Hims & Hers plunges on FDA crackdown over unapproved weight-loss drugs
Regulatory action threatens telehealth company's key growth driver amid DOJ referral
Hims & Hers Health shares tumbled to a one-year low on Friday after federal regulators announced a sweeping crackdown on the company's marketing of unapproved compounded weight-loss drugs, a strategy that had become a central pillar of its growth trajectory.
The San Francisco-based telehealth provider saw its stock fall 2% to $23.02, extending losses that have erased more than half the company's market value since early January. The decline came after the Food and Drug Administration declared it would take "decisive action" to restrict the use of GLP-1 active pharmaceutical ingredients in compounded drugs that lack regulatory approval.
The regulatory assault marks a critical setback for Hims & Hers, which had recently announced plans to sell a compounded semaglutide pill for $49 per month—a sharp discount to Novo Nordisk's FDA-approved Wegovy, which costs between $149 and $199 monthly. The company's strategy of offering cheaper alternatives to branded weight-loss treatments had resonated with cost-conscious consumers and helped drive revenue to $2.21 billion over the past 12 months.
"Companies are prohibited from marketing non-FDA-approved compounded products as generic equivalents or identical to FDA-approved drugs, nor can they claim these products are clinically proven to yield the same patient results," the FDA stated in its announcement. The agency said it would employ "all available compliance and enforcement tools," including seizures and injunctions, against entities that fail to address violations.
The escalation follows a September 2025 warning letter in which the FDA accused Hims & Hers of making "false and misleading" marketing claims about its compounded products. Now, the Department of Health and Human Services' general counsel has referred the company to the Department of Justice for investigation into potential violations.
Novo Nordisk, which manufactures Wegovy, has already indicated it will pursue legal action against Hims & Hers. The pharmaceutical giant characterized the telehealth company's offering as an "unapproved, inauthentic, and untested knockoff" in a statement reported by multiple outlets. The Danish drugmaker has been aggressive in defending its market position against compounded versions of its blockbuster weight-loss medication.
Hims & Hers has defended its practices, stating that it adheres to all relevant federal and state regulations regarding compounding and that its active pharmaceutical ingredients are sourced from FDA-registered facilities. However, the FDA emphasized that unapproved compounded versions "do not undergo the rigorous safety, effectiveness, and quality evaluations that FDA-approved drugs do before entering the market."
The regulatory timing is particularly challenging for the company. Analysts at Morningstar noted that Hims & Hers had been banking on the weight-loss category to drive growth, especially as the broader telehealth market faces increasing competition and margin pressure. The company's compounded GLP-1 offerings had emerged as a bright spot in a sector that has struggled with skepticism about the quality of virtual healthcare services.
Hims & Hers maintains a relatively strong analyst following, with an average price target of $39.69—more than 70% above its current trading price. However, ratings are evenly distributed, with 2 buy recommendations, 10 hold ratings, and 1 sell rating, reflecting uncertainty about the company's path forward.
The company's valuation metrics already reflected aggressive growth expectations, with shares trading at 47.8 times trailing earnings and 2.5 times sales. The regulatory action threatens to undermine the growth assumptions baked into that premium valuation, particularly if the FDA's restrictions force Hims & Hers to abandon its compounded GLP-1 strategy.
For investors, the immediate question is whether Hims & Hers can pivot to a sustainable growth model that doesn't rely on regulatory arbitrage. The company's core telehealth platform spans multiple categories, including sexual health, mental health, and dermatology, but none have demonstrated the explosive growth potential of the weight-loss market.
The FDA's action also sends a broader warning to the telehealth and compounding pharmacy industries. Regulators appear determined to close what they view as loopholes that allow companies to mass-market unapproved versions of branded medications under the guise of compounding.
As the situation develops, Hims & Hers faces a narrow path: either negotiate a regulatory framework that allows some continued participation in the GLP-1 market, or accelerate its focus on other healthcare categories that carry less regulatory risk. Neither option offers the same growth trajectory that the weight-loss market promised, explaining why investors are reassessing the company's prospects at these depressed levels.