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Hims & Hers Faces Regulatory Storm Over Weight-Loss Drugs
2 Mar
Summary
- Hims & Hers faces regulatory scrutiny over compounded weight-loss drugs.
- SEC investigation and lawsuit from Novo Nordisk create uncertainty.
- Company expands internationally while facing new business costs.
Telehealth company Hims & Hers Health is navigating intense regulatory pressure and investor impatience regarding its weight-loss drug business. The company faced immediate backlash and regulatory referral to the Department of Justice for its plan to offer a $49 version of Novo Nordisk's Wegovy pill, prompting a swift reversal.
Further complicating matters, Hims & Hers disclosed a U.S. Securities and Exchange Commission investigation in February. Simultaneously, the company is incurring new costs from its U.S. operations and expansion into eight countries, including the UK and Australia. Analysts question whether these factors will allow Hims to meet its projected growth targets.
CEO Andrew Dudum maintains that the weight-loss business is sustainable and that Hims will adapt its model. However, recent downward revisions to share price targets by analysts reflect investor concerns. The legal battle with Novo Nordisk over compounded semaglutide versions of Wegovy and Ozempic adds to the uncertainty, with potential FDA actions, such as adding semaglutide to a 'do-not-compound' list, looming.
Despite these challenges, Hims & Hers is pursuing international expansion, having acquired the UK's Zava and planning to purchase Australia's Eucalyptus for up to $1.15 billion. These acquisitions also offer access to mental health and sexual health treatments, potentially aiding diversification. However, the expansion is currently impacting profits, with a significant headwind expected in the first quarter for the weight-loss business.
