Hims & Hers' Alleged Patient Data Handoff Brings 5 States Knocking (Zuck's Ad Algo Pleads the Fifth)

Hims & Hers: "We take your privacy seriously."

The FTC: "Then explain why Zuckerberg knows about my erectile dysfunction."

It appears Gen Z's favorite online pharmacy has finally discovered a medical condition it can't treat.

Five state attorneys general crawling up its a**.

And unfortunately for Hims & Hers shareholders, there doesn't appear to be a GLP-1 prescription available to make this particular problem go away.

Quick recap: On Tuesday, Arizona, Florida, Nebraska, Ohio, and Wisconsin officially joined the FTC's lawsuit accusing Hims & Hers of sharing customers' sensitive medical information with third-party advertising platforms.

Including Marky Mark (read: Meta) and Snap.

Because nothing says doctor-patient confidentiality quite like Mark Zuckerberg knowing why your marriage is struggling.

Now, if you're wondering how we arrived at this pharmaceutical sh*tshow, rewind to July.

That's when the FTC accused Hims & Hers of promising customers privacy while allegedly sharing their sensitive medical information with Meta and Snap.

Patient: "Doc, I think I'm losing my hair."

Facebook five minutes later: "BALDING? TRY THESE 17 PRODUCTS."

But apparently, the FTC wasn't finished rummaging through Hims & Hers' medicine cabinet. 

The lawsuit also accuses Hims & Hers of charging customers for prescription medications before they even meet with a healthcare provider, then making canceling their subscriptions unnecessarily difficult.

Which is certainly one way to improve customer retention.

Comcast executives frantically taking notes.

And with five additional states now joining Utah and Los Angeles County in the legal festivities, the company seems to be entering into the Find Out portion of its regulatory journey.

For its part, Hims & Hers denies the allegations, calling them flawed and promising to vigorously defend itself.

However, defending itself in court is only one of the company's problems right now.

While management has been busy fighting the FTC, HIMS shareholders have been playing the world's most expensive game of hot potato.

And judging by the stock chart, the last guy holding it just lost his retirement account.

Shares are down 26% in a single week.

And Monday's earnings report might explain why.

Turns out Hims & Hers' expensive pivot toward branded weight-loss drugs has been so effective that management had to cut its full-year adjusted EBITDA outlook.

The company's third-quarter revenue actually jumped 49% to $890 million.

Except, gross margins collapsed from 74% to 57%.

Meaning Hims is selling considerably more product while getting to keep a smaller slice of every transaction.

The customers are eating. The shareholders are starving.

Meanwhile, despite making customers obtain a presidential pardon just to cancel their subscriptions, Hims & Hers still lost 100,000 subscribers, bringing its total to 2.8 million. 

Perhaps making the cancellation button easier to find wasn't such a terrible idea after all.

Just four days earlier, Hims & Hers announced a new agreement with Eli Lilly to expand access to the pharmaceutical company's blockbuster weight-loss treatments, Zepbound and Foundayo.

A deal that should have been cause for celebration.

Instead, investors took one look at the company's deteriorating margins, reduced profit forecast, and increasingly expensive business model and decided they'd seen enough.

By Tuesday afternoon, HIMS was trading around $18.76, down more than 18% on the day and 26% over the previous week.

And once again, shareholders are left asking the same question: “What would this company be worth if it could just stay out of court?”

Well, I guess we'll never know.

At the time of publishing this article, Stocks.News holds positions in Meta and Snap as mentioned in the article.