**Note: This report was updated 2.20.25 to reflect updated credit card commentary.

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Cheers.

As we mentioned before, this article has been updated to reflect the recent BofA commentary and credit card data they highlighted vs our original research which means the CC data portion has been seriously cut down as an FYI.

Earlier in January, BofA sent out a note regarding observed sales and how accounting for deferrals could mean that HIMS misses on Q4 estimates. Based on the Second Measure data that BofA used, it appears that HIMS could beat its Q4 guidance of between $465 million and $470 million and sell-side estimates of $469 million.

However, the concerning data here is that the estimates for net GLP-1 contribution of 26% of sales, which has been circulated for a few months now, are much higher than anticipated. Much higher.

BofA noted that HIMS observed sales per Bloomberg Second Measure (BSM) data grew 104% y/y in January and suggests GLP-1s are ~40% of gross online sales (vs. 26% in 4Q per their estimates). Based on the January trend, 1Q’25 Online revenue could be $551MM- $574MM (representing 106-114% y/y growth).

If recognized Online revenue in 1Q’25 is $551-$574MM and recognized GLP-1 contributions are $199-$222MM, this implies that core growth could be ~31% y/y vs. 42-45% in 4Q’24 and 47-50% y/y in 3Q’24 (Exhibit 3). This suggests that the core business is decelerating at a faster pace as GLP-1 contributions support an acceleration in overall growth.

This is highly concerning given many investors believe that the company is still growing its core business meaningfully despite GLP-1s. This does not seem to be the case which further reinforces the short thesis that HIMS is becoming too dependent on GLP-1 growth while the core business is struggling to hold on to momentum thus setting it up for a steeper fall once the shortage ends.

The other factor to consider is while GLP-1 revenue could be pushing HIMS over the guidance hump, the margins could be weighing down on the bottom line.

Compounded GLP-1s have a margin of anywhere from 35% - 60% (depending on many variables) so if we contribute an extra ~4p.p. in lower margin compounded GLP-1s, there could be a miss to managements guide of $50 million to $55 million in adj. EBITDA for Q4.

This decline in gross margin started in Q1 (minimally) though continued and accelerated in Q2 and Q3 and confirmed going into Q4 based on Yemi’s Q3 commentary.

Again, we don’t speculate on earnings given that it’s not our strategy but we’re also not saying this won’t happen in a meaningful way to upend estimates. We’re only pointing out something to consider.

For reference if you haven’t read it already, you can see the math that we provided on what downside risk there would be to revenue should compounding come offline.

The first one is here when discussing what happens when you transition from 503b compounding to 503a while the other focuses on the bigger valuation picture of the company when we shared it on January 12th.

Given the massive run-up in price over the last two weeks, the biggest questions are, how will the market respond to earnings and was there any short covering recently?

Based on the NASDAQ short interest report released last week as of 1/31/25, there was a record high of shares short at ~58 million shares or ~32% of the public float.

However, if we look at Fidelity’s prime brokerage data, it looks like the run-up to $60 was largely due to short covering and not much else. Speculation around the confirmation of RFK Jr. and HIMS SuperBowl ad garnering a 650% increase was what led to the spike even though we think otherwise.

Based on the image below, “shares on loan” (not to be confused with shares short) on Fidelity’s platform decreased 36% over the last 30 days and ~21% just in the last 7 days to levels not seen since early December and October of 2024.

While this prime brokerage data doesn’t account for true shares that are being shorted, it allows us to use it as a proxy considering that in order to short shares they need to be on loan and how their data is being reported in real-time. Again, not a perfect 1:1 since you can still loan shares as collateral for long investors but it’s what we have to work with.

Given that they were recording ~32 million shares on loan as of 1/25, it seems much of the “gas” has been taken out of this rally heading into earnings if we want to use this as any kind of indicator for the +27% increase in a day for the stock.

Don’t forget as well that HIMS employees are watching this stock head to the stratosphere and are unable to sell because of the blackout period linked to their earnings release next Monday. If Employees were to be free of a lockup a few days after the earnings announcement, we could see some selling pressure coming from that particular area.

Additionally, if we want to speak abstractly, many institutional investors (if they’re smart enough) understand that this move is a short squeeze and not just from the potential beat of earnings after getting updated credit card data.

