The GLP-1 sugar high and the margin hangover

Today, I'm digging into Hims & Hers Health (HIMS).

They run a direct-to-consumer digital health platform. Similar to other providers in the space, you go to the app or the website, answer some questions, and get connected to a licensed provider. Most encounters end in a recurring prescription and/or wellness product.

Their original wedge was things people tend to be embarrassed about: hair loss, erectile dysfunction, skincare, and mental health. Then weight loss came onto the scene and changed changed their trajectory.

The exact same class of drugs that pushed Weight Watchers (Tuesday’s NOOB report) into Chapter 11 bankruptcy in 2025 is what propelled Hims & Hers up and to the right. One was the disruptor and one was the disrupted.

A few things that stood out to me:

• This is a marketing and brand company that happens to sell healthcare. They spent roughly $919M on sales and marketing in FY2025, about 39% of revenue. Hims and Hers are arguably the best-known consumer brands in telehealth, and they paid up to get there.

• Revenue went from $872M in 2023 to $2.3B in 2025. That is a near-tripling in two years, and a big chunk of that growth came from compounded GLP-1 weight loss drugs they started selling in May 2024.

• They actually make money now. FY2024 was their first full year of GAAP net income ($126M), and they generated real operating cash flow.

• They sold compounded semaglutide (the active ingredient in Wegovy and Ozempic) by exploiting a drug-shortage loophole. The FDA declared the shortage over in February 2025, the loophole closed, and Novo Nordisk publicly torched the relationship in June 2025, accusing Hims of illegal mass compounding and deceptive marketing.

• The margin hangover is here. Gross margin has fallen every year, from 82.0% in 2023 to 73.8% in 2025, and the TTM is down to 67.6% as cheap, high-margin compounded drugs get replaced by branded GLP-1s they have to buy from the manufacturer.

Hims built a great acquisition machine and a strong brand, then bolted on a category (weight loss) that supercharged the top line but came with a lot of dynamic factors outside of their control. Controlling a strong brand where the product is out of your control comes with plenty of risk.

With that said, the key takeaway for me here, outside of the dynamic nature of GLP-1s, is that this is an example where line extension works and makes sense. Hims has aimed for "easy, private, judgment-free access to a doctor," and that promise stretches across ED, skin, mental health, and weight loss without breaking. It’s tempting to take a winning brand and apply it to new markets.

Al Ries and Laura Ries wrote an awesome book on positioning/branding in 1998, The 22 Immutable Laws of Branding. One of the 22 laws is “The Law of Line Extension”.

With this law, they argue that brands get weaker as their scope expands: a name that once stood for one clear idea becomes diluted when stretched across products, categories, or price tiers. Line extension feels smart internally and can boost short-term sales, but it borrows against long-term brand equity. Their rule is “more is less”: protect the flagship and launch separate brands when needed, as Toyota did with Lexus. For HIMS, the caveat is that service-promise brands like “trusted, convenient telehealth”.

I highly recommend picking up a copy of that book.

With that, I'll see you on Saturday!

Nick

TL;DR

• Hims & Hers is a direct-to-consumer telehealth brand selling subscription treatments for hair loss, sexual health, skincare, mental health, and now weight loss.

• It makes money on recurring subscriptions plus the medications and products attached to them, with roughly 94% of revenue from the US.

• Recent growth was turbocharged by compounded GLP-1 weight loss drugs, but the regulatory loophole closed and the high-margin version is being replaced by branded drugs they buy from Novo Nordisk.

• Financially it is a paradox: revenue nearly tripled to $2.3B in two years while gross margin fell from 82.0% to 67.6% TTM, and Q1 2026 swung to a $92M loss on restructuring charges.

• The stock is down about 49% over the past year (versus Teladoc +6% and LifeMD -64%) but still up roughly 150% over five years, as the market reprices how durable that GLP-1 growth really is.

• Read alongside yesterday's Weight Watchers issue: the same GLP-1 wave that bankrupted WW supercharged Hims, but both ended up leaning on a drug they don't own.

