Hims & Hers: Legal Headwinds and Valuation Uncertainties in the Wake of Wegovy® Fallout

The abrupt termination of Hims & Hers' partnership with Novo Nordisk in June 2025 has thrust the telehealth firm into a storm of legal battles, regulatory scrutiny, and investor skepticism. The fallout, triggered by allegations of non-compliance with FDA regulations and deceptive marketing practices, has left Hims & Hers' stock reeling and its future growth prospects in doubt. For investors, the question now is whether the stock's valuation discounts adequately reflect these risks—or if further declines lie ahead.

The Legal Quagmire: Securities Fraud and Regulatory Overreach

At the heart of the crisis are claims that Hims & Hers sold unapproved compounded versions of Wegovy®, Novo's anti-obesity drug, despite the FDA having declared the shortage of the drug resolved in April 2025. Compounded drugs, typically permitted only during shortages or for individual patients, were allegedly mass-produced and marketed as cheaper alternatives. This practice, dubbed “sham compounding” by Novo, has led to two class-action lawsuits accusing Hims & Hers of misleading investors about its regulatory compliance.

The lawsuits, Sookdeo v. Hims & Hers Health, Inc. and Yaghsizian v. Hims & Hers Health, Inc., allege that the company concealed its non-compliance and overstated the sustainability of its partnership with Novo. The result: a 34.6% stock plunge on June 23, 2025, as investors digested the news.

Regulatory Fallout and Operational Risks

The FDA's stance is clear: compounded drugs are not meant to replace FDA-approved treatments at scale. Hims & Hers' use of unapproved Chinese manufacturers for semaglutide ingredients—a move flagged by the Brookings Institute as violating quality assurance standards—has further fueled regulatory ire. Novo's termination of the partnership was framed as a defense of patient safety, but Hims & Hers CEO Andrew Dudum countered that Novo's actions were anticompetitive, aiming to stifle cheaper alternatives.

The immediate financial hit is stark. Wegovy® sales were projected to contribute significantly to Hims' 2024 revenue of $1.48 billion. With that revenue stream now gone, the company's remaining offerings—such as personalized hormone therapies—face reputational damage and regulatory hurdles. Analysts warn that Hims' stock, trading at 7x trailing revenues (historically 3x), may drop another 40% to around $25 if litigation and compliance costs escalate.

Investor Considerations: Act Now or Walk Away?

The August 25, 2025, deadline for joining the class-action lawsuit adds urgency. Eligible investors who held shares between April 29 and June 23 must decide whether to seek compensation for losses. However, even if the lawsuits succeed, the stock's long-term viability remains questionable. Hims' ability to rebuild trust hinges on its commitment to FDA-approved treatments—a pivot that could strain margins and growth.

For new investors, the risks outweigh opportunities. The stock's rebound potential is limited without a credible strategy to offset lost revenue or resolve legal liabilities. Meanwhile, the broader telehealth sector faces heightened scrutiny, as regulators crack down on “sham compounding” and companies reliant on unproven partnerships.

Conclusion: A Stock in Regulatory Freefall

Hims & Hers' saga underscores the fragility of firms that prioritize aggressive growth over regulatory compliance. With legal costs mounting, revenue streams shrinking, and investor confidence evaporating, the stock's current valuation appears overly optimistic. Until the company can prove it can navigate these challenges—or secure new partnerships on stable footing—the risks here are too great to ignore.

Investors holding Hims shares should act swiftly to assess their exposure and explore legal options before the August deadline. For others, this is a cautionary tale: in the telehealth space, shortcuts to growth often end in costly detours.

Disclaimer: This analysis is for informational purposes only and does not constitute financial advice. Consult a licensed professional before making investment decisions.