Hims & Hers: Legal Storms and Investor Risks in a Post-Novonordisk World

The recent collapse of Hims & Hers Health, Inc.'s partnership with Novo Nordisk has ignited a legal and regulatory firestorm, exposing the company to unprecedented risks. The termination of this collaboration—announced on June 23, 2025—triggered a 34% stock price drop, erasing nearly $10 billion in market value. Now, with a class-action lawsuit looming and a lead plaintiff deadline of August 25, 2025, investors must grapple with the implications of alleged misconduct and the long-term viability of a business model built on compounded GLP-1 drugs.

The Legal Quagmire

Two securities lawsuits—Sookdeo v. Hims & Hers and Yaghsizian v. Hims & Hers—allege that Hims & Hers misled investors by overstating its regulatory compliance and downplaying the risks of its Novo Nordisk partnership. The lawsuits claim the company sold “knockoff” versions of Wegovy, a Novo Nordisk drug, using compounded semaglutide sourced from unapproved foreign manufacturers. This, they argue, violated the Securities Exchange Act of 1934 and exposed patients to safety risks.

The lead plaintiff deadline of August 25 is critical. The appointed lead plaintiff will likely have the most financial stake in the case and the authority to select counsel. Investors who bought shares between April 29 and June 23, 2025, are urged to act swiftly. The outcome of this litigation could determine whether Hims & Hers faces costly settlements or navigates the crisis with minimal financial damage.

Financial and Regulatory Vulnerabilities

Hims & Hers' financials are inextricably tied to its partnership with Novo Nordisk. Wegovy sales accounted for 15% of its 2024 revenue, and the termination of the deal has created a $300 million–$500 million revenue gap in 2025. The company's reliance on compounded semaglutide—now under FDA scrutiny—further exacerbates its exposure.

The FDA's recent enforcement actions against compounded GLP-1 drugs highlight the regulatory risks. Compounded semaglutide, which differs chemically from FDA-approved versions, has been linked to 520 adverse event reports in 2025 alone. The agency has warned that such drugs bypass rigorous safety and efficacy testing, putting patients at risk. For Hims & Hers, this could mean stricter oversight, product recalls, or even a ban on compounded offerings—a core revenue driver.

Analysts' Cautious Outlook

Despite Hims & Hers' strong Q1 2025 performance—$586 million in revenue, up 111% year-over-year—analysts remain skeptical. The stock's forward P/E ratio of 94.12x is unsustainable, given the legal and regulatory headwinds. Thirteen Wall Street analysts have set price targets averaging $39.83, implying a 36% downside from the current $62.48 price. The “Reduce” consensus rating reflects concerns over legal liabilities and the FDA's potential crackdown.

Strategic Moves and Long-Term Prospects

Hims & Hers is attempting to pivot by expanding into menopause care, low testosterone treatments, and AI-driven tools like MedMatch. The acquisition of Zava, a European telemedicine firm, is a step toward international diversification. However, these initiatives may take years to materialize and are unlikely to offset the loss of Novo Nordisk's partnership.

The company's $274 million cash reserves (as of March 2025) provide short-term flexibility, but long-term success depends on its ability to comply with FDA guidelines and rebuild investor trust. CEO Andrew Dudum's claims of “unfair competition” from Novo Nordisk may resonate with some stakeholders, but they do little to address the core issue: a business model operating in a regulatory gray area.

Investment Advice: Proceed with Caution

For investors, Hims & Hers represents a high-risk, high-reward proposition. The lead plaintiff deadline and pending litigation create significant uncertainty. While the company's telehealth expansion and AI initiatives offer growth potential, the risks of legal settlements, FDA restrictions, and reputational damage are substantial.

1. Monitor Legal Developments: The outcome of the class-action lawsuits and the FDA's stance on compounded drugs will shape the company's future.
2. Diversify Exposure: Given the stock's volatility and regulatory risks, investors should limit their HIMS allocation and consider hedging strategies.
3. Watch Earnings and Cash Flow: The Q2 2025 earnings report (August 4) will provide insights into how the company is adapting to the Novo Nordisk loss.

In conclusion, Hims & Hers is at a crossroads. Its survival hinges on navigating the legal and regulatory landscape while pivoting to sustainable growth. For now, the stock remains a speculative bet, best suited for risk-tolerant investors willing to monitor developments closely.