FDAs Compounded Finasteride Warning: A Hair-Raising Risk for Hims & Hers and Telemedicine Investors?

The U.S. Food and Drug Administration (FDA) has ignited a storm in the dermatology and telemedicine sectors with its April 2025 alert on compounded topical finasteride products. The agency’s stark warning about unapproved formulations marketed for hair loss—particularly by companies like Hims & Hers Health (HIMS)—has investors weighing risks against potential rewards in a market increasingly reliant on compounded drugs. Let’s dissect the implications for investors.

The FDA’s Case Against Compounded Topical Finasteride

The FDA’s alert targets compounded topical finasteride, which lacks FDA approval and has no proven safety or efficacy data. The agency cited 32 adverse event reports between 2019–2024, including persistent side effects like erectile dysfunction, anxiety, suicidal ideation, and testicular pain—even after discontinuation. Patients described life-altering consequences, with one stating, “their lives were ruined.”

Critically, topical finasteride poses unique risks compared to oral versions. Compounded formulations lack protective coatings, raising risks of unintended exposure to pregnant individuals, who could harm a male fetus if exposed. Additionally, the FDA highlighted systemic absorption concerns and skin reactions like erythema or burning.

Hims & Hers: Ground Zero for Regulatory Scrutiny

Hims & Hers’ finasteride-minoxidil spray—marketed via its telemedicine platform—is front and center in this controversy. The FDA criticized telemedicine platforms for rapid prescription practices that may bypass patient education on risks. While analysts project a $44.50 average one-year price target for HIMS stock (up from $26.20), the company faces reputational and regulatory hurdles.

The FDA alert caused a slight dip in HIMS shares, but the broader market remains divided. GuruFocus estimates a 23.61% upside within a year, citing strong demand for telehealth services. However, the company’s claims of transparency clash with FDA assertions that compounded drugs’ risks are often undisclosed in marketing.

Broader Telemedicine Risks and Regulatory Trends

The FDA’s action is part of a broader crackdown on unapproved compounded drugs. Previous warnings on compounded semaglutide (2024) and sulfite-containing drugs underscore a pattern: regulators are targeting telemedicine-driven distribution of medications that bypass traditional oversight. Investors in platforms like Hims must now consider:

• Liability risks: Lawsuits over undisclosed side effects could strain balance sheets.
• Reputation damage: Negative patient testimonials and media scrutiny may deter users.
• Regulatory overreach: Future FDA actions could force recalls or restrict compounded drug sales via telemedicine.

Market Sentiment vs. Regulatory Realities

Analysts remain bullish on Hims’ long-term prospects, citing its $2.3 billion market cap and diversified product portfolio. However, the FDA’s April 2025 alert—and its emphasis on compounded drugs’ lack of safety data—should give investors pause.

While Hims’ stock has outperformed the S&P 500 in 2024, the FDA’s warning could be a harbinger. If compounded drugs face stricter enforcement (e.g., mandatory warnings or prescription limits), revenue from finasteride could plummet.

Conclusion: A Risky Growth Gamble

Investors in Hims & Hers must balance its telemedicine growth story against escalating regulatory and safety risks. Key data points:

• 32 adverse events reported, with severe, persistent side effects.
• FDA’s explicit warning about compounded drugs’ lack of oversight.
• Analyst projections suggest a 69.86% upside from current prices, but these hinge on avoiding lawsuits and regulatory penalties.

The FDA’s stance signals a shift toward curbing unproven compounded drugs, particularly those marketed aggressively online. For Hims, the path forward requires navigating transparency demands, liability mitigation, and potential changes in prescribing practices. While the stock’s upside is tempting, the compounded finasteride controversy is a stark reminder: in healthcare, regulatory tailwinds can quickly turn into headwinds. Investors would be wise to proceed with caution—or prepare for a potential fallout.