Hims & Hers Health Inc (HIMS): The Opportunity is still Strong and Potent

Source: TradingView

Investment Thesis

TradingKey - Despite the whole controversy with NVO, we believe HIMS is able to achieve 6 million subscribers and $6 billion of revenue by 2030, due to the large opportunity of growth for the telehealth industry, early investments in logistics capabilities and ability to upsell their patients. However, near-term volatility will remain an issue mostly due to the feud with NVO and the intense competition.

Company Background

Hims & Hers (HIMS) is a telehealth company founded in 2017, providing personalized accessible and affordable healthcare solutions through its digital platform. The company targets various health and wellness needs, including, but not limited to sexual health, hair loss, dermatology, mental health and weight loss (the most controversial one). HIMS is doing this by connecting the patients with a network of licensed healthcare professionals over its online platform, followed by delivery the medicine to their homes.

Source: Investor Presentation

HIMS business model has several crucial aspects:

Direct-to-Consumers: Providing the medicine to the patients directly, without involving any insurers or traditional pharmacy stores.

Targeting young people: The company’s main customer base is young to middle-aged adults who value convenience, affordability, and privacy in managing their healthcare needs.  So far, the male-to-female split is 56%/44%, but this will change with the introduction of more products on the platform.

Subscription model: Even though patients can purchase one-off medical products, the large majority of the revenue comes from subscription plans.

Cash payments: As HIMS does not work with insurance firms that can offset the price paid for a medicine, it means the price stated on HIMS platform is the finalized one, bringing more transparency for the patients.

No vertical integration: HIMS does not have any production facilities, they partner with pharmacies and manufacturers (503B outsourcing facilities) for sourcing. However, they do invest in their own fulfillment centers.

The Weight Loss Drama

In late 2023, HIMS decided to get involved in the weight-loss drug business, in addition to its sexual health and dermatology legacy business. In 2024Q2 they started selling glucagon-like peptide-1 (GLP-1) weight products on their platform.

GLP-1 products are among the hottest on the market, valued for their efficacy (they were initially used for diabetes). What these products do is to mimic the action of a naturally occurring hormone in the gut that helps regulate blood sugar levels and appetite usually with the help of GLP-1 receptor agonists like semaglutide and tirzepatide.

Currently, the hottest GLP-1 drugs are Ozempic and Wegovy, both produced by Novo Nordisk and both containing semaglutide. Eli Lilly’s Mounjaro and Zepbound, however, both contain tirzepatide.

So, back in 2024Q2, HIMS took advantage of the semaglutide shortage and started providing semaglutide-based compound drugs. But then comes the question of what exactly compound is?

Compounded drugs are customized medications prepared by licensed pharmacists or compounding facilities (e.g., 503A pharmacies or 503B outsourcing facilities) to meet specific patient needs. They use FDA-approved active ingredients but are tailored in dosage, form, or combination not available in standard commercial drugs. Compounding involves mixing FDA-approved ingredients (e.g., sildenafil citrate) with excipients (inactive ingredients like flavoring or binders) to create unique formulations (e.g., chewables, topicals, or adjusted doses).

Compound drugs are quite different from branded and generic drugs in several aspects:

In April, NVO and HIMS entered into agreement to sell Wegovy (a branded drug) on HIMS along with the other compounders on the platform. However, two months later NVO cancelled the partnership due to "deceptive promotion and selling illegitimate, knockoff versions of Wegovy". 

As of now, patients can still get Wegovy but on a higher price (650$) vs previously ($499-$599). There is a high chance NVO to initiate a lawsuit against HIMS with regards to the GLP-1 business. Further to this, the Eli Lilly management said they will not partner with anyone who is doing compounding. 

