The Moral of the Story of Hims (So Far)
When I first wrote about Hims in May 2024, my mistake was trying to be rational at a point when the market was about to become irrationally unhinged…
And Hims & Hers HIMS 0.00%↑ was in the right place at the right time with the right loophole allowing it to sell a compounded version of the right drug – GLP-1s, just as they were lifting off the launchpad.
But under the surface, the company’s core business was unwinding. I spelled out the issues in my formal Red Flag Alert in collaboration with my pal Russell Young, who runs his own family office, Decameron Capital. After backing into the numbers and realizing just how bad things without the GLP-1s really were, he had shorted the stock.
Original Short Thesis
Among his reasons, as I wrote…
I followed it up a few months later with “The Weight Loss Illusion”…
Alas, the joke was on me – and to some extent Russell, who shorted more along the way. The stock went on to rise roughly 300%, as retail investors and every “bro” newbie – infatuated with Hims via the easy purchase of ED drugs made them feel like porn stars – climbed aboard what looked to be an erectile rocket.
Round-Tripping
Its stock, as of its close today, has since done a near-complete round-trip from where I started…
Between there and here, an entire community sprang up on Twitter around the stock… reminiscent of the old dot-com stock message boards. Many Hims investors were hanging on for $100… and then – to the moon, Alice!
Except, the underlying business told a very different story…
What was clear is that no matter how the bullish narrative had been spun, this entire story was hanging by the thread of a loophole that allowed Hims for a very brief period to sell compounded versions of the weight-loss drugs.
But Hims didn’t stop there. It started tinkering with those still under-patent drugs, as if patents were meaningless… and as if it were a drug company instead of the online marketer it really is. It even began offering “personalized” treatments, flouting FDA rules.
The company’s hubris continued even as recently as last week, when Hims had the gall to roll out its own version of Wegovy’s weight loss pill. And not just a copycat pill, but one, as the company touted in a press release, with “the same active ingredients as Wegovy,” Novo Nordisk’s NVO 0.00%↑ GLP-1 pill for an introductory price of $49. (That’s $100 less than Novo Nordisk’s price.)
Two days later, the FDA came out swinging, saying – in effect – you can’t do that, while the Department of Human Services said it was referring the matter to the DOJ.
‘Illegal Conduct’
Then, today, Novo Nordisk said it had filed a suit “to stop Hims’ illegal conduct.” It further said it “is asking the court to permanently ban Hims from selling unapproved, compounded drugs that infringe our patents, and is seeking to recover damages.”
Why Novo Nordisk waited until now to do this – and not a year ago – is beyond boggling.
Maybe it was waiting for the government to launch its own online pharmacy, which happened last week, where it sells Novo Nordisk’s GLP-1s for the same price as Hims.
What happens next?
Before I go there, yet another shout-out to Paul Cerro of Cedar Grove Capital Management, who is the only analyst to publicly nail this – via every twist-and-turn – for a bit more than a year. What gave him credibility with me: When he first messaged me after my initial reports, he was long the stock. That gave me pause, because he used to work at Hims competitor, Ro, which is private. In other words, he knows this business from the inside. But then… as things started getting dicey, he not only sold his Hims stock but went short… all of which he details in his report, “A Bridge Too Far.”
But here’s the thing, Paul by nature is not a short-seller! His Hims work provides not just a lesson in flexibility (which is not easy in something as ego-driven as investing) but also explains in real time – in the face of social media trolling all along the way – why Hims was headed for serious trouble.