Hims & Hers Stock Down 33%, Citi’s Financial Outlook Unchanged

Hims & Hers stock (NYSE: HIMS) experienced a dramatic sell-off today, plummeting nearly 33% by afternoon trading. The catalyst for this sudden shift in sentiment was Novo Nordisk's (NYSE: NVO) unexpected termination of its month-old partnership with Hims & Hers, a collaboration designed to expand access to the highly sought-after weight-loss drug Wegovy through NovoCare.

The abrupt dissolution has sent shockwaves through the market, raising questions about Hims & Hers' future growth trajectory and legal vulnerabilities.

The partnership, announced with considerable fanfare in late April, was intended to leverage Hims & Hers' telehealth platform to provide a more affordable and accessible avenue for patients seeking Wegovy. The bundled pricing model, starting at $599 per month, aimed to disrupt the traditional weight-loss market.

Shifting Sands – A View from the Street

However, behind the scenes, tensions apparently escalated quickly, culminating in Novo Nordisk's decision to pull the plug. While the official reasons remain somewhat opaque, industry analysts speculate that Novo Nordisk grew increasingly concerned about Hims & Hers