As a fiduciary to LP capital, you could assume that they’d be looking to sell into and around earnings to lock in gains for what would be a stellar start to the year performance-wise. They may be looking for increased liquidity in the market to sell down their position without hammering the stock price.

Since the start of the year, HIMS has been trading at an average daily volume (ADV) of ~10 million shares. However, there were clear days of spikes when other short interest reports came out, the news of the Super Bowl ad being released, and chatter on retail channels to pump the stock.

If institutional funds are looking for outsized liquidity, closer to or the day after earnings would be the time to do it. Of course, this is speculation but as history has always shown, retail investors are always last to the exit → see GME and AMC as some of the more recent short squeeze case studies even after the notorious “pause” by Robinhood.

With so much fuel already having been spent (short covering), it would seem logical that this would be a realistic scenario to play out. We do want to highlight that while shares on loan have been cut by nearly 1/3rd over the last 30 days, we think that an announcement of HIMS launching hormone therapies (either TRT, HRT, or both) will occur at this quarter’s earnings call.

We think either they will announce a formal launch of the condition or at least a soft date on when the launch will occur. This would have a positive impact on the perception of the future for HIMS as well as any other information regarding the success of the Super Bowl ad potentially pushing the stock up higher.

While we think Andrew and the team will be very open about future condition launches and the results of the controversial Super Bowl ad, it seems almost a guarantee that they will shoot down any and all questions regarding the contribution of GLP-1s to the growth of their business during the quarter just as they tried to do on the last earnings call.

Simultaneously, we think that the company will not have their FY’25 guidance reflect any possible interruptions from a resolution to Semaglutide which we just want to formally speak out and say how grossly negligent and misleading this would be to not acknowledge if they choose not to.

To be completely frank, having worked in this industry in the past and for their direct competitor (Ro), we are deeply worried about management’s continued push of the “gray area” for telehealth under the guise of public health and for the greater good.

There are many lines to not cross in the healthcare game and recently, in our opinion, HIMS seems to think they can push that gray area as far as they can to “win the hearts and minds of the people” and potentially sway regulatory opinion in favor of compounders once RFK Jr. starts making moves and Makary gets confirmed.

But with pushing lines comes watchful eyes and now after that Super Bowl stunt, many providers, and healthcare outlets and publicly voiced their concerns and dissatisfaction with the tactics the company is using including two U.S. Senators.

Even a recent Sermo survey of 2,000 primary care physicians conducted in January found that two-thirds of PCPs (67%) said the are concerned about the potential health risks if their patients access GLP-1 prescriptions for weight loss through a third-party telehealth company.

Fewer than 18% of respondents said they were comfortable with their patients using third-party telehealth prescribers for GLP-1 weight loss treatment and more than half (57%) said that they caution their patients against accessing GLP-1s for weight loss through these services.

You can read more about this survey via the PDF below.

This brings us to our next note, updated timing on when the shortage could end.

Since the announcement of Tirzepatide being resolved by the FDA in October,1 there has been an ongoing lawsuit by the Outsourcing Facilities Association (OFA) claiming that the FDA didn’t follow protocols for taking a drug off shortage and that they were actually wrong in their decision to do so.

This lawsuit opened up an unheard-of back-peddling by the FDA to which they agreed to “double-check” their assumptions which led to their decision to remove the drug from shortage in the first place. This was initially supposed to come in November but was delayed a month until December 19th,2 when the agency confirmed that they were right in marking Tirzepatide resolved.

That, however, has not stopped the suit from continuing, and most recently, a joint motion filed on February 11th of this year by the defendants (FDA and LLY) argued that there’s no point in responding to the OFA complaints for a preliminary injunction (PI) until after a summary judgment by the judge.

You can read the document below.

Originally, the defendants were supposed to file their motion of opposition (basically arguments against the OFA) by February 18th and then the OFA (plaintiff) would have a week to respond (February 25).

The defendants are both saying that to respond to this complaint right now is just a complete waste of time because it won’t actually matter until the summary judgment comes out if it comes out against the defendants.

The reason this is important and the reason why we bring it up is because it ties into our Expert Call from February 2nd, where they stated that the the FDA is not trying to have another OFA lawsuit on their hands if they take Semaglutide off.

This opinion from >2 weeks ago checks with a side conversation from another FDA laywer who stated that they don’t believe the FDA would make a move on Semaglutide before then.

They also added that

If we’re waiting for a PI ruling based on the above approximation of 22 days, we can expect something to happen by the middle of March at the earliest (if tied to this).

