Hims & Hers Health (HIMS): A Cautionary Tale of Regulatory Risk and Valuation Collapse

The abrupt termination of Hims & Hers Health's partnership with Novo Nordisk and the subsequent class action lawsuit have exposed vulnerabilities in the company's strategy, regulatory compliance, and investor relations. Once a darling of the telehealth boom, Hims now faces a perfect storm of legal, operational, and reputational risks that could permanently derail its growth narrative.

The Operational Fallout: Losing Wegovy's Legitimacy

The partnership with Novo Nordisk, announced in April 2025, was meant to be a turning point for Hims. By bundling Wegovy—a FDA-approved weight-loss drug—with its telehealth services, the company aimed to cement its leadership in the $20 billion obesity treatment market. However, the relationship unraveled after Novo accused Hims of selling “knockoff” compounded semaglutide sourced from unapproved Chinese manufacturers, violating FDA regulations.

The fallout was immediate: Hims' stock plunged 34.6% on June 23, 2025, the day of the termination. The loss of direct access to Wegovy—a drug in high demand—strikes at the core of Hims' revenue growth. Analysts estimate Wegovy sales contributed significantly to Hims' 2024 revenue of $1.48 billion. Without this cash cow, Hims must now rely on smaller, less profitable streams like hormone therapies and personalized nutrition plans.

Legal Risks: A Class Action and Regulatory Scrutiny

The class action lawsuit, filed by investors on June 23, 2025, alleges Hims misled shareholders about its regulatory compliance and the sustainability of its partnership with Novo. Key claims include:
- Misrepresentation: Hims falsely claimed it could legally offer both FDA-approved Wegovy and compounded semaglutide, even after the FDA declared the Wegovy shortage resolved in April 遑2025. Compounded versions are now restricted to individualized cases, not mass sales.
- Termination Impact: The lawsuit ties the stock's collapse to the revelation of Hims' noncompliance, arguing executives knew the partnership was fragile but hid the risks.

The case, with a lead plaintiff deadline of August 25, 2025, seeks to recover losses from investors who bought shares between April 29 and June 23, 2025. A successful ruling could force Hims to pay damages, while the broader regulatory fallout—such as FDA crackdowns on compounded drugs—threatens its business model.

Valuation Collapse: From Overvalued to Overexposed

Hims' valuation has always been a stretch. Prior to the partnership termination, its stock traded at 7x trailing revenues, double its historical average of 3x. This premium was justified by its growth narrative and the Wegovy partnership's potential. Now, that narrative is shattered.

Analysts warn of a “multiple compression” risk: If Hims' valuation returns to its historical 3x revenue multiple, its stock could drop to around $25 per share—a 40% decline from its post-termination price of $41.98. Even worse, the company faces:
- Revenue Vulnerability: Losing Wegovy sales could shrink 2025 revenue by hundreds of millions.
- Litigation Costs: Legal fees and potential settlements could further strain cash reserves.

Investment Implications: Avoid the Risk, or Bet on a Hail Mary?

The risks are clear, but the path forward is murkier. Hims' CEO, Andrew Dudum, insists the company will continue offering Wegovy through compliant channels and “fight anticompetitive tactics.” Yet, the FDA's stance on compounded drugs and Novo's leverage over telehealth partnerships make this a steep uphill battle.

For investors, the calculus is grim:
- Near-Term Risks: Regulatory penalties, lawsuit payouts, and declining revenue could push the stock lower.
- Long-Term Uncertainty: Hims must pivot to new treatments or partnerships, but its reputation as a “regulatory risk” will deter partners and investors alike.

Conclusion: A Cautionary Signal for Growth Stocks

Hims & Hers Health's decline is a cautionary tale for investors in the digital health sector. The company's overreliance on a single partnership, its gamble on regulatory gray areas, and its failure to communicate risks transparently have led to a valuation implosion. While some may see value in its $25 potential price, the risks of further legal and operational setbacks are too high to justify a bet.

Investment Advice: Avoid HIMS until its regulatory and legal challenges are resolved. For those holding shares, consider exiting before the August 25 class action deadline to mitigate losses. The era of “growth at all costs” is over—especially when compliance and ethics are optional.

This analysis underscores a critical truth: in healthcare, cutting corners on safety and regulations is a guaranteed path to financial ruin. Hims' story is a warning to prioritize integrity over shortcuts.