Top 2 S&P 500 Stocks to Watch This Week After Hims & Hers Stock's Surprise Move
Key Points
Hims & Hers' stock is up after ending its lawsuit with Novo Nordisk.
The deal shows that industry power lies with the drugmakers.
Both Novo Nordisk and Eli Lilly are key stocks to watch in this sector.
- 10 stocks we like better than Hims & Hers Health ›
It has been a wild ride for Hims & Hers (NYSE: HIMS) shareholders over the last few years. The stock is currently in a 65% drawdown from its highs, but up 50% in March, due to the telehealth platform's latest deal with a weight-loss drugmaker that was formerly suing it.
Now, Hims & Hers is teaming up with its former enemies. Here are two S&P 500 index stocks to watch after this latest Hims & Hers stock move, and what it means for the future of the weight-loss market.
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Watch the weight-loss drugmakers
This deal with Hims & Hers shows the power that weight-loss drugmakers have in the market today. Initially led by Novo Nordisk (NYSE: NVO), the market is now dominated by Eli Lilly's (NYSE: LLY) Zepbound. This has helped Eli Lilly's business grow quickly in recent quarters, while Novo Nordisk's business has stagnated. However, both companies' revenues are up around 200% in the past 10 years.
Eli Lilly has a partnership with Hims & Hers competitor Ro, while Novo Nordisk is now (maybe reluctantly) in a deal with Hims & Hers. Both drugmakers likely want it to be easier for customers to get these weight-loss drugs delivered directly to their doors, which will hopefully spur customer demand.
These partnerships indicate that the industry's power lies with pharmaceutical giants such as Novo Nordisk and Eli Lilly. They have spent billions of dollars researching these drugs and getting them approved by regulators. Regardless of whether they are sold through Hims & Hers, Ro, or another telehealth platform, most of the profits flow back to the drugmakers. This is why both drugmakers earn over $15 billion in net income a year. Hims & Hers is barely profitable as a drug reseller.
Weight-loss drugs are perhaps the fastest-growing pharmaceutical category in history. They could be so monumental that they change the course of the obesity issue around the world, which would drastically improve health outcomes for millions.
Keep watching these two pharmaceutical giants. They have been top stocks over the long haul due to their leadership positions in the sector, and can ride this weight-loss drug momentum for years (and perhaps decades) to come.
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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Hims & Hers Health. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
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