Hims & Hers Suffers a Setback as FDA Declares End of Eli Lilly's Weight-Loss Drug Shortage

Resolution of Eli Lilly's Drug Shortage

The Food and Drug Administration (FDA) made a significant announcement on Wednesday, stating that the supply shortages of Eli Lilly's widely-used weight-loss and diabetes drugs have been resolved. These drugs had been experiencing a shortage due to the surge in demand for anti-obesity drugs in recent years. However, the availability of a sufficient supply of GLP-1 drugs now could indicate a potential deflation of the 'fat bubble' in equity markets.

The FDA confirmed the resolution of the multi-year shortage of Lilly's Zepbound and Mounjaro, and emphasized that there are "legal restrictions on making copies of FDA-approved drugs" when a shortage does not exist.

Impact on Hims & Hers Health

Following the FDA's announcement, shares of the telehealth company, Hims & Hers Health, experienced a nearly 12% drop in premarket trading in New York. This company has been known for selling generic versions of weight-loss drugs. As indicated earlier, this could be seen as the official bursting of the 'fat bubble'.

In contrast, Lilly's shares remained relatively stable in premarket trading, with a slight increase. Similarly, Novo Nordisk, the manufacturer of Wegovy, saw a half percent increase in Denmark.

Market Dynamics

According to Goldman's index of companies with high exposure to GLP-1s, momentum has slowed throughout 2024. Companies that were previously at risk due to the success of GLP-1s have been gradually recovering their losses.

Eli Lilly's Executive Vice President, Patrik Jonsson, stated that Lilly has made significant investments to expand the production of GLP-1 drugs and introduce new options to the market. He emphasized that the resolution of the shortage demonstrates Lilly's dedication to providing a consistent supply of authentic and safe medicines.

Competition and Legal Concerns

Lilly and its rival, Novo Nordisk, which manufactures the diabetes drug Ozempic and the weight loss drug Wegovy, have been engaged in a fierce competition against the generic GLP-1s market. In August, Lilly's legal representatives issued warnings to prescribers to stop selling the generic drugs.

Experts cited by Bloomberg estimate that hundreds of thousands of Americans have used generic versions of Lilly and Novo's weight loss drugs. They added that the manufacturers of these compounded drugs could be earning up to $1 billion a year.

Scott Brunner, CEO of the trade group Alliance for Pharmacy Compounding, expressed concern that the FDA's decision to end the shortage designation for these drugs could pose challenges for consumers who have been using off-brand compounded tripeptides. He noted that pharmacies "must immediately cease preparing and dispensing compounded copies of Mounjaro and Zepbound."

Bottom Line

This development in the pharmaceutical industry raises important questions about the future of generic drug manufacturers and the potential impact on consumers who rely on these medications. How will this decision affect the broader market and the ongoing competition between original and generic drug manufacturers? We invite you to share your thoughts on this issue and discuss it with your friends. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.