The war over cheaper Ozempic won’t end well for some investors

livemint.com:

America’s insatiable demand for weight-loss medications is minting vast fortunes—and not just for the makers of GLP-1 drugs such as Ozempic. Shares of Hims & Hers Health, the telehealth provider better known for its trendy commercials for erectile-dysfunction medications, are up more than 150% this year. The company said last month it would start offering compounded forms of the injections that use the same active ingredients as the popular drugs Ozempic and Wegovy.

The stock soared before Hims & Hers sold even a single injection. For now, given the Food and Drug Administration’s rules allowing drugs to be compounded during shortages and the fact that most insurance policies don’t cover obesity medications, Hims & Hers is filling an important void. But over the longer term, there are questions hanging over its strategy given that those problems might no longer need solving in just a few years.

Hims & Hers’s pitch to consumers is pretty appealing. The price for compounded GLP-1 injections will start at $199 a month, a bargain compared with the $1,000 or more it can cost to get Novo Nordisk’s Wegovy or Eli Lilly’s Zepbound without insurance. The pitch to investors is also, on the face of it, attractive.

Over 100 million Americans have obesity. Not everyone is interested in taking the drugs, nor can everyone who is interested afford them. But even if just a portion get on the drugs, the market opportunity for Hims & Hers could be “comically large," at something such as $30 billion annually, noted a recent Citi report.