Hims & Hers Health: Navigating Regulatory Storms and Rebuilding a Growth Narrative

The story of Hims & Hers Health (HIMS) in 2025 is one of paradox: a company that has scaled to 2.4 million subscribers and $544.8 million in Q2 revenue while grappling with existential regulatory and partnership crises. The termination of its collaboration with Novo Nordisk in June 2025—over allegations of promoting non-FDA-approved compounded Wegovy—has forced investors to recalibrate their expectations. This case study offers a blueprint for how regulatory missteps can reshape a high-growth stock's trajectory, even as the broader telehealth and aesthetic care markets remain attractive.

The Regulatory Quicksand

Hims & Hers' partnership with Novo Nordisk, announced in April 2025, was initially hailed as a validation of its business model. The deal allowed the company to market Wegovy alongside compounded semaglutide, a practice that became untenable when the FDA resolved Wegovy shortages by the same month. By June, Novo Nordisk cited “failure to comply with FDA regulations” and “deceptive promotion” as reasons to terminate the partnership. This triggered a 34.6% stock plunge and a securities class-action lawsuit alleging material omissions about the legality of compounded drug sales.

The fallout underscores a critical risk for telehealth companies: the FDA's zero-tolerance stance on unapproved compounded drugs. Hims & Hers' reliance on Chinese-sourced ingredients for these products further amplified scrutiny, with regulators warning of contamination and dosage inconsistencies. For investors, this highlights a broader trend: as telehealth scales, regulatory bodies are tightening oversight, particularly in areas like drug compounding and direct-to-consumer pharmaceutical sales.

Financial Resilience Amid Turbulence

Despite the setbacks, Hims & Hers' financials remain robust. Q2 2025 revenue surged 73% year-over-year, and Adjusted EBITDA hit $82.2 million, doubling from the prior year. The company reaffirmed its full-year revenue guidance of $2.3–$2.4 billion and Adjusted EBITDA of $295–$335 million. However, cash flow metrics tell a different story. Free Cash Flow turned negative at -$69.4 million in Q2 2025, compared to $47.6 million in 2024, reflecting heavy reinvestment in infrastructure and international expansion.

The stock's 12% post-earnings drop in after-hours trading illustrates the market's skepticism. A $100 million settlement, if required, would represent a 13% hit to HIMS' $750 million market cap. Yet, the company's ability to maintain a 31% subscriber growth rate despite losing GLP-1 subscribers post-Novo Nordisk termination suggests underlying demand for its platform.

Market Dynamics: Growth vs. Risk

The telehealth sector is projected to grow from $226.63 billion in 2025 to $553.82 billion by 2029, driven by chronic disease management and AI-driven diagnostics. Competitors like Teladoc and Amwell are leveraging mergers and acquisitions to strengthen their offerings, while Hims & Hers is pivoting toward longevity and personalized care. However, trade tensions—such as U.S. tariffs on medical devices and diagnostics—pose a headwind. The industry's shift to local manufacturing and tariff exemptions for critical supplies may mitigate these risks, but not without short-term pain.

Hims & Hers' strategy to expand lab testing, enhance pharmacy personalization, and enter international markets aligns with sector trends. Yet, its recent governance failures—internal warnings allegedly ignored by leadership—raise questions about its ability to navigate future regulatory hurdles.

Strategic Rebuilding and Investor Considerations

For Hims & Hers to regain investor confidence, it must address three pillars:
1. Regulatory Compliance: Demonstrating a commitment to FDA standards, particularly in drug sourcing and promotion.
2. Transparency: Providing clear updates on litigation costs and partnership alternatives to the Novo Nordisk deal.
3. Diversification: Reducing reliance on high-risk segments (e.g., compounded drugs) while scaling higher-margin services like longevity and mental health.

The aesthetic care market, though less detailed in the data, remains a growth engine. Hims & Hers' expansion into this space—leveraging its existing subscriber base for cross-selling—could offset losses in the GLP-1 segment. However, investors must weigh the company's governance risks against its market position.

Conclusion: A High-Risk, High-Reward Play

Hims & Hers Health's valuation has contracted by 40% over 12 months, creating a discount to its growth potential. For risk-tolerant investors, the stock offers exposure to a resilient telehealth platform with a strong subscriber base and a clear path to diversification. However, the regulatory and litigation risks remain acute. A prudent approach would be to monitor the outcome of the FTC investigation and the company's ability to secure new partnerships. If Hims & Hers can stabilize its operations and demonstrate compliance, it may reclaim its position as a leader in the $553 billion telehealth market. For now, the stock is a speculative bet best suited for those with a long-term horizon and a tolerance for volatility.