Why Is Healthcare Turning Into a Subscription?

Transcript

From the video captions, split by chapter. Timestamps link to that moment on YouTube. Corrections are marked inline.

3 passage(s) with price targets or valuation scenarios were removed from this transcript (see Methodology).

0:00 Why is healthcare turning into a subscription?

You pay monthly for music, for movies, for cloud storage. Now millions of people pay monthly for their health care too. An online doctor visit, a prescription, and a box at the door, every month. The biggest company built on that idea is Hims and Hers.

It is also at the center of the hottest and messiest market in medicine, the weight loss drugs known as GLP-1s. That makes it one of the most fascinating, and most controversial, stocks of the decade. This is Bet The Decade. Today we look at Hims and Hers.

Its history, how the model works, the GLP-1 saga, the numbers, the bear case, and my personal model. This is not financial advice, and nothing here is medical advice.

0:50 How did a men's health startup get here?

The company, Hims and Hers, was founded in San Francisco in twenty seventeen. The idea was to make care for awkward, everyday problems simple, private and online. In January twenty twenty-one, it went public through a merger with a blank check company, Oaktree Acquisition Corp, and began trading on the New York Stock Exchange. Growth has been fast.

In twenty twenty-five, revenue reached about two point three five billion dollars, up fifty-nine percent in one year, and the company earned a net profit of about one hundred twenty-eight million dollars.

1:27 How does the subscription model work?

Here is the loop. A customer fills in an online visit. A licensed provider decides whether a treatment fits. If it does, the medicine ships to the door, and the plan renews on a set schedule until the customer pauses or cancels.

By the end of June twenty twenty-six, Hims and Hers had about two point nine million subscribers, up nineteen percent in a year. And each subscriber is worth more than before. Monthly revenue per average subscriber was ninety-two dollars in the second quarter, compared with seventy-six dollars a year earlier. The menu keeps growing.

In October, the company added injectable and oral testosterone options for eligible men. It is also going global. In February, Hims and Hers agreed to buy Eucalyptus, an Australian digital health company, for up to one point one five billion dollars. The deal closed on June second and added markets such as Australia, the United Kingdom, Germany, Japan and Canada.

2:32 Why is the GLP-1 decade such a big deal?

The biggest growth engine of the last few years was weight loss. While GLP-1 drugs like Wegovy were officially in shortage, United States law allowed compounding pharmacies to make copies. Telehealth companies, including Hims and Hers, sold them for less. That window began to close in February twenty twenty-five.

The FDA said the semaglutide shortage was resolved, and its grace period for most compounders ended in April and May of that year. In April twenty twenty-five, Novo Nordisk, the maker of Wegovy, started working with Hims and Hers. Only about two months later, in June, Novo ended the deal. It accused the company of mass compounding and deceptive marketing.

The company disputed that, and its shares fell about thirty percent in a day. In September twenty twenty-five, the FDA sent Hims and Hers a warning letter. It said claims that its compounded drugs had the same active ingredient as Ozempic and Wegovy were false or misleading. Then came February twenty twenty-six.

The company launched a forty-nine dollar compounded semaglutide pill. The FDA said it would restrict the ingredients for mass marketed copies and refer the company to the Department of Justice. The company pulled the pill two days after launch, and Novo sued it for patent infringement. One month later, the story flipped.

On March ninth, Hims and Hers and Novo Nordisk announced a new collaboration. Ozempic and Wegovy, including the Wegovy pill, came to the platform. The company stopped advertising compounded GLP-1s, and Novo dropped its lawsuit. So the business changed shape.

Less of its own compounded product, more branded drugs bought from a drug maker. That brings more customers and more revenue, but a thinner slice of each dollar.

4:33 What do the numbers say?

In the second quarter of twenty twenty-six, revenue was about seven hundred fifty-three million dollars, up thirty-eight percent from a year earlier. United States revenue grew sixteen percent. Revenue from the rest of the world jumped from seven and a half million dollars to about one hundred thirty-one million, helped by Eucalyptus. The company raised its twenty twenty-six revenue outlook to between three point one and three point three billion dollars.

It expects adjusted EBITDA of two hundred seventy-five to three hundred twenty-five million. Its own long-term targets for twenty thirty are at least six and a half billion dollars in revenue and one point three billion in adjusted EBITDA. Those are company goals, not results. On June thirtieth, it had about eight hundred forty-one million dollars in cash and short-term investments, against about one point three seven billion dollars of convertible notes.

The next check-in is on Monday, November ninth, when Hims and Hers reports its third-quarter results after the market closes.

5:41 What could go wrong?

Now the other side of the trade. The first risk is margins. Gross margin fell from seventy-six percent to sixty-four percent in a year. Management says that as branded weight loss and international sales grow, margins will stay below the levels it achieved in the past.

And the bottom line turned red. In the second quarter, the company posted a net loss of about eighty-six million dollars, after a profit of forty-two and a half million a year earlier. Free cash flow was negative sixty-eight million. The second risk is regulation of compounding.

The shortage that allowed mass copies is over. In February, the FDA said it would restrict GLP-1 ingredients for unapproved copies that are mass marketed by companies, and it named Hims and Hers. Compounded GLP-1s on the platform are now limited to cases where a provider decides they are clinically necessary. The third risk is Novo Nordisk and the FDA.

The company has been on both sides of Novo, partner, then opponent, then partner again. Novo dismissed its lawsuit without prejudice, which means it could be filed again. And the FDA has already sent one warning letter about marketing claims. The fourth risk is the subscription model itself.

In July, the Federal Trade Commission, the state of Utah and Los Angeles County sued Hims and Hers. They allege unclear subscription consent, hard cancellation, and sharing of health data for advertising. These are allegations, not findings. The company says it will defend itself, and it booked a forty-seven and a half million dollar legal charge.

Regulation can also open doors. On October twenty-eighth, the Department of Health and Human Services said it would temporarily not act against certain pharmacies compounding six peptides while it writes a formal rule. That is not an FDA approval, and the rules can change again.

7:45 What could the decade look like?

So what could twenty thirty to twenty thirty-five look like? In a bull scenario, a monthly health plan becomes as normal as a phone plan, and Hims and Hers becomes a global front door to care, and drug makers use it to reach patients. In a bear scenario, margins keep shrinking, regulators and courts tighten the rules, and the brand never escapes its controversies. Both are scenarios, not forecasts.

Here is my personal model. This is my opinion only, not a forecast and not advice. I built three scenarios for how the company's value could change by the early to mid twenty thirties, starting from prices in late October twenty twenty-six. [Sentence removed on this site: price target or valuation scenario. See Methodology.]

The method: a revenue estimate at the end of the horizon, times a margin, times an earnings multiple, compared with today's value, after dilution. The bull case is very uncertain, and the cautious case could still be too optimistic. [Personal holdings statement omitted on this site. The author may hold shares in companies discussed. See Disclosure.] Again, this is not financial advice, and it is not medical advice.

[Personal holdings statement omitted on this site. The author may hold shares in companies discussed. See Disclosure.] Do your own research.

9:06 Why am I betting the decade on it?

My thesis: more and more everyday care will be bought like a subscription, online and across borders. In my view, Hims and Hers is one of the largest platforms built for exactly that. The key risks are margins, regulation, and trust. Would you pay a monthly fee for your health care?

Tell me in the comments. [Personal holdings statement omitted on this site. The author may hold shares in companies discussed. See Disclosure.]