The 30,000-Foot View

The model is simple to describe. Hims & Hers acquires a customer through heavy paid and brand marketing, routes them through an online consultation with a licensed provider, and sells them a recurring subscription. The subscription is the whole game. Once you are paying monthly for your hair loss treatment or skincare routine, you are a predictable repeat revenue stream, and they layer more categories on top of you over time.

What makes it work is vertical integration the customer never sees. They own affiliated pharmacies and fulfillment, which lets them control the experience and increasingly the cost structure. That is why capex exploded to $226M in FY2025, more than 4x the prior year. This is no longer an asset-light software story. The catch is that switching costs are thin: a subscription is a habit, not a lock-in, and a prescription is portable, so the brand and the acquisition machine have to keep doing the heavy lifting.

Revenue mix (FY2025, geographic):

• United States: ~94%

• Non-US: ~6%

Hims doesn't break out clean product-segment revenue, but the business spans sexual health, hair loss and dermatology, mental health, general wellness, and weight loss, with weight loss the swing factor of the last two years. [Category-level revenue split unavailable from filings, supply manually if you want exact percentages.]

Key Stats

• Market cap: ~$6.7B

• TTM revenue: ~$2.4B

• TTM gross margin: ~67.6% (down from 73.8% in FY2025)

• 1Y total return: -49.5%

• Employees: ~2,442

• Industry: Direct-to-consumer digital health

Company History

• 2017: Andrew Dudum and co-founders launch Hims in San Francisco, starting with men's hair loss and sexual health.

• 2018: The Hers brand launches, extending into women's health, skincare, and birth control.

• 2020: Agrees to go public by merging with Oaktree Acquisition Corp, a SPAC.

• 2021: Begins trading on the NYSE as HIMS in January.

• 2022: Expands mental health offerings and broadens the subscription catalog beyond the original niches.

• 2024: Launches compounded GLP-1 (semaglutide) weight loss treatments in May, riding the Ozempic-era shortage. Posts first full-year GAAP profit of $126M.

• 2025 (Feb): Runs a high-profile, controversial Super Bowl LIX ad attacking the food and healthcare system. Acquires at-home lab testing company Trybe Labs. The FDA declares the semaglutide shortage resolved.

• 2025 (Apr to Jun): Partners with Novo Nordisk to sell branded Wegovy, then Novo terminates the deal roughly a month later, publicly accusing Hims of illegal compounding and deceptive marketing.

• 2025 (Jul): Acquires European telehealth platform ZAVA (about 1.3M subscribers) for roughly $266M to expand into the UK, Germany, France, and Ireland.

• 2026 (Q1): Announces a strategic shift away from compounded GLP-1s toward branded drugs, books $33.5M in restructuring and inventory write-downs, swings to a $92M quarterly loss, and reaches a renewed arrangement to offer Novo's branded Wegovy and Ozempic. Raises full-year revenue guidance to $2.8B to $3.0B.

Show Me the Money

Standout financial features:

• Revenue nearly tripled in two years, from $872M (FY2023) to $2.3B (FY2025). That is rare, and also the source of the problem, because a lot of it leaned on a product they couldn't keep selling the cheap way.

• Gross margin compressed every single year: 82.0%, 79.5%, 73.8%, and now 67.6% on a trailing basis, as high-margin compounded drugs get swapped for lower-margin branded GLP-1s.

• The balance sheet flipped from net cash of $209M (end of FY2024) to net debt of about $1.0B a year later, after raising roughly $919M in debt and ramping capex into owned infrastructure. Capital-light to capital-committed in twelve months.

Financial Data

Stock Performance

Total returns, dividend-adjusted, through June 15, 2026:

The 10-year cell is blank because Hims only began trading in January 2021. The split-screen is the whole story: up about 150% over five years, but cut almost in half over the last twelve months as the market repriced the GLP-1 growth. The 3-month bounce reflects optimism about the renewed Novo deal and the raised guidance.

