Competitive dynamics are important and can impact investors earlier than they anticipate. Eli Lilly ‘s ( LLY 1.82% ) The CEO revealed that the large pharmaceutical company is prepared to eliminate a potential source of revenue growth. Health services for both men and women. ( HIMS -1.69% ) , and it will also experience some growth in the process.
Here is the current situation and its impact on the investment potential of each company.
This obstacle to increasing revenue is quickly diminishing.
Currently, weight loss medications are in high demand. Eli Lilly’s Zepbound, a drug for combating obesity, generated over $1.2 billion in sales in just the second quarter of its release, despite being on the market for less than a year. Exploration and innovation efforts Efforts are being made to expand the range of conditions for which Zepbound is authorized to be used through a few clinical trials and research work.
It appears that Lilly had to produce a large quantity of medication in order to generate significant revenue. Since the drug was introduced, the company has not been able to produce enough to meet the demand. According to the FDA, there is currently a shortage of Zepbound, leading to a pause in accepting new patients to ensure that existing patients receive an adequate supply of the medication.
Due to the vast sum of billions of dollars capital expenditures refer to the funds that a company invests in the acquisition, maintenance, or improvement of long-term assets such as property, equipment, or infrastructure Plans are in progress to establish manufacturing plants worldwide, and the shortage issue was expected to only be temporary, despite the high and increasing demand. It is noteworthy that Eli Lilly’s CEO David Ricks has mentioned that the company’s production capacity is close to meeting the requirements for the drug to no longer be considered in short supply by the FDA. This development is positive for Lilly’s investors as it suggests that the revenue from the treatment will no longer be limited by the lack of sufficient doses to meet the demand.
Unfortunately, that is not good news for Hims & Hers.
Hims & Hers follows a direct-to-consumer business approach with a focus on wellness. They offer a range of weight loss treatments, including both well-known brands and custom compounded formulations. Novo Nordisk ‘s ( NVO 0.03% ) Wegovy.
Compounded medications are created by compounding pharmacies, which produce various versions of medications for individuals who are unable to use an FDA-approved medication in its standard presentation, often due to allergies to certain components or other concerns. When there is a scarcity of an FDA-approved version, compounding pharmacies can step in and produce replicas, as long as they adhere to federal regulations. It is crucial to note that compounded versions are not officially approved by the FDA, and the FDA does not have the authority to ensure their quality and safety standards.
Hims & Hers does not offer a compounded form of Zepbound for sale. However, with a high demand for weight loss treatments and a shortage of such products, introducing this option could have significantly boosted their earnings. This opportunity might soon be lost.
If the company chooses to proceed with producing Zepbound through compounding despite the challenges, it may face another obstacle. Compounding pharmacies and compounded medications, being loosely regulated, do not have a strong reputation among the general public. When consumers have the option to purchase the branded Zepbound, which comes with a regulatory assurance of its quality and safety, they will be less motivated to purchase from Hims & Hers.
Another competitor may soon join the competition.
Eli Lilly’s increase in Zepbound production does not currently have a negative impact on Hims & Hers’ revenue, but it does affect one of the company’s potential growth opportunities. The situation with Novo Nordisk, however, is distinct.
Currently, Novo Nordisk’s weight loss medication Wegovy is facing a shortage situation. Similar to Eli Lilly, the company is investing significant resources and effort to address this issue. Once the supply meets the demand, Novo Nordisk’s revenue is expected to experience further growth. Consequently, this could impact Hims & Hers’ ability to sell a compounded form of Wegovy at a profitable rate in the future.
After Novo Nordisk’s latest manufacturing investments start showing results, it is expected that the effect on Hims & Hers sales will be immediate and significant. Although obtaining a prescription for Wegovy may become more challenging for patients, the possibility of receiving improved insurance coverage for treatment expenses and access to a reliable product will likely attract them towards the FDA-approved choice and away from the compounded alternative.
In summary, Eli Lilly and Novo Nordisk are good investment options due to their increasing production levels that will boost growth. value for the shareholders Hims & Hers may not be a poor investment overall, but it appears to be losing its competitive edge, especially in the weight loss industry.
