Hims & Hers' GLP-1 Growth Stalls: Partnership Gaps and Regulatory Headwinds Threaten Dominance

The GLP-1 weight-loss market is undergoing a seismic shift, and Hims & Hers (NASDAQ: HIMS) finds itself in a precarious position. Despite its early-mover advantage in compounding GLP-1 medications, the company's inability to secure a formal partnership with Eli Lilly and escalating competition from GoodRx (NASDAQ: GDRC) are exposing critical vulnerabilities. Regulatory crackdowns on compounded drugs, margin erosion from pricing pressures, and saturated demand for its core offerings now cast doubt on its long-term growth trajectory. Investors should exercise caution: this stock is overvalued relative to its slowing momentum.

The Partnership Problem: No Lilly Discount, No Competitive Edge

Hims & Hers' business model hinges on offering GLP-1-based weight-loss therapies at prices far below branded alternatives. However, its lack of a partnership with Eli Lilly—a leader in GLP-1 innovation—undermines this strategy. While Hims sells Lilly's Zepbound at $1,899/month, Lilly's own LillyDirect program offers the same drug for $25/month for insured patients and $349/month for self-pay users. This stark price disparity leaves Hims unable to compete on cost for branded products, forcing it to rely on unapproved compounded versions to maintain affordability.

The regulatory risks here are severe. The FDA has repeatedly warned that compounded GLP-1 drugs lack approval and pose safety risks, with reports of hospitalizations linked to impurities. As enforcement intensifies, Hims' compounded drug sales—a critical revenue driver—could face supply restrictions or outright bans. Without a Lilly partnership to offer legitimate, low-cost branded alternatives, the company is trapped in a high-risk, low-margin business.

GoodRx's Entry: Undermining the "Affordability" Moat

GoodRx's 2025 push into the GLP-1 market directly challenges Hims' core value proposition. By partnering with pharmacies and insurers, GoodRx provides price transparency tools and copay cards that reduce the cost of branded GLP-1 drugs like Ozempic and Wegovy. For example, a patient using GoodRx might pay $300/month for Wegovy instead of Hims' compounded version at $199/month—but with FDA-approved safety and efficacy.

This shifts demand toward regulated products, eroding Hims' customer base. GoodRx's strategy also targets Hims' biggest weakness: its reliance on unproven compounded drugs. As consumers prioritize safety over cost, Hims' revenue growth—already slowing to 59% in 2025 from 111% in 2024—is likely to decelerate further.

Margin Pressure and Overvaluation: The Financial Reality

Hims' financials reveal growing strain. Despite $2.3B in projected 2025 revenue, its gross margins have collapsed by 9 percentage points in just one year. Rising customer acquisition costs ($929 per customer in 2024) and the high cost of compounded drug production are squeezing profitability. Meanwhile, GoodRx's entry and Lilly's direct-to-consumer plays are compressing pricing power further.

At a 31x EV/FCF multiple, Hims' valuation assumes perpetual high-growth rates. But with regulatory risks mounting and competition intensifying, this assumption is overly optimistic. The stock trades at 4.5x its 2025 revenue guidance, a premium to peers like Teledoc (TELD) and Novo Nordisk (NVO), which benefit from FDA-approved products and stable margins.

Conclusion: Sell HIMS—The GLP-1 Party is Ending

Hims & Hers' growth story is unraveling. Its inability to partner with Lilly leaves it at a pricing disadvantage, while GoodRx's entry chips away at its cost-based moat. Regulatory headwinds threaten its compounded drug sales, and margin pressures suggest profitability will remain elusive. With the stock up 27% YTD despite slowing growth, investors are overpaying for risk.

Recommendation: SELL
Hims' valuation no longer reflects reality. Investors should capitalize on the current premium and exit ahead of the coming reckoning. The GLP-1 market is consolidating around FDA-approved players and cost-transparency platforms—Hims' reliance on regulatory gray areas and unproven compounds makes it the weakest link in this chain.