This GLP-1 compounder could develop a "niche, yet sizeable market", Canaccord says

Investing.com -- Telehealth firm Hims Hers Health (NYSE:HIMS ) should be able to continue offering compounded versions of the obesity drug semaglutide despite a recent announcement from US regulators that a similar product was not in shortage, according to analysts at Canaccord Genuity.

Last week, Hims & Hers shares dipped after federal drug regulators said Eli Lilly (NYSE:LLY )'s blockbuster weight-loss and diabetes medications are no longer considered to be in shortage.

Major drug companies, including Eli Lilly and rival Novo Nordisk (NYSE:NYSE:NVO ), have struggled to keep up with the soaring demand for these so-called GLP-1 class medications, which have been shown to help patients lose up to 20% of their weight on average.

Because of the shortage, US regulators have allowed other businesses to make compound versions, or close recreations of brand-name medicines.

Hims & Hers is one such compounder, offering an injection of semaglutide -- the key ingredient in Novo Nordisk's popular Wegovy drug -- for $199 per month to patients on a 12-month plan, according to its website. The company said last month that it would begin selling compound versions of Wegovy to patients in certain professions for $99 a month.

However, the Food and Drug Administration has now said that tirzepatide -- the medication Eli Lilly markets as Zepbound for weight loss and Mounjaro for diabetes -- is no longer in short supply in the US, ending a shortage classification it first put in place in 2022.

Analysts at the time noted that Hims & Hers will not be directly impacted by the FDA's decision because it compounds semaglutide, which remains on the FDA's shortage list. But they flagged that the announcement constrains Hims & Hers's future total addressable market and "portend[s] a faster-than-anticipated resolution to shortages."

Even still, the Canaccord Genuity analysts have argued that, because Wegovy in particular has shown to lead to side effects in some people, Hims & Hers may provide personalized dosing to these patients.

"Compounded GLP-1s could develop into a niche, yet sizable market," they wrote in a note to clients. They reiterated their "Buy" rating of Hims & Hers and a price target of $24.

Source: Investing.com