Hims & Hers Health Stock Down 40% From Highs as Drugs Being Phased Out

Hims & Hers Health delivered impressive financial results for the fourth quarter of 2024, demonstrating significant growth across key metrics and helping the stock (NYSE: HIMS) to a 4.12% gain in yesterday's session. Why then is has the stock price fallen more than 21% in this morning's pre-market, to sit more than 40% away from the highs set just last week?

The company has made the decision to phase out its weight loss product line, coming as the FDA removed semaglutide injections from its shortage list. CEO, Andrew Dudum, assured customers that they would be informed about the cessation and advised them to seek alternative weight loss options.

Hims and Hers had been producing affordable versions of Novo Nordisk's drugs, Ozempic and Wegovy, during a shortage situation since 2022. These generic versions were offered at a starting price of $199 per month, compared to branded options which cost over $900.

The FDA has now given compounders 60-90 days to cease the production of semaglutide copies, which are active ingredients in Ozempic and Wegovy. This regulatory throwback has a significant implication as weight-loss drugs accounted for around 20% of last year's sales for Hims and Hers, as stated by CFO Yemi Okupe.

Despite this setback for future operations, results for Q4 2024 reached $481 million, marking a 95% increase compared to the same period last year. For the full year 2024, revenue totaled $1.5 billion, reflecting a 69% year-over-year increase. Net income stood at $26 million for the quarter and $126 million for the entire year, successfully achieving the company's first year of GAAP profitability .

Adjusted EBITDA for Q4 was $54 million, translating to a margin of over 11%. Over the full year, adjusted EBITDA was $177 million with a 12% margin . However, there was a noted decline in gross margin by approximately 2 percentage points quarter-over-quarter, attributed to scaling efforts and strategic pricing actions .

The company reported a remarkable 45% growth in total subscribers, reaching over 2.2 million by the end of Q4 2024. Over 55% of these subscribers are engaged with at least one personalized health solution offered by Hims & Hers . Furthermore, the Monthly Online Average Revenue per Subscriber increased by 38% year-over-year, reaching $73 during the same period .

Free cash flow was robust at nearly $60 million in Q4 and close to $200 million for all of 2024, supported by cash and short-term investments exceeding $300 million at year-end . Notably, the company managed to improve its marketing efficiency, with marketing expenses accounting for 46% of Q4 revenue—a 5-point improvement from the previous year .

Looking forward, CEO Andrew Dudum has expressed ambitions to exponentially grow the subscriber base to 10 million within six years, fueled by continued expansion of their platform, personalised treatments, and innovative technology investments . This vision encapsulates future integration of AI-driven tools for on-demand therapists and nutritionists to further enhance treatment outcomes.

The future of Hims and Hers will also involve a shift in focus given that the US market for anti-obesity drugs is anticipated to grow substantially, with Goldman Sachs projecting a potential reach of $100 billion by 2030. As the company transitions away from the semaglutide products, they expect a portion of their revenue for this fiscal year, possibly amounting to $725 million, to originate from their weight-loss drug offerings.