Shares of Hims & Hers Health, Inc. (HIMS) extended their sharp decline in Tuesday's premarket trading, falling an additional 4.2% to $18.52. This drop compounds a steep 16.0% sell-off on Monday, which closed with the stock at $19.33. The mounting pressure stems from a sudden reversal of the company's strategy in the lucrative weight-loss drug market, now drawing intense legal and regulatory scrutiny.
Regulatory Crackdown and Legal Action Intensify
The company announced over the weekend that it is discontinuing patient access to its compounded semaglutide pill, a move it attributed to "constructive conversations with stakeholders." This decision follows explicit warnings from the U.S. Food and Drug Administration (FDA). The regulatory body has signaled a forthcoming crackdown on the use of GLP-1 active pharmaceutical ingredients in compounded drugs that lack its formal approval, warning it may pursue legal action without further notice. GLP-1 agonists, which include drugs like Wegovy and Ozempic, are a critical class of medications for diabetes and obesity treatment.
Compounding, the practice of pharmacies creating tailored drug formulations for individual patients, now sits at the center of the controversy. The situation escalated when Reuters reported that the U.S. Department of Health and Human Services plans to refer Hims & Hers to the Department of Justice for potential legal action, adding a significant layer of risk for the telehealth provider.
Novo Nordisk Files Patent Infringement Lawsuit
Simultaneously, the pharmaceutical giant Novo Nordisk (NVO), maker of the blockbuster drugs Wegovy and Ozempic, has filed a patent infringement lawsuit against Hims & Hers. The suit targets the company's compounded semaglutide offerings. Novo Nordisk is seeking a permanent court order to block sales of what it calls "unapproved, patent-infringing compounded drugs." In a statement, a Novo Nordisk representative accused Hims & Hers of "mass marketing unapproved knock-off versions of Wegovy® and Ozempic® … that’s dangerous and deceptive to patients." This marks a notable escalation, reportedly being the first time Novo has filed a U.S. patent suit against a compounder over Wegovy.
Legal experts highlight the high stakes. "Patents are the big guns," noted Robin Feldman, a professor at University of California Law San Francisco, underscoring the serious nature of the litigation. The sheer scale of the obesity treatment market, which has reached tens of billions of dollars, makes these legal battles particularly consequential for all players involved.
Broader Implications for Telehealth and Market Dynamics
The developments cast a harsh light on the regulatory and legal vulnerabilities facing cash-based telehealth companies that rapidly expand into complex pharmaceutical markets. For Hims & Hers, the core uncertainty is whether its ambitious model of offering lower-priced weight-loss treatments can withstand the mounting pressure. If authorities significantly tighten regulations, telehealth firms may be forced to radically rethink their product offerings and pricing strategies, potentially upending current growth forecasts.
For investors, the immediate concern shifts from long-term courtroom schedules to the potential for swift regulatory intervention that could disrupt supply chains, marketing practices, and the underlying profitability of discounted drug offers. While backing away from the compounded pill may mitigate short-term risk for Hims & Hers, the conflict has fundamentally evolved. What began as a competitive pricing challenge has transformed into a broader contest over regulatory compliance and intellectual property rights in a fiercely contested market.
The risk profile is now two-sided. Should the FDA or other regulators enact stricter enforcement—or if Novo Nordisk secures a swift preliminary injunction—Hims & Hers could face further downside. Conversely, if the company can successfully navigate compounding regulations and avoid an immediate court-ordered sales halt, its shares might stabilize after the recent severe decline.
Market participants are closely monitoring several key fronts: new court filings, potential motions by Novo Nordisk to secure an immediate sales injunction, and further guidance from the FDA. Attention is also focused on whether Hims & Hers will adjust its broader weight-loss treatment portfolio and revise its marketing approach in light of the intensified scrutiny. The company is scheduled to report its fourth-quarter and full-year 2025 earnings after the market closes on February 23, with a management conference call to follow at 5:00 p.m. Eastern Time, which will be scrutinized for strategic updates and financial guidance.
