Hims vs LifeMD: An In Depth Review.
Deep Dive
A growing number of Tech Stock Goldmine alumni are writing their own company deep dives:
Max wrote a deep dive on ELF Beauty.
Satishan wrote a deep dive on a “forbidden investment.”
An in depth comparison of LifeMD and Hims reveals what patients in the US really want: great outcomes and free treatments. At the limit, LifeMD can’t do that but Hims can.
In turn, LifeMD’s advantage over Hims is that is has far less legal risk and it still presents appealing upside.
LifeMD is essentially like Hims, except that it has a focus on insurance coverage and it lacks in-house personalised compounding capabilities. LifeMD’s attention is currently split between making insurance coverage easier to access and between going the Hims way, with LifeMD’s proprietary compounding pharmacy “on-track” to launching by this summer. Although LifeMD’s execution to date is commendable, the graph below suggests that the market is far more welcoming of Hims’s exclusive focus on delivering better patient outcomes per dollar spent, in absolute terms.
LifeMD’s weight loss vertical has gone from 5,000 active subscribers in Q2 2023 (when they launched the vertical) to over 75,000 in Q4 2024, the last quarter in which they disclosed the metric. This shows LifeMD has a competitive ability to deploy and mature new verticals. However, as you will infer from LifeMD CEO Justin Schreiber’s below remarks during the Q1 2025 earnings call, LifeMD is highly focused on delivering a better user experience for insurees. So long as this focus remains, LifeMD can only optimise drug prices within the inflationary dynamics of the legacy healthcare system:
At LifeMD, we feel the insurance component of these offerings is very important.
And as you know, we’ve invested an enormous amount of time and resources into building a platform for accepting commercial and government insurance programs and for making sure that we’re doing that compliantly and training our providers and doing everything else that’s required to scale that side of the business.
Assuming both management teams are similar, Hims’s exploding cash from operations relative to LifeMD’s suggests that US healthcare customers want the best outcomes they can possible get and the cheapest treatments in absolute terms - not relative to the inflationary tendency of the legacy healthcare system. This is why in essence, seeking to reduce the friction in the insuree experience does not present as explosive upside as the Costco Algorithm applied to healthcare does.
At the limit, customers would be most delighted with optimal outcomes and essentially free treatments. Free treatments are not viable in a model that consists of minimising inflation, while they are viable in a model that’s ultimately about generating a vertical ontology of the healthcare system. Hims’s end game is building such an ontology that can then be leveraged to bootload a healthcare AI. Long term, the way to make this AI most irreplicable is by compressing the margins of the underlying healthcare business to zero so that it’s near impossible to replicate Hims’ network.
Such deflationary remarks seem ridiculous in the context of healthcare, but this is happening in every other industry that’s been penetrated by internet-driven business models earlier. A great example is the stock brokerage business which is currently on a deflationary spiral towards effectively zero trading fees, in order to maximise the number of dollars that can then be funnelled into long duration financial services. Prices may not reach zero in every industry, but as AI continues to scale most network-based businesses will do whatever is necessary to maximise data advantages and thus create the best AI models possible.
On the other hand, LifeMD’s business has less legal risk because it’s an enhancer of the current healthcare system and not a disruptor. This is best evidenced by the deal they closed in Q1 2025 with both Novo and Lily to improve access to GLP-1s for patients without insurance coverage. Unlike Novo, Lily has been slower to close a deal with Hims because the latter is a disruptor and until Hims has deals with every single large pharma player, its legal risk will continue to be higher than LifeMD’s.
Nonetheless, it was interesting to see LifeMD CEO Justin Schreiber confirm my suspicions in the Q4 2024 earnings call - Lily and Novo are on on a race-to-scale:
Secondly, we have seen the drug manufacturers that control the current GLP-1 market begin to compete with each other in the self-pay market. Now, the supply levels have stabilised.
In the past several weeks, both Eli Lilly and Novo Nordisk, the manufacturers of Zepbound and would go be respectfully announced price reductions to their self-pay GLP-1 product offerings, bringing the price of some dose levels as low as $3.49 per month.
This ultimately means that the pharma industry per se is also on a deflationary tendency. As more conditions come to be cured via peptides, this sort of competitive dynamic will likely further accentuate - because it will be increasingly harder for end customers to tell the difference between one branded drug and the other. This also likely means that pharma companies will be increasingly prone to default to the distributor with the largest network. Meaning that whichever company customers love most (free treatments) will ultimately get the better conditions from pharma companies.
With the shift to treating or preventing conditions via the administration of complex amino acid sequences that we are likely to see over the coming ten years, pharma stands to make most money by hyper-personalising treatments. In effect, a not-dying-as-a-service is a far bigger business than having people die sooner or later after paying for one single expensive treatment. However, much of the value creation in hyper-personalisation will accrue to networks. Meaning that while the deal with Novo de-risks the Hims thesis considerably, the friction between Hims and pharma companies is likely far from over.
LifeMD has plenty of upside by continuing to scale across the Medicare insuree base, but its platform seems far less efficient than Hims’s.
As previously mentioned, the growth of LifeMD’s weight loss vertical points to a notable ability to deploy and mature new verticals. Even without having a cost advantage in absolute terms, LifeMD has plenty of upside by continuing to scale across the insuree base in the US and treating more conditions. During the Q4 2023 earnings call, LifeMD CEO Justin Schreiber alludes to their technology platform giving them great operating leverage, by enabling LifeMD to deploy new verticals efficiently:
And we've just really now built the infrastructure through this weight management offering, like, and develop the tech to a certain point where we can quickly and efficiently launch these new care offerings that are great cross-care offerings as well. And so I think that's something that we really want investors to understand and look forward to.
