Up-and-coming telehealth company Hims & Hers Health (HIMS 0.88%) has capitalized on the weight loss drug craze to become one of the market's top performers over the past few years.
However, recently, pharmaceutical giant Novo Nordisk, the maker of popular GLP-1 agonist weight loss drug Wegovy, terminated its sales partnership with the company due to its continued efforts to sell compounded semaglutide, the patented active ingredient in Wegovy.
The stock tumbled over 30% on the news, but is still up nearly 100% over the past year. Will Hims & Hers recover, or is this the beginning of the stock's troubles?
Here is what you need to know.
Image source: Getty Images.
What's going on?
Wegovy is a popular weight loss drug, a type of GLP-1 agonist, that helps patients lose weight by slowing digestion and suppressing their appetite. It was so popular that Novo Nordisk couldn't keep up with demand, and regulators declared a shortage from 2022 to earlier this year.
During a drug shortage, healthcare providers can prescribe compounded versions of medications. Compounding involves producing customized versions of a mass-produced drug, typically intended for uncommon circumstances. For example, a patient may experience severe side effects from the commercially available dosage and need a custom dose.
Hims & Hers began selling compounded semaglutide (Wegovy) in May 2024, which has helped fuel the company's success over the past year. The semaglutide shortage ended in February, after which compounding was supposed to cease, except in the rare instances where compounding has traditionally helped patients. In April, Novo Nordisk partnered with Hims & Hers to provide direct access to Wegovy to the telehealth company's patients.
However, Hims & Hers has continued to sell compounded semaglutide on the basis that patients still require personalized treatments. CEO Andrew Dudum recently posted on X that the company had conducted a study of over 90,000 participants using personalized GLP-1 treatments, though he didn't provide any sources. Novo Nordisk, arguing that Hims & Hers is abusing compounding as a loophole to bypass its patent, terminated the sales agreement.
Early results from our personalized GLP-1 program are in: in a study of over 90,000 participants, we're seeing 60% clinical adherence and retention after 3 months, meaningfully surpassing benchmarks available to date on commercially available doses.
-- andrewdudum (@AndrewDudum) June 13, 2025
Personalized dosing is...
Novo Nordisk has made serious allegations against Hims & Hers Health
The press release Novo Nordisk put out includes several potentially troubling allegations against Hims & Hers, including:
- Using deceptive marketing practices
- Illegal mass compounding to skirt patent protection
- Selling potentially unsafe knock-off versions of Wegovy, made by Chinese manufacturers without regulatory approval or oversight
Now, whether these allegations are factual is impossible to know without more information, some of which may not ultimately come out without litigation. Thus far, Novo Nordisk has not sued Hims & Hers, though it's certainly a possibility.
NYSE: HIMS
Key Data Points
Will the stock recover? It's a complicated question.
The stock's trajectory from here is up in the air, to say the least.
On the one hand, Hims & Hers was a flourishing business before it started offering compounded semaglutide. It grew its subscriber base from 391,000 in Q1 2021 to 1.7 million in Q1 2024 (just before announcing its weight loss launch), selling generic drugs and products for other conditions across skin and hair care, sexual health, and other categories.
Management's 2025 sales guidance is currently $2.3 billion to $2.4 billion, with approximately 30% of revenue coming from weight loss drugs. So, while compounded semaglutide has been a significant growth catalyst, which explains why management is fighting to continue selling it, it's not the entire business, by any means.
On the other hand, the allegations could damage the Hims & Hers brand and reputation, which are crucial to the business model, considering its treatments, even the personalized versions, aren't proprietary. Numerous competitors sold compounded semaglutide throughout the shortage, and it's been the company's strong marketing and execution that have fueled such impressive growth over the past several years.
Now, investors must wait and see whether this drama begins to weigh on the Hims & Hers brand. Will patients start to back away from Hims & Hers? Will Novo Nordisk sue Hims & Hers? Lawsuits can be lengthy and expensive, casting a dark cloud over the stock for the foreseeable future.
Novo Nordisk's allegations could be bitter mudslinging, or they could be serious trouble for Hims & Hers if they're true. If anything, it's probably safe to say that a promising, growing business has become a far riskier stock. Investors will want to use extra caution when approaching Hims & Hers until some of the dust settles.