1-year total return versus peers:

I picked Teladoc as the largest pure-play telehealth incumbent and LifeMD because it runs almost the same DTC subscription playbook at a fraction of the size. It was a rough year for DTC telehealth all around, but Hims landed in the middle: it gave back far more than the steadier Teladoc while holding up better than the much smaller LifeMD.

The N.O.O.B. Nine — Competitive Powers

The Nerd Out on Business Nine is made up of Hamliton Helmer's famous "7 Powers" of competitive advantage (Scale Economies, Network Economies, Counter-Positioning, Switching Costs, Branding, Cornered Resource, and Process Power) combined with two of my own (Data Flywheel and Distribution Advantage).

Average Score: 2.8/5 - The moat is brand and owned distribution, not lock-in or exclusivity. It is a marketing machine more than a fortress.

Memorable Marketing

Hims & Hers markets like a consumer brand, not a healthcare provider. The strategy is to take subjects people are embarrassed to discuss, normalize them, and make buying treatment feel as easy as a razor subscription. Awareness is the product, and they will spend and provoke to get it.

Notable campaigns and tactics:

• "Sick of the System" Super Bowl LIX ad (2025): A combative spot attacking the American food and healthcare industries. It generated enormous reach and real controversy, including political pushback over disclosure, which is exactly the trade Hims keeps making: attention over comfort.

• Destigmatizing the awkward categories (ongoing): Years of bold, plainspoken creative around hair loss, ED, and mental health turned taboo purchases into casual subscriptions.

• Category land-grab via weight loss (2024 onward): Aggressive marketing of GLP-1 access rode the single biggest consumer health wave in a decade and pulled in a flood of new subscribers.

Tactical takeaways:

1. Pick the conversation nobody else will have out loud, then own it. Embarrassment is a moat against competitors who play it safe.

2. Bundle the awkward purchase into a subscription so the hard part (deciding to buy) happens once, not monthly.

3. Controversy is a media-buying strategy. Just be honest about the regulatory and reputational bill that comes with it.

4. Ride the wave, but build the brand underneath it, so you keep the customer after the wave breaks.

AI Uses & Opportunities

Current exposure:

• Hims uses tooling like MedMatch to help providers tailor treatment plans from de-identified data, and pairs medications with at-home lab testing and AI coaching after the Trybe Labs deal.

• Funnel personalization and conversion are already AI-assisted, which matters when marketing is 39% of revenue.

Future opportunities:

• AI intake and triage that automates more of the consultation, lowering the cost to serve each subscriber.

• Predictive retention models that flag who is about to cancel, directly attacking the thin-switching-cost problem.

• Personalized cross-sell, using treatment and lab data to move a hair loss customer into skincare, wellness, or weight loss at the right moment.

Bumps in the Road

• Regulatory and partner dependence. The GLP-1 story has whipsawed from loophole to lawsuit to partnership, and Hims does not control the drug, the FDA, or Novo Nordisk's patience.

• Margin compression. Replacing high-margin compounded products with branded drugs they have to buy at wholesale structurally lowers gross margin, and that trend is already visible.

• Thin switching costs. Growth has to be constantly re-bought through marketing, so any rise in customer acquisition cost hits hard. Weight Watchers is the cautionary version of this: a weight-loss subscriber will walk the moment something cheaper or better shows up, and a points program found that out the hard way.

• Balance sheet shift. About $1.0B of net debt and a heavy capex load just as profitability got bumpier means less room for error than a year ago.

• Reputational risk. Aggressive marketing and compounding controversies invite scrutiny from regulators, lawmakers, and pharma litigants.

Your Swipe File

• Owning a customer relationship in a wide category is powerful. As they’ve on with their market of "easy, private, judgment-free access to a doctor".

• A brand you own plus a product you don't is a fragile combination.

• If switching costs are low, make sure to use conservative assumptions when it comes to churn/retention.

• High margins built on a temporary advantage can be “borrowed” margins. The key is to try to understand how strong/weak your advantages are.

• Weight Watchers and Hims are the same cautionary tale told from opposite ends: one got destroyed by GLP-1s, the other got inflated by them, and neither directly controls product. If a single drug can make your business, it can break it just as fast.