Hims stock rallied almost 22% in two days on enthusiasm after the Food and Drug Administration said it will allow compounded versions of Eli Lilly's blockbuster weight-loss drug.
Specifically, the FDA said compounding pharmacies and facilities will be allowed to sell their versions of tirzepatide. Lilly sells tirzepatide as a type 2 diabetes treatment called Mounjaro and as the obesity treatment Zepbound. The FDA is currently reexamining whether tirzepatide is in short supply. If so, compounders can step in to help alleviate the shortage.
Hims & Hers Health shares jumped 9.7% on Monday and 11.2% on Tuesday following the FDA's decision. On Wednesday, shares reversed lower and fell 1.9% to 22.36.
But the massive jump in Hims stock might be at risk, based on IBD stock research.
According to MarketSurge, Hims stock has an average true range of 1.14. That means on any given day shares travel an average 1.14 above or below their opening price — or 5.5%.
But investors are encouraged to have a stop loss at 7% to 8%. So, the entry must be perfect with Hims stock or they'll get shaken out with the normal 5.5% movement.
Hims Stock Is Nearing A Breakout
Meanwhile, Hims stock is forming a cup base with a buy point at 25.74. Shares approached that mark on Tuesday.
Shares this week have cleared a short-term high of 19.99 and a trendline, offering early entries.
HIMS is approaching a 25.74 buy point. But, at 22.80, it's actually trading 11% below that high. A handle could also form on the base. Usually, a handle can form anywhere from less than 1% off the cup's left-side peak and up to usually 15%.
But it's anyone's guess how the FDA move will play out. An industry group for compounders called the Outsourcing Facilities Association sued the FDA after the agency removed tirzepatide from its drug shortages list. When a drug is on the shortages list, compounders can step in to help fill the gap.
According to the Outsourcing Facilities Association, tirzepatide is, indeed, in shortage.
In response to the lawsuit, the FDA said it would review its decision and allow compounders to make their versions of tirzepatide in the meantime. Hims stock took off on the news.
Hims Focuses On Semaglutide
But, it's important to note, Hims & Hers doesn't make tirzepatide. Instead, the company compounds its version of semaglutide injections, which Novo Nordisk sells in diabetes and obesity treatment as Ozempic and Wegovy, respectively.
"Whenever we bring a treatment to our platform, our first consideration is how accessible it will be for the large majority of customers and accessible means consistently available at a reasonable price," a spokesperson told Investor's Business Daily by email. "Through that lens, right now we're focused on offering semaglutide and our oral therapies."
Hims & Hers is due to report its third-quarter earnings after the market closes on Nov. 4. Hims stock analysts project adjusted earnings of 10 cents per share on $382 million in sales, according to FactSet. Earnings would reverse from a year-ago loss, while sales rocket 68%.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