Based on the discussions and channel check data that we shared with you all on January 27th, it doesn’t seem that supply is the issue here. It appears that the agency is looking for as much cover as it can before once again making a decision that could affect millions of people.

If they are indeed waiting for this lawsuit to get resolved by winning, then the coast should be clear to act on Semaglutide given the courts have ruled in favor of the FDA making a sound decision to remove Tirzepatide from the shortage list in the first place.

The issue here though is that if the FDA is not waiting for just this lawsuit, then the next obvious hurdle would be to “wait until there’s an adult in the room,” as stated by our recent Expert Call.

As mentioned in the preview, we did add another Expert Call (should be in your inbox) with both a former FDA lawyer from the Center for Drug Evaluation and Research (CDER) who wrote the guidelines for compounders while at the FDA and another partner at an FDA law firm based out of Chicago specializing in IP and FDA regulation.

You can view that report here.

If we’re waiting for Makary, this is the timeline that we think could unfold.

On Christmas Eve, we sent out a “7 Themes We’re Monitoring in 2025” deck with you all, and on page 7 of that deck, we outlined the healthcare portion of the new administration which included Trump’s three nominees.

We concluded, as well in other reports, that Martin Makary seems to be the least concerning cabinet nominee from Trump’s line-up. While he has opinions on how COVID was handled, insiders who have worked closely with him have described him as a ‘level-headed guy who respects the FDA approval process. Though not always.’

Normally this would be a good thing for those bullish on the traditional way of doing things (i.e. jumping through hoops and spending billions on R&D and trials to get their drug approved) but there’s a problem here. Martin Makary has a massive conflict of interest that in any normal circumstances would most likely disqualify him.

Concern around conflicts of interest at the FDA is nothing new. Nine of the FDA’s past 10 commissioners went on to work for the drug industry or serve on the board of directors of a drug company.3 The agency is often criticized for being a revolving door, and ethics experts have questioned if close ties to the pharma industry create bias in public health decisions.

Martin Makary is no unicorn when it comes to having a conflict of interest before being confirmed to run an agency. He’s currently the CMO of Sesame Care (which currently offers compounded GLP-1s) and was listed on their website previously (confirmed with Wayback Machine) though not anymore and his LinkedIn has been scrubbed of all work experience.4

While Makary may not be a hotly debated individual to lead the agency, it is worth noting his conflict because both RFK Jr. and Trump have been very public about how against they are for leaders of government agencies having conflicts with pharma companies.

For example, the nomination of FDA Commissioner Robert Califf (the previous FDA commissioner who just left) was originally opposed by the Project on Government Oversight, a nonpartisan watchdog group due to his ties to the pharmaceutical industry. The group noted he received more than $1 million in pharma payments between 2017 and his nomination in 2021.

Still, Califf was easily confirmed by the Senate for a second term as commissioner in 2022 after committing to sell any relevant stocks and end his financial relationships with pharma companies.

Cynthia Schnedar was the former head of CDER's office of compliance who resigned back in 2016 due to conflicts stemming from her husband's employment, not even directly related to her. She was only on the job for 1.5 years before her resignation.

The process isn’t always smooth. In 2006, Lester Crawford, who was commissioner of the FDA for just two months in 2005, pled guilty to conflict of interest and failing to disclose financial holdings that were under the agency’s purview and was fined $90,000 in 2007.

And though we keep circling back to it, based on our Expert Call earlier in the month, if Makary wants to nip any question of loyalty to the Trump administration around a conflict of interest and come off as part of the solution (whatever that is) and not more of the problem that RFK Jr. hates, ending the shortage would be a great first move in demonstrating he’s a team player.

The $8 billion question (the market value we think is above and beyond what HIMS is worth) is when will Makary’s hearings even be? As of yesterday, it still has yet to be confirmed, but we can use history as a point of reference for a potential date.

Traditionally, a new Congress convenes around January 3rd, with confirmation hearings for nominees starting a week or two after the commencement of the new session.6

Trump in his first term and George W. Bush had the most hearings before Inauguration Day with 12 hearings. They were followed closely by Obama with 11 nominee hearings before January 20th.

The time it takes presidents to get a hearing for each Cabinet secretary nominee has varied significantly, in part due to differences in the number of nominees that dropped out of the process. Obama’s nominees took the longest, with hearings finishing in late March. He had three announced candidates withdraw during this period.

