Hims and Hers Health reports disappointing earnings; Novo Nordisk fails to outperform Eli Lilly in a head-to-head study; A reader's incredible weight-loss story using Zepbound; Greetings from Cape Town
1) "Stinky Six" stock Hims and Hers Health (HIMS) reported fourth-quarter earnings after the close yesterday...
Revenue was up 28% for the quarter, but margins fell sharply. That resulted in net income dropping by 21%. And the company's guidance for first-quarter revenue growth of only 2% to 7% missed expectations.
Plus, as this Wall Street Journal article notes:
The results come as Hims & Hers faces a lawsuit from Novo Nordisk seeking to ban it from offering copycat versions of Novo's weight-loss drugs. Novo Nordisk has accused Hims & Hers of violating the patents covering its Ozempic and Wegovy drugs, while Hims & Hers has criticized the lawsuit as an attack on an affordable option for medicines.
The federal health agency referred Hims & Hers to the Justice Department for potential violations of the Food, Drug, and Cosmetic Act.
HIMS initially collapsed this morning before moving higher. Through yesterday's close, it's down nearly 70% since I named it as one of my stocks to avoid in my October 29 e-mail. I continue to warn against it.
2) GLP-1 drug pioneer Novo Nordisk's (NVO) shares plunged 16% yesterday on disappointing news...
As reported by the WSJ, its new obesity treatment, CagriSema, failed to outperform Eli Lilly's (LLY) Zepbound in a head-to-head study:
The study results are a setback for Novo Nordisk in its efforts to regain ground lost to Eli Lilly in a market that it helped pioneer. The Ozempic maker has already in the past year reshuffled its leadership, announced sweeping job cuts and warned of weaker-than-expected results...
In the late-stage study, people treated with CagriSema achieved a weight loss of 23% after 84 weeks, compared with 25.5% with Eli Lilly's tirzepatide. Tirzepatide is marketed as Mounjaro for Type 2 diabetes and as Zepbound for obesity.
Novo Nordisk said this meant its drug missed the trial's primary goal of showing a noninferior weight loss compared with tirzepatide. Prior studies suggested CagriSema didn't significantly outperform Zepbound, but those trials didn't compare the two drugs against each other.
In my February 9 e-mail, I compared the two stocks and noted:
But I like Novo less because its drug, semaglutide – marketed as Wegovy and Ozempic – is inferior to tirzepatide. Lilly's drug has been shown to result in greater weight loss with fewer side effects.
But I also shared the bull case for the stock that Oliver Müller of European investment firm Accresco presented at the ValueX conference in Switzerland earlier this month. (You can see it here, shared with permission.)
Oliver shared this update with me after yesterday's sell-off:
I think the market reaction reflects a sharp reset of expectations for CagriSema as a "clear win" versus Eli Lilly's tirzepatide. I agree that the readout is a meaningful narrative and credibility setback. However, I do not view it as sufficient to overturn the longer-term investment case given the scale and under-penetration of global obesity treatment.
He cites several reasons why the sell-off looks overdone...
First, obesity remains a huge and underserved market. About 934 million people struggle with obesity, while roughly 0.4% are taking GLP-1s. "In a market that is far from saturated, the winner takes all framing is often too simplistic," Oliver wrote. "More than one scaled leader can compound volumes for years, especially while manufacturing capacity is a binding constraint."
Next, Oliver argued that the difference in weight-loss results between the drugs – 23% for CagriSema versus 25.5% for Zepbound – is too narrow to declare an obvious winner in the marketplace. In the long run, other factors – including things like cost and availability – will determine market share.
"The competitive race is unlikely to remain a pure 'max weight loss' contest indefinitely," he wrote. "As efficacy reaches very high levels, differentiation naturally shifts toward broader attributes – side effects, discontinuation, long-term maintenance, comorbidity benefits, route of administration, and real-world persistence."
Oliver also points out that obesity is a global problem. International markets, notably India and China, represent a huge opportunity. In those places, Novo has a big lead on Lilly in terms of distribution, supply reliability, price, and access.
He concludes by saying:
This latest trial is a real setback: It weakens the simplest "CagriSema matches Lilly" narrative and will likely weigh on management credibility until additional data (and subsequent trials) clarify the true performance envelope. Nonetheless, I believe the magnitude of the share price reaction embeds an overly pessimistic view of (i) the commercial viability of a 23% weight-loss product and (ii) the longer-term market structure in an underpenetrated, capacity-constrained category that can support multiple winners. I therefore maintain NVO as a BUY, with the explicit caveat that the path to restoring investor confidence may be measured in quarters, not weeks.
Thanks for sharing your views, Oliver! Meanwhile, I still remain bullish on Lilly's stock.
3) Speaking of Lilly's weight-loss drug, in yesterday's e-mail, I asked my readers to share their stories to help me persuade my friend to start taking it.
