Hims & Hers: Valuation Risks Amid Regulatory and Partnership Headwinds

The telehealth company Hims & Hers (NYSE: HIMS) has long positioned itself as a disruptor in the $40 billion GLP-1 weight-loss market, leveraging partnerships and subscription models to fuel growth. Yet, its June 2025 stock plunge—a 34% single-day drop to a 52-week low—exposes a critical question: Can its $750 million market cap withstand the fallout from losing its Wegovy partnership, mounting litigation, and FDA scrutiny? For investors, the answer hinges on whether Hims can offset the loss of its most lucrative revenue stream while navigating a regulatory minefield in a crowded market.

The Discrepancy Between Valuation and Reality

Hims' valuation has always been a puzzle. Despite its June 2025 market cap of $750 million, the company's Q2 2025 revenue guidance of $530–$550 million—up 68–74% year-over-year—relies heavily on assumptions that no longer hold. The abrupt termination of its partnership with Novo Nordisk in June 2025, which provided access to Wegovy (semaglutide), stripped away a key growth driver. Wegovy sales had contributed a “disproportionate share” to Q1 2025's 111% revenue surge to $586 million. Now, Hims is left scrambling to replace that revenue with compounded semaglutide, a product facing existential regulatory threats.

The problem? Compounded semaglutide—now 15% of 2024 revenue—is under fire. The FDA prohibits “mass compounding” of drugs like semaglutide, which is reserved for individualized prescriptions. Hims' alleged use of unapproved Chinese-manufactured APIs and bulk sales have drawn accusations of violating federal regulations. As one securities lawsuit alleges, the company “misrepresented its compliance with FDA rules” to investors. With the FDA having declared the Wegovy shortage resolved in April 2025, Hims' continued sales of compounded semaglutide now look like a regulatory overreach.

Litigation and Legal Costs: A $100M Overhang

Two class action lawsuits—Sookdeo v. Hims & Hers and Yaghsizian v. Hims & Hers—filed in June 2025 accuse the company of securities fraud. Plaintiffs argue that Hims inflated its stock price by misleading investors about the stability of its Novo partnership and its ability to comply with FDA rules. The lawsuits, which cover investors from April 29 to June 23, 2025, could result in settlements of $50–$100 million—a crippling sum for a firm with just $274 million in cash.

The litigation timeline is critical. Investors have until August 25, 2025, to apply for lead plaintiff status, a deadline that could determine the severity of penalties. Even a $50 million settlement would erase 18% of the company's market cap. Add to this the potential reputational damage, and Hims' valuation looks increasingly precarious.

Regulatory Headwinds: The FDA's Next Move

The FDA's stance on compounded GLP-1 drugs remains a wildcard. While the agency has not yet taken formal enforcement action against Hims, its rules are clear: mass production of compounded drugs is prohibited. If regulators crack down—a distinct possibility given Novo's public accusations—the company could lose access to its 15% compounded semaglutide revenue stream.

Moreover, the FDA's scrutiny extends beyond compounding. Hims' February 2025 Super Bowl ad, which critics called misleading about GLP-1 risks, has drawn further ire. The agency's response to these issues could redefine the telehealth firm's ability to operate in the weight-loss space.

Can Diversification Save the Day?

Hims is betting on diversification to offset Wegovy's loss. Over 80% of 2024 revenue came from non-GLP-1 segments like mental health, dermatology, and sexual health. The company also highlights its AI-driven telehealth tools (e.g., MedMatch) and international expansion via Zava's acquisition. Yet, these efforts face stiff competition.

Rivals like Amazon's One Medical, Cigna, and CVS Health are muscling into digital health, while established pharmacies undercut Hims' price advantage. The GLP-1 market itself is becoming oversaturated, with generics and biosimilars looming. Hims' 2.4 million subscribers (up 38% year-over-year) may struggle to grow in a crowded field.

Key Inflection Points: 2025–2030

Hims' path to its $6.5 billion 2030 revenue target hinges on three inflection points:
1. FDA Compounding Ruling: A green light for compounded semaglutide would preserve 15% of revenue. A crackdown could force a pivot to lower-margin services.
2. Litigation Outcomes: A $100 million settlement would erase 13% of the market cap; a dismissal would be a lifeline.
3. Competitive Positioning: Can Hims's telehealth platform and AI tools differentiate it in a market flooded with alternatives?

Investment Thesis: Caution Advised

Hims' valuation is a bet on a high-risk, high-reward scenario. The stock's June 2025 price of $41.98—down from $64.22—reflects investor skepticism, but the risks remain underpriced. The company faces:
- Legal liabilities that could consume 10–15% of its market cap.
- Regulatory uncertainty that threatens its core revenue streams.
- Competitive saturation in a market where its main advantages (price and convenience) are eroding.

Analysts' mixed outlook underscores the dilemma. While a $49.10 price target (15% above June lows) hints at potential recovery, the GuruFocus one-year valuation of $34.94 suggests downside risks dominate. For now, Hims' valuation appears stretched relative to its ability to navigate these headwinds.

Final Take

Hims & Hers is a cautionary tale of overvaluation in the face of regulatory and legal chaos. While its diversification efforts and subscriber base offer hope, the loss of Wegovy, compounded drug risks, and mounting lawsuits create a high bar to clear. Until the FDA and courts rule in Hims' favor—and until it proves it can thrive in a crowded market—the stock remains a gamble, not an investment. Proceed with extreme caution.