However, both Lily and NVO continue to work with HIMS direct competitors such as Ro, but Ro already stopped its semaglutide compounding for weight-loss. Overall, Lili and NVO will fiercely chase anyone who is doing compounding with semaglutide, thus there is a high chance for HIMS to abandon its GLP-1 business

Operating and Financial Metrics

Source: Bloomberg, HIMS Annual Report

HIMS’s revenue has been in a hyper-growth stage for a while, driven primarily by growth in subscribers and revenue per user:

Growth in customers (patients) is the main operating metric, and it has been growing by 30-40% in the last two years:

Source: Bloomberg, HIMS Annual Report

As of most recent data, out of the 2.4 million users, 1.4 million are enrolled in personalized solutions that involve extensive usage of compound drugs, while the remaining 1 million are using mostly branded and generic drugs.

Another important operating metric is the monthly average revenue per user. We can see how entering the weight-loss business in mid-2024 affected the ARPU, and it went even further up in 2025 when they started the partnership with NVO.

Source: Bloomberg, HIMS Annual Report

Segment-wise, 98% comes from online and just 2% comes from wholesale where HIMS sells to major retailers through wholesale purchasing agreements. Wholesale will not be a growth driver, as this serves more as a strategy to increase brand visibility.

Also, as of now, roughly one third of the revenue comes from the weight-loss business and of this one third, large majority is from GLP-1 products, partially explaining the market worries when it comes to the future NVO legal actions.

Profitability-wise, the gross margin revolves around mid-70s, with a single-digit operating margin. Sales and Marketing is the largest expense line, representing around 46% of the total revenue.

Growth Potential

From a secular point of view, the growth opportunity is quite obvious, as sexual health TAM stands at $32.9B, Dermatology at $93.6B (across hair loss, acne and anti-aging), and Mental Health at $25.4B. In addition, 8% of the US population, or 25.6mm Americans, are uninsured, which is the most direct target for HIMS. The company can also attract insured customers who are dissatisfied with the inefficient bureaucratic insurance system in the country.

Apart from the traditional verticals, HIMS is planning to launch products related to hormone therapy, menopause, mental health, and dermatology further diversify revenue streams.

Geography-wise they will expand into Canada in 2026 and also acquired ZAVA, a pan-European digital health platform.

Valuation

Overall, HIMS should not be viewed as a direct competitor to Novo Nordisk or Eli Lilly. HIMS is essentially an e-commerce company that aims at disrupting the pharma retailers such as CVS and Walgreens.

We expect the subscriber growth to normalize from previous years towards 20-25% per year mostly due to the lack of GLP-1 business, the intense competition and the rule of large numbers:

Source: TradingKey

With regards to the pricing, before the start of the GLP-1 business, the ARPU was around $70. An average American spends $100-$120 per month on prescription drugs, but we do not believe HIMS can reach this level of wallet penetration, thus we assume a monthly fee of $85 (or $1,020 per year)

With 6.1 million subscribers, spending $1,020 per year, it would mean around $6.2 billion revenue in 2030. This is just a bit below the company goal of $6.5 billion revenue by 2030.

In terms of margins, the NP margins of the main brick-and-mortar pharmacies CVS and Walgreen are very low at around 2%. However, HIMS has all the chances to have better margins because it operates with more niche drugs, and it has asset-light e-commerce model, thus the net profit margin of HIMS would be closer to large e-commerce players, or roughly 8-10%, (half a billion of net profit in 2030).

This basically means the company is traded at around 20x expected 2030 earnings – low but considering the current volatility, it can go down even further, thus I would stay on the sidelines for now.

Risk

There are a large number of risks associated with HIMS:

Competition, without a doubs, is the biggest risk as telehealth is already a quite crowded space with players like Ro Health, Thirty Madison, BlueChew and OptumStore being all telehealth companies, focusing on sexual health and dermatology. This brings a lot of unpredictability in terms of who can dominate this field. However, HIMS has two advantages, as it has the largest amount of users on its platform and it has already started to invest in fulfillment centers, developing a better logistics infrastructure.

But here comes the question of whether big players like Amazon would want to enter this market. These companies have plenty of resources to do so, but we also saw in the past that Amazon cannot dominate every product (as we see in pet food industry with Chewy being able to resist Amazon’s pressure).

More potential risks include miss-steps while investing in infrastructure, regulatory crackdowns and even potential breach of patients’ data. 

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