But as you may appreciate in the graph below, cash from operations (orange line, next axis) is not scaling as LifeMD continues to deploy verticals. On the other hand, CapEx (blue line, right axis) is scaling rapidly. This stands in contrast to Hims’s rapidly scaling cash from operations and CapEx which you can see depicted in the next graph. While this doesn’t mean that LifeMD doesn’t have appealing technology, it tentatively points to Hims’s platform being far superior. Thus, although LifeMD presents less legal risk, Hims’s value proposal and overall infrastructure are far more appealing to me.
As previously mentioned, LifeMD is gearing up to launch their own compounding pharmacy by the start of this summer and they expect to be licensed across “most states” in the US by the end of year. I believe this will tend to scatter their focus and will likely further accentuate the delta depicted above between LifeMD and Hims. In-house compounding adds complexity to LifeMD’s infrastructure and they’re already not excelling relative to Hims at the software level.
As Netflix has illustrated since 2022, in the digital space a marginal advantage in overall user experience tends to equate to an exponential advantage in terms of user growth. If you’re a little bit better at the various components of your business than your nearest competitor, you tend to take most of the pie. With LifeMD’s cash flow from operations not scaling as fast as Hims’s with the addition of new verticals, although LifeMD is far from being badly managed, it doesn’t look like the sort of company with hyper-growth potential.
Meanwhile, the evolution of LifeMD’s free cash flow per share is unappealing:
To LifeMD management’s credit, it caught my eye that they allegedly spent time optimising the unit economics of RexMD. LifeMD then printed positive cash from operations for the first time ever in Q2 2023, which demonstrates that LifeMD management has a good ability to optimise processes. This is why although LifeMD’s platform seems to be less efficient than Hims’s at present, I wouldn’t discard future non-linear leaps in efficiency making LifeMD a more appealing investment. As Schreiber mentioned in the Q1 2025 earnings call, just scaling throughout Medicare has lots of upside:
Another major milestone is our acceptance of fee-for-service Medicare, opening a significant and largely untapped market. We’ve already expanded coverage to over 21 million Medicare Part B beneficiaries across 26 states, and we’re on track to reach 49 states and over 60 million beneficiaries by the end of Q2.
Approximately 75% of the Medicare population suffers from obesity or chronic cardio-metabolic conditions such as diabetes, hypertension or high cholesterol, all areas where LifeMD delivers or intends to deliver high-quality and effective care.
Given the lack of convenient, timely access to primary care for many Medicare beneficiaries, we believe our virtual care model is uniquely positioned to serve this population while diversifying revenue and improving outcomes.
LifeMD launched its own pharmacy in 2024, which is currently licensed in 47 states and was shipping around 20,000 orders per month in Q4 2024. This is key infrastructure to scale up across the insuree base and I will be watching the progress of the facility closely. It should serve as a proxy to understand the likelihood of LifeMD’s ability to bring to life and operating its upcoming compounding facility.
Lastly, LifeMD launched its hormone replacement therapy (HRT) vertical in 2023 and 2024: in September 2023, it partnered with ASCEND Therapeutics to offer EstroGel for women and in October 2024, it introduced TestoRx, a direct-to-consumer testosterone therapy service for men through its Rex MD brand. It was interesting to learn that gross margins are not as appealing because COGS (cost of goods sold) is higher than in other verticals. But also that the business is highly accretive to the bottom line, because retention is so high:
So HRT, for example, while extremely profitable from a bottom line economic standpoint because of the retention associated with it, which obviously drives a lot of leverage in the ad spend, the pure gross profit is not, the gross margin percentage that is, is not as high as some of the other businesses because the underlying COGS are higher.
So it'll be in upper 70s, mid to upper 70s versus an upper 80s, but obviously it's very accretive to the bottom line of the company.
-LifeMD CFO Marc Benathen during the Q4 2024 earnings call.
Hims announced they will be launching their menopause and testosterone verticals soon. The comparison between the HRT operations of the two companies will yield further insights into the relative efficiency of their respective platforms. What happened with Netflix in 2022 is that they were slightly better than competitors are producing local hits, making them global and then reinvesting capital to enhance that process. We will see the same dynamic play out in the “tele-health” market and so clearly identifying advantages, no matter how marginal they may be, will pay handsomely over the coming five years.
There’s a future in which Hims’s legal risk is too high.
Every disruptor platform has to eventually achieve a MAD (mutually assured destruction) with incumbents. Spotify has done it. Uber has done it. And far from being the end-game, GLP-1s are the start of many years of friction with pharmaceutical incumbents for Hims. While I believe the odds of Hims succeeding long term are far higher than not, it’s interesting to explore an alternative thesis with far lower legal risk, such as is LifeMD.
However, the game I play is identifying world class companies early and making concentrated bets. LifeMD is not at the bleeding edge of efficiency across the key components of the business while Hims is. The odds of exponential success are therefore far higher for Hims than they are for LifeMD.
I explore the idea of key business components in this write up. The market tends to believe that companies like LifeMD, Hims, Spotify and Netflix have no moat. This is because the market hasn’t yet learned to identify moats in the network-defined economy. All network-defined winners are fundamentally the same and it pays to study closely the big internet winners of the past two decades.
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Twitter: @alc2022
LinkedIn: antoniolinaresc
Thanks for the comparison, very helpful.
I noticed that 20% of their revenue is strangely from a seperate PDF document SaaS company called WorkkSimpli , which seems it could split their focus on execution 🤔
Lot of great content here!