Hims will follow its Viagra playbook and offer weight-loss drugs that are 85% cheaper than Wegovy—with Mounjaro and Zepbound in its sights next

In just a few years, Hims & Hers Health Inc. reached almost $1 billion in sales by making it easy to buy cheap, generic versions of popular drugs such as Viagra. Now it’s using that playbook to jump into the hottest part of health-care: weight-loss shots.

And in typical fashion, a big part of the company’s pitch is the discount. Wegovy, made by Novo Nordisk A/S, costs roughly $1,350 for a month of injections without insurance, and Eli Lilly & Co.’s Zepbound is similarly priced. Hims said it’s offering a treatment with the same active ingredient as Wegovy for $199 a month. That undercuts big pharma by as much as 85%.

This will help customers access these drugs without “navigating the shortages and costs that are currently limiting access to the branded medications,” Hims said in a press release. The company’s stock shot up as much as 38% on Monday, the biggest intraday move in more than three years.

Hims can offer the prescription weight-loss drugs because US regulators have rules that allow pharmacies to make copycat versions of drugs in shortage, a practice that’s known as “compounding.” This exists to make drugs available when manufacturers can’t produce enough to meet demand or when a pharmacist needs to tweak a drug’s recipe to remove an ingredient that might cause an allergic reaction in some people, for example.

Compounding of weight-loss drugs has exploded as Lilly and Novo have failed to keep up with demand for the new drugs. Yet there’s little publicly available information on how many people are taking compounded versions of these drugs, known as GLP-1s for mimicking a hormone the body produces that helps people feel full. Novo and Lilly’s versions are currently protected by patents, meaning mass-produced generic versions aren’t yet available. But as long as they remain in shortage, compounded pharmacies can continue to produce these drugs at ever greater scale.

“It’s gonna be a big part of the weight loss category going forward,” Hims Chief Executive Officer Andrew Dudum said in an interview. “Our belief is that compounding can be done very safely, if done correctly.”

Hims is among the dozens of telehealth companies that have been trying to tap into the insatiable demand for weight-loss drugs. In December, the company began prescribing a suite of drugs off-label for weight loss. That included the diabetes medication metformin and naltrexone, which is approved for alcohol-use disorder. 

Those offerings are Hims’ fastest-growing division, and are on track to eclipse $100 million in revenue by next year, according to Dudum. The company’s stock has risen more than 60% this year, prior to the latest weight-loss news.

No FDA Approval 

No one has a clear picture of just how much the compounded weight-loss drug market has grown. The FDA isn’t closely tracking it, neither are state health departments. Compounded medications are not technically approved by the FDA and don’t undergo the same rigorous review for safety, effectiveness or quality as branded and generic medications do. 

Ro, another telehealth company that offers weight-loss shots, has also started offering compounded GLP-1s because of the shortages. WW International Inc., better known as WeightWatchers, does not support the use of compounded versions.

Dudum said the drugs will be made at an FDA-licensed facility that he described vaguely as “one of the largest generics manufacturers” in the country. He evaluated more than 100 potential partners before striking a deal with a supplier that offered enough assurances on volume to give him confidence that the company will be able to meet demand.

Hims is far from finished in weight-loss drugs. The company aims to offer compounded tirzepatide, the active ingredient in Lilly’s Mounjaro and Zepbound, in the next couple of months. Dudum also plans to integrate the real, name-brand drugs when adequate supply is available. 

Subscribe to Well Adjusted, our newsletter full of simple strategies to work smarter and live better, from the Fortune Well team. Sign up for free today.