It still strikes me how wrongly investors see the GLP-1 drugs. It is not an obesity drug, it is way more than that.
Last year I shared some research on $HIMS and why I think they are ideally positioned for a huge next pharma wave. (yes, they are still down 25% since I shared the research, but it's about the thesis).
It is scientifically proven that GLP-1 helps with cardiovascular health, kidney diseases, addiction, neurological conditions, sleep apnea, fatty liver, fertility, and even more conditions.
So why is it still mainly seen as an obesity drug?
The GLP-1 production is now regulated by 2 main players, $LLY and $NVO. They both own patents that prevent other companies from starting GLP-1 production. This means that both of those companies have huge pricing power.
The pricing power is a simple supply/demand principle here. The supply is limited, so the higher the demand, the more Novo and Lilly can ask for their GLP-1 products.
Here is where the governments jump in. They also see these huge GLP-1 benefits, but want to make sure the system benefits most. Obesity is one of the most costly diseases for our healthcare system and so the governments regulate the drug only for obesity use.
How can this change?
Patents will expire and other companies will find ways to bypass the patents or create their own. Pfizer and Roche are both working on their own GLP-1 products.
In other words, the supply gets bigger -> price of the drug will come down -> and governments can ease the prescriptions.
First, governments will just widen the prescriptions to more diseases, to not let the demand side surge again. But after a couple of years, I believe that you won't need a prescription anymore.
Andrew Dudum expects competition to push prices from $1,500 / month toward $50 / month as supply grows & patents expire.
Who benefits from this change?
The one who can get the GLP-1 products to the customer. As long as the products are protected by prescriptions, $HIMS basically has a monopoly.
They will need to do everything in their power to attract as many customers as possible to the platform with this monopoly.
They will need to be the front-tier supplier/platform when prescriptions fall off. If not, it will be easy for Amazon or others to catch up.
This is why the dispute with Novo is so important. $NVO is the first company to produce a GLP-1 pill. It is super important that $HIMS brings it to the customers. Customers should create a habit of ordering from HIMS.
The price targets I set in December look out of proportion at the moment. But, I still believe in the business case. With a settlement ready between HIMS and Novo, I don't see any reason to change my business case.
