Hims & Hers Shares Plunge as Costs Tied to Weight-Loss Drugs Squeeze Margins

Shares of Hims & Hers Health (HIMS) plunged in late trading Monday after the company reported falling margins as costs rose, overshadowing better-than-expected sales.

The online healthcare provider’s fourth-quarter revenue nearly doubled year-over-year to $481.14 million, while earnings per share rose to 11 cents from 1 cent a year ago. Both figures topped analysts’ mean estimates compiled by Visible Alpha. 

Hims & Hers shares were down nearly 20% in extended trading Monday following the release. They had roughly quintupled in value over the past year through Monday’s close.

However, the company’s gross margin fell to 77% from 83% as costs surged. Hims & Hers said the higher costs related to the rollout of new weight-loss offerings, that it said were “strategically priced to attract new customers.”

Looking ahead, the company said it anticipates first-quarter revenue of $520 million to $540 million, above the analyst consensus.

The report comes days after shares of Hims & Hers took a hit after the Food & Drug Administration said the active ingredient in Eli Lilly’s (LLY) Wegovy and Novo Nordisk’s (NVO) Ozempic is no longer in short supply, raising worries about the strength of weight-loss offerings from Hims & Hers, which makes copycat drugs and has benefited from the limited availability of some obesity medicines.