Shares of Eli Lilly closed at $1,058.18 on Friday, gaining 3.7%, as regulatory actions against unapproved weight-loss medications bolstered investor sentiment toward established pharmaceutical players. The move followed an announcement by telehealth company Hims & Hers that it would stop selling a compounded version of a GLP-1 drug after receiving a warning from the U.S. Food and Drug Administration.
Regulatory Pressure Intensifies
The FDA stated it would take swift action against companies mass-marketing unapproved copycat versions of GLP-1 medications, which are used to treat obesity and diabetes. The agency referred Hims to the Department of Justice for investigation and warned that violators could face legal measures, including product seizures or injunctions. This stance aims to curb the proliferation of compounded alternatives that have not undergone the FDA's standard approval process.
Analysts note that the enforcement could reduce pricing pressure on the cash-pay segment of the obesity drug market, where patients pay out-of-pocket. "Until this issue is resolved, it adds another level of uncertainty to the obesity investment story," remarked Markus Manns, a portfolio manager at Union Investment, which holds stakes in both Eli Lilly and Novo Nordisk.
Market Implications and Competitive Landscape
Novo Nordisk, another key maker of GLP-1 drugs, saw its shares rebound 5.4% on Friday. The regulatory scrutiny began after Hims launched a compounded semaglutide pill at an introductory price of $49 per month, significantly undercutting Novo's branded version, which starts at $149. Eli Lilly, which plans to launch its own oral obesity drug in April, also faces potential competition from such copycats.
The FDA's crackdown focuses on active pharmaceutical ingredients used in compounded drugs that are being widely marketed without approval. Both Lilly and Novo Nordisk have emphasized patient safety concerns, with Lilly noting that compounders using substandard ingredients endanger consumers.
Looking ahead, investors are monitoring the speed of regulatory enforcement and its impact on drug pricing. Eli Lilly has provided 2026 guidance for adjusted earnings of $33.50 to $35 per share and sales between $80 billion and $83 billion, driven by strong demand for its obesity and diabetes treatments. The FDA is expected to rule on Lilly's oral obesity drug by April 10.