I received an incredible response, and today I want to share a powerful story from Jeff H. (I'll share more responses in a future e-mail). He begins with his background:
After turning 40, as with all the men in my family, I started growing a pot belly. It was devastating because I had always been naturally fit and was used to my low-maintenance good looks. I had some success with diet and exercise. I have a very active life, but also a huge appetite for good food. The weight would always return.
By the time I was in my mid-50s, I assumed it was time to surrender. I threw away most of my fit-guy clothes and filled my closet with XL and XXL. At 6'4", I weighed 250 pounds. In my late 50s, my blood pressure and cholesterol were consistently high. I still swam and played tennis, but never lost weight unless I went on a starvation diet.
Jeff then details his experience with Zepbound:
My physician wanted me to start taking all the drugs for blood pressure and cholesterol that most all of us big-bellied old men take. I resisted and told him that if I could lose weight, my vitals would return to normal. He agreed to let me try (again), but this time with a prescription for Zepbound. I don't remember the cost, but it was reasonable – maybe free. My insurance paid because I was technically obese.
Next time at my doctor, 30 days later, I was 241 pounds and already feeling euphoric. My blood pressure was normal and the blood work was trending significantly in the right direction. The next month or two later, I was 225 pounds. (My doc wanted to check with me regularly because I was one of his first patients to be on the drug.) The entire staff was high-fiving me.
He continued successfully taking the drug without insurance coverage:
Unfortunately, my insurance stopped covering the drug because, as they noted, I was no longer obese. The monthly cost soared to about $2,500. This was not sustainable. I read in Forbes about the top providers of weight-loss drugs from alternative pharmacies, which provide essentially generic versions, and my physician gave me his blessing to work with one called Remedy Meds.
Now, for $399 a month, I have been continuing the "miracle." I am now steady at 200 pounds and am starting to go to a gym to do some weight resistance work. My tennis game is immeasurably better. I still eat great food, but in considerably smaller portions. I have a distaste for junk food – chemical-laden junk literally does not taste good. I drink far less alcohol without even thinking about it, yet I still enjoy drinking with my friends, who I don't think even noticed my more moderate consumption. My next goal is to lower the monthly cost again.
Jeff also notes that there were some undesirable effects, mostly at the beginning of his journey:
I would have gastro-distress and constipation that was terrible. I quickly learned that this was because I wasn't listening to my body. I would stubbornly eat the same-sized portions that I had become accustomed to over my life. My body punished me. I began listening to my body, and the bad effects stopped. I think it is during this first phase that many people stop because it is not pleasant.
I was thinner but looked terrible. After decades of my skin being stretched over a fat body, it now hung on me like a loose sack. The good news is that skin is a remarkable organ and the elasticity still works. It took a bit of time, but my skin now fits me again. With the loss of the fat, my loss of muscle mass (from years of sitting on the sofa eating peanuts or chemical-filled junk and drinking Scotch on my time off) is more obvious, so I joined the gym.
Nothing in my closet fit me except for one T-shirt I saved for sentimental reasons. I had bought the shirt when I was 26 or 27 years old on a visit to the Netherlands... to watch the European World Cup. It was one of the most enjoyable events of my life, and the shirt now fits me perfectly. A man can't live on one T-shirt, so I flew to New York and spent a couple days at Bloomingdale's (I love the men's section there!) and other stores that have, thank God, been able to stay open and started to rebuild my new wardrobe. This side effect was a bit expensive, but I had a blast. I went to the opera after a shopping day in a new suit and more people smiled at me, wanted to say "hello," and chat than I remember since I was much younger.
He concludes with a heartwarming sign-off and a photo:
You didn't ask for another miracle story, but I can't resist telling mine. Tirzepatide changed my life... saved my life.
You look great, Jeff – thanks for sharing!
4) After four wonderful days in Lamu, Kenya with my parents and buddy David Berman, we flew back to Nairobi midday yesterday.
David had a 1 a.m. flight to Cape Town, South Africa while I had a Thursday flight back to New York City. But David suggested I join him and, generous guy that he is, offered to buy my ticket.
Long story short (with the permission of the world's most patient woman and wonderful wife, Susan), we arrived in Cape Town at 5 a.m. this morning. Susan found a flight home for me on Sunday afternoon for only $541 (and I preserve the return flight home from Nairobi for a future trip). I love it when last-minute things work out perfectly!
I also love Cape Town – it's one of best cities in the world and crazy cheap. I plan to hike Lion's Head and Table Mountain every day that I'm here – at the former, I'll be going to see the sunset.
Today, David and I had lunch with his mate Roy at a fantastic new restaurant called Luuma. I ate the best prawns I've ever had, and the meal was only $40 – it would have easily been $200 in New York City.
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.