- Hims & Hers shares surged 14% on news of cheap pill but ended 4% lower
- $49 price is for first month, will cost $99 afterwards for those who purchase a five-month plan
- Hims & Hers shares have been highly volatile, attracted short-sellers
NEW YORK, Feb 6 (Reuters) - Hims & Hers sent a shockwave through the pharmaceutical industry on Thursday with its announcement of a weight-loss pill with a $49-a-month introductory price. Its shares ended down anyway.
That pattern is nothing new for investors in the compounding company, an upstart competitor to established drugmakers that became a momentum-stock darling before entering into a downtrend that has seen it shed 60% of its value since mid-October.
Hims announced plans to offer a discounted compounded version of Novo Nordisk's Wegovy weight-loss pill, which has itself been losing ground to Eli Lilly's offerings in the thriving market for weight-loss drugs. Hims shares rallied sharply before a pullback that turned into a selloff once Novo threatened legal action.
"Wall Street's reaction is often based on perception, and the (initial) perception is, $49 is a lot cheaper than what they can get elsewhere," said Rajiv Leventhal, senior analyst, digital health at eMarketer.
But he noted $49 is for the first month, and it would cost $99 afterwards for those who purchase a five-month plan.
The stock surged 14% at the open of trading but ended down 4%. Shares fell a further 4% in after-hours trading after U.S. Food and Drug Administration head Marty Makary said on X that his agency would take "swift action against companies mass-marketing illegal copycat drugs, claiming they are similar to FDA-approved products."
He did not name any drugs.
VOLATILE STOCK
For investors with a strong stomach - or no interest in watching the market - hanging onto Hims stock has paid off, as it has nearly tripled over the past two years. But that stretch includes whiplash-inducing moves like its 170% surge in January 2025 that was followed by a 63% selloff - and then another 145% rally.
Roughly 69 million shares of Hims traded on Thursday, its busiest day since October.
"It is a bit disappointing that the stock really couldn't rally on good news; that's usually not a good sign," said Steve Sosnick, chief strategist at Interactive Brokers in Greenwich, Conn.
Its ups and downs have made it a favorite of short-sellers. While institutions BlackRock, Vanguard, and JP Morgan Asset Management are among the largest holders, nearly one-third of the shares have been loaned out for short bets, according to LSEG data. By contrast, less than 1% of Eli Lilly's stock is being borrowed for short bets.
Those institutions did not respond to requests for comment. The stock went through a notably volatile period over the summer after it entered into a partnership with Novo that the Danish drugmaker ended only a few months later.
“This stock has gotten hammered - it’s done nothing but go down,” said Paul Cerro, founder and chief investment officer at hedge fund Cedar Grove Capital, who used to short the stock but no longer has a position.
Since the summer, daily trading volume has declined sharply, so a busy day like Thursday was an opportunity for fund managers to sell, Cerro said. "The longs found the liquidity to get out of that position."
Options market data shows investors expect more volatility. The stock's 30-day implied volatility hit a three-month peak on Thursday, according to Trade Alert, and pricing indicates traders anticipate a potential 20% move in either direction by next week's close. That would mark the largest weekly swing since June, according to LSEG data.
Novo and Hims have been tussling since 2023, when Hims was allowed by the FDA to sell versions of Novo's GLP-1 injectable drugs while the branded medicines were in short supply.
To Sosnick, Thursday's fizzle shows the mo-mo crowd's love affair with the stock is over.
"It was a big favorite of momentum traders on the way up, and like so many of these stocks, it's much less popular on the way down," he said.
Reporting by David Gaffen; Additional reporting by Saqib Ahmed; Editing by Jamie Freed
Source: Reuters