Hims & Hers Health, Inc., a notable telehealth provider, is currently navigating a severe regulatory and legal storm that has profoundly affected its stock market performance. The company saw its shares fall sharply, hitting new 52-week lows as investors reacted to unfolding events that could jeopardize its growth prospects.
At the core of the current crisis is Hims & Hers’ recent decision to introduce a compounded oral semaglutide pill. This product is designed to mimic Novo Nordisk’s newly approved oral formulation of Wegovy, a popular GLP-1 receptor agonist used for weight management. However, this strategic move has attracted swift federal scrutiny.
On the regulatory front, the U.S. Food and Drug Administration (FDA) issued a definitive statement last Friday imposing heightened restrictions on compounding pharmacies regarding the promotion of GLP-1 ingredients. The FDA Commissioner, Marty Makary, emphasized the agency’s opposition to unauthorized copycat drugs that have bypassed its rigorous approval process, underscoring the importance of maintaining established safety standards.
Compounding pharmacies, entities that prepare customized medications, typically operate under exemptions that do not cover mass production or distribution of drugs intended to compete with approved products. The FDA’s direction signals a clampdown on such practices involving GLP-1 compounds, effectively targeting the underlying mechanism of Hims & Hers’ newly launched product.
Further intensifying the pressure, the Department of Health and Human Services’ (HHS) General Counsel has referred the situation involving Hims & Hers to the Department of Justice for a potential evaluation of violations under the Food, Drug, and Cosmetic Act. This referral suggests that the company could face significant legal consequences if found in breach of federal regulations governing drug manufacturing and marketing.
Responding to this regulatory headwind, Hims & Hers swiftly withdrew its oral semaglutide offering within 48 hours of its launch, indicating a rapid attempt to mitigate risk amid escalating federal intervention.
Adding to these challenges, Novo Nordisk initiated a patent infringement lawsuit against Hims & Hers early Monday. The Danish pharmaceutical giant asserts that Hims & Hers' GLP-1 product line infringes on U.S. Patent 8,129,343, which protects the semaglutide molecule and is valid until 2032.
This lawsuit is broader than the FDA’s concerns, extending beyond the oral pill to encompass Hims & Hers' entire GLP-1 business, including its widely marketed injectable compounded semaglutide. The legal action seeks a permanent injunction that, if granted, could effectively eliminate a key revenue stream for Hims & Hers.
The financial implications for Hims & Hers are substantial. The GLP-1 segment is estimated to contribute approximately $800 million in projected revenue for the year 2025. Analysts have responded by lowering price targets, with some noting that the weight management products involving GLP-1 compounds account for about 25% to 30% of the company's earnings before interest, taxes, depreciation, and amortization (EBITDA).
The stock market has reflected these risks decisively. Over the recent trading days, Hims & Hers stock has depreciated by more than 40%, with trading volumes exceeding four times the average. As of midday on Monday, shares were down over 20%, priced at approximately $18.39, underscoring investors’ waning confidence amid uncertainty.
While Hims & Hers remains profitable in other product areas, such as hair loss and sexual health treatments, the GLP-1 issues have positioned the company as a high-risk equity. The legal and regulatory setbacks not only threaten near-term revenue but also cast doubt on the sustainability of its expansion strategy within the competitive weight loss pharmacotherapy market.
Investor attention remains focused on how the company navigates these intertwined federal and legal challenges. The outcomes will likely dictate Hims & Hers’ ability to maintain its footing in a dynamic telehealth and pharmaceutical environment.
Key Points
- Hims & Hers’ stock plummeted to new 52-week lows following federal regulatory actions and a patent lawsuit.
- The FDA imposed restrictions on compounding pharmacies marketing GLP-1 ingredients, directly impacting Hims & Hers’ recent oral semaglutide product.
- Hims & Hers halted sales of its compounded oral semaglutide pill within two days of launch due to federal pressure.
- Novo Nordisk filed a patent infringement suit covering all of Hims & Hers’ GLP-1 products, seeking a permanent injunction.
Risks and Uncertainties
- Regulatory scrutiny by the FDA and referral to the Department of Justice raise potential legal penalties and compliance costs.
- Patent litigation with Novo Nordisk could result in loss of critical GLP-1 product offerings, impacting projected revenues around $800 million for 2025.
- Investors face heightened volatility and uncertainty given the over 40% stock value decline and aggressive trading.
- The company’s weight management segment, making up roughly 25%-30% of EBITDA, is directly threatened by legal and regulatory actions.