Biden stands out from his contemporaries. Despite making announcements about as quickly as Trump and George W. Bush during their first terms, and having none of his announced candidates withdraw, Biden’s nominees did not complete hearings until February 23rd. Contributing factors included Trump’s refusal to acknowledge the 2020 election results, the January 5th Georgia Senate run-off election, difficulties negotiating and navigating a power-sharing agreement in an evenly divided Senate, and the second Trump impeachment trial.

George W. Bush and Obama had a high level of success in getting their nominees confirmed in the early days of their administrations. Bush had 7 nominees confirmed on Inauguration Day, while Obama had 6. By February 1st, Bush had his entire Cabinet confirmed. Obama had 11 confirmed by February 2nd, but then hit a stalemate, largely due to candidate withdrawals.

Biden and Trump 1 faced a slower rate of confirmations. By February 1, Biden and Trump 1 only had three and four Cabinet secretaries confirmed, respectively. It took more than two months for all of Biden’s Cabinet secretaries to be confirmed. Trump’s initial slate of nominees who did not withdraw took over three months to be confirmed.

Biden’s and Trump’s nominees waited an average of 21 and 27 days between their hearings and confirmation, respectively. The delays in part resulted from increased procedural barriers placed on their nominees.

Unlike their predecessors, most of Biden’s and Trump’s nominees had to go through the cloture process and every nominee required a recorded final vote in order to be confirmed. The new Senate majority will have to devote more floor time for Trump’s nominees to be confirmed at a quicker pace than his first term or Biden’s term.

If history is any guide, we can assume that Makary’s hearings could be any time in the middle of March (at the earliest) with a full confirmation by the end of March (at the earliest) or sometime in April.

By then, the lawsuit with the OFA and additional supply should be able to give additional ammo to the FDA in order to make a decision instead of waiting for Makary to arrive. However, with so many unknowns, it’s tough to say just what the FDA will do or who/what they’ll be waiting for.

Everyone we’ve spoken to so far understands that the FDA is trying to keep its head down in the face of mass federal government firings but agrees that the longer they wait, the more compounded drugs can be hurting rather than helping the public given its loophole.

While not too important to the situation, the most recent update that has been circulating over the weekend was the article that came out on Bloomberg regarding US Health Department layoffs that hit the CMS, FDA, CDC, and ACA.

At first, this would be a bullish sign for holders long the stock but it appears that the FDA layoffs have largely avoided CDER, the department for compliance which is what we care about.

As the Trump administration continues to allow DOGE to cut employees all across departments, it will be tough to determine who is deemed safe considering that DOGE had to rehire nuclear weapons bomb specialists that were “accidentally let go.”

This assault would add additional fuel to the fire for why FDA officials will be slow to make big moves that would stir the pot and possibly put them on the chopping block.

However, never say never for the interim chief to make a last ‘hurrah’ in the event she believes she’s about to get the axe.

This trade has got to be one of the hardest and most stressful trades we’ve probably ever had to deal with and hopefully, it will be the last (unlikely). However, as you can see, being short this company has not been without deep diligence and understanding of not just the inner workings of the HIMS business but also external factors that we sought to understand to gauge timing.

Based on the new research we’ve compiled, it seems clear that the company is grossly overvalued, benefitting from a short squeeze that seems to have rid itself of most of the gas that helped get it there in the first place, and despite how the supply situation is, the agency is looking to dial back as much blowback from a large and what will be widely unpopular decision of doing the ‘right thing’ and removing Semaglutide off the shortage list.

Besides those factors, after the dust has settled, we’ll be seriously looking to see whether we’re comfortable going forward with HIMS given the near-unethical decisions the company has made in light of navigating gray areas.

Though that will be for another time. We’re still looking to release our full HIMS deck that outlines why the cash-pay telehealth business is so special and which conditions going forward make the most sense to launch in their effort to continue disrupting the healthcare industry.

If you also need a refresher on our post-shortage math that came out ~1 month before this report, click the report here to access it.

As always, we appreciate your support of our work. If you have any questions, please make sure to message or comment below. If you think others would benefit from the research/commentary we release, we would greatly appreciate you sharing.

Until next time,

Paul Cerro | Cedar Grove Capital

Personal Twitter: @paulcerro

Fund Twitter: @cedargrovecm