Why his-and-hers health stocks fell this week

Actions of His and her health (HE 0.61%)direct-to-consumer online pharmacy pulled back this week as investors feared pharmaceutical companies could begin encroaching on its turf.

In particular, Eli Lilly (LLY -0.92%)maker of popular GLP-1 drugs such as Mounjaro, said Tuesday it will scale back single-dose vials of its Zepbound GLP-1 weight loss drug in response to high demand.

The news was seen as a competitive threat to Hims & Hers and a number of other pharmacies, and shares in Hims & Hers fell 9.2% on Tuesday and lost 12% for the week after Thursday’s close.

Image source: Getty Images.

The competition is heating up

Big pharma is starting to go direct to consumers with drugs like Zepbound, and that could be a problem for Hims & Hers.

Lilly’s discount appears to be a competitive move to fend off GLP-1 compounders like Hims & Hers or those selling off-brand versions of GLP-1 drugs. City Group predicted the move would take market share from competitors such as Hims & Hers, which launched a new weight-loss program that includes GLP-1 drugs last December.

How big of a fail is this for Hims & Hers?

Hims & Hers tends to focus on lifestyle treatments like antidepressants, weight loss, birth control and hair loss, but its competitive edge has never been entirely clear.

The company has used smart advertising and benefits from the convenience of home ordering and shipping. It’s also growing fast, with revenue up 52% ​​in its most recent quarter.

However, Lilly’s move shows that pharmaceutical companies are easily undermining telemedicine platforms like Hims & Hers, making it look like a middleman. The Zepbound move alone shouldn’t do much harm to Hims & Hers, but if this kind of competition becomes a pattern, it could be a big risk for the growth stock.