Hims & Hers Faces Legal and Market Fallout: A Class Action Crossroads for Investors

The telehealth pioneer Hims & Hers Health (NASDAQ: HIMS) is now at a pivotal crossroads, facing mounting legal risks and market skepticism after its June 2025 partnership collapse with Novo Nordisk, manufacturer of the weight-loss drug Wegovy. A class action lawsuit alleging securities fraud, coupled with a 34.6% stock plunge following the termination, has left investors questioning the company's future. With a critical August 25, 2025 deadline for investors to join the lawsuit, the stakes are high—and the path forward fraught with regulatory, financial, and reputational challenges.

The Legal Crisis: Deceptive Marketing and Regulatory Blowback

The lawsuit, filed by the Portnoy Law Firm on June 26, 2025, accuses Hims & Hers of misleading investors about its collaboration with Novo Nordisk and its involvement in selling unapproved compounded versions of semaglutide, the active ingredient in Wegovy. The class period spans April 29 to June 23, 2025—the day Novo Nordisk terminated the partnership, citing Hims' alleged “illegal mass compounding” of knockoff drugs.

At the heart of the dispute: Hims & Hers continued selling compounded semaglutide even after the FDA declared the Wegovy shortage resolved in April 2025. Compounded drugs, typically permitted only during shortages or for individual patients, were being marketed as cheaper alternatives to Wegovy. Novo Nordisk argued this violated federal regulations and posed patient safety risks, as some compounded ingredients were sourced from unapproved Chinese manufacturers.

Hims CEO Andrew Dudum defended the practice, claiming Novo Nordisk pressured the company to prioritize Wegovy sales over patient care. However, the lawsuit asserts that Hims misrepresented the sustainability of its partnership and its compliance with FDA rules, inflating its stock price before the June 23 crash.

Stock Price Implications: A 34.6% Drop and a Fragile Valuation

The termination triggered a catastrophic 34.6% single-day decline in Hims' stock price (). The drop reflects investors' loss of faith in Hims' growth thesis, which had relied heavily on the Wegovy partnership.

Analysts highlight two critical risks:
1. Valuation Multiple Compression: Hims' stock trades at seven times trailing revenues, double its historical average of three times revenues. If the market reverts to historical norms, the stock could decline further—potentially by 40%—to around $25.
2. Revenue Pipeline Vulnerability: Wegovy sales had been projected to contribute significantly to Hims' $1.48 billion in 2024 revenue. Without this partnership, the company's remaining revenue streams—niche personalized treatments and hormone therapies—face steep headwinds.

Why the Legal Battle Matters

The class action deadline on August 25, 2025, is a critical juncture. If investors fail to act by then, they may forfeit their right to seek compensation for losses tied to Hims' alleged misstatements. A successful lawsuit could force the company to pay damages, further straining its financial position.

Moreover, the case could set a precedent for telehealth firms leveraging compounded drugs to compete with branded pharmaceuticals. Regulators may intensify scrutiny of such practices, adding to Hims' compliance costs.

Investment Implications: Proceed with Caution

Near-Term Risks:
- The stock's volatility will likely persist until the legal outcome is clearer.
- Hims' valuation may continue to compress as investors reassess its business model.
- Regulatory actions, such as FDA crackdowns on compounded GLP-1 drugs, could amplify headwinds.

Long-Term Outlook:
- Hims must pivot to non-controversial revenue streams or secure new partnerships—both daunting tasks given its damaged reputation.
- A settlement with investors could provide short-term relief but would still leave the company grappling with lost growth opportunities.

Advice for Investors

1. Evaluate Holdings: Investors holding Hims stock should consider its heightened risk profile, especially with the August 25 deadline looming.
2. Consider Legal Recourse: Eligible investors (those who purchased shares between April 29 and June 23, 2025) should consult legal counsel to join the class action before the deadline.
3. Avoid Speculative Buying: The stock's post-crash rebound potential is limited unless Hims announces a credible path to growth, such as a new drug partnership or regulatory clarity.

Conclusion

Hims & Hers' saga underscores the perils of balancing innovation with regulatory compliance in the high-stakes weight-loss drug market. With legal battles intensifying and investor trust eroded, the company's survival hinges on navigating this crisis without further damage. For shareholders, the message is clear: this is a stock to avoid unless you're prepared for prolonged volatility—and the possibility of deeper losses.