Summary:
US health start-ups face sustainability issues amidst drug shortages.
Hims & Hers saw a 70% spike in share price after launching a cheaper alternative to Wegovy.
Regulatory laws limit the production of copycat drugs, threatening revenue streams.
Eli Lilly and Novo Nordisk are ramping up production, aiming to alleviate supply issues.
Legal actions are being taken against operators for false advertising and safety violations.
The Challenge for Health Startups in the Weight-Loss Market
US health start-ups are grappling with sustainability issues as they profit from the shortages of popular anti-obesity drugs like Wegovy. As telehealth companies like Hims & Hers enter the market with cheaper alternatives, questions arise regarding the long-term viability of these revenue streams.
A Surge in Demand
Hims & Hers has seen a 70% spike in share price after launching a copycat version of a GLP-1 weight-loss treatment at just $199 a month, significantly lower than the $1,349 price tag for Novo Nordisk's Wegovy. The company added 155,000 users in Q2, projecting $100 million in revenue from its weight-loss segment by 2025.
Regulatory Hurdles
However, US laws restrict the manufacturing of copycat drugs, allowing bulk production only when original brands are officially designated as short in supply. This regulatory framework puts start-ups at risk of losing their lucrative new revenue streams as major players like Eli Lilly ramp up production to meet demand.
Competition and Market Dynamics
Eli Lilly recently introduced a cut-price version of its Zepbound drug, aiming to alleviate supply issues and compete with the rising popularity of compounded alternatives. Compounded drugs, while similar, lack FDA approval and are primarily used for patients with specific needs or during shortages.
Future Outlook
Despite the uncertainty, Hims’ co-founder, Andrew Dudum, expressed intentions to continue offering a compounded version of semaglutide post-shortage, aiming to demonstrate that it serves as an additive solution rather than a competitor to branded medications. In contrast, competitors like Sesame are more cautious, indicating they may not continue offering compounded options once shortages resolve.
Legal and Safety Concerns
The compounded drug market is under scrutiny, with Eli Lilly and Novo Nordisk taking legal actions against numerous operators for false advertising and safety violations. Patient safety remains a top priority, as unsafe knock-offs could pose serious risks. The Alliance for Pharmacy Compounding argues that legitimate compounding should not be conflated with illicit activities.
The Road Ahead
As the landscape evolves, health startups like Hims must navigate a complex regulatory environment and evolving market dynamics, with potential legal battles looming on the horizon. Investors are left pondering the sustainability of these ventures as the industry faces a crossroads.
This article has been updated to clarify that Hims & Hers’ projected $100 million revenue from weight loss products by the end of 2025 does not include GLP-1s.
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