since Andrew made his post-shortage comments during the Q2’24 earnings call.
The longer the drug remains available but not resolved, the greater portion of sales GLP-1s will make up. Based on our post-Q3’24 earnings report we sent you all, we estimated GLP-1s made up ~13% of total sales. This is up from ~4% in Q2 with an estimated ~26% of sales for Q4’24 according to BofA.
While currently in Q1 and attached to the widely known “new year, new me” mentality of health changes, it’s not hard to imagine it can become much more if core shows signs of weakness, which BofA also potentially alluded to in their report earlier this month.
In essence, the risk of just this one event, which is now 87 days since marked “available” on the FDA’s website, is now 26 days longer than it took them to resolve tirzepatide.
As we’ve spoken to a few of you already about this matter personally, you know that we’ve labeled long investors holding the stock with this risk growing as equal to clutching a lit M80 firecracker with a closed fist. And as time goes on, that M80 is only getting bigger.
Frankly, we’d rather not lose our fingers, and that’s why we spent the last week doing channel checks to see what’s actually happening out there.
Pharmacy Channel Checks
As a reference point, the last time we did something similar to this, it was to weigh the odds that the FDA was right in removing tirzepatide from the shortage list and updating the country on their decision come December 19th.
Our channel checks were proven right and indeed, the FDA doubled down on removing tirzepatide from the shortage list on that day.
For semaglutide, it gets a little bit trickier.
It’s been around and compounded for longer than tirzepatide which has caused longer shortage-related issues for the active ingredient.
But given that it’s taken longer for the FDA to resolve the shortage than tirzepatide, we wanted to talk to pharmacies to ensure we weren’t missing anything.
Over the last week, we talked to 40 pharmacies in 30 cities across 17 states ranging from independent pharmacies to bigger chains like CVS and Walgreens.
We even talked to a few pharmacies that were located within supermarkets like Target and Harris Teeter and asked them all the same three questions.
Do you currently have 0.5mg of Wegovy (NOT Ozempic) in stock?
We asked for 0.5mg specifically because it’s the second lowest dose which can be a proxy for patients who have already officially started but are at the next stage of titration.
Currently in stock refers to whether it is in their fridge at the very moment we called them.
If they didn’t have it in stock, how long would it take them to order it with a script ready?
Have they been seeing the supply issue getting better over the last few weeks/month versus a few months ago?
We felt these questions were appropriate enough to get a gauge on the situation and we specifically targeted many pharmacies in states with the highest obesity rates.
Below are the unfiltered takeaways from each pharmacy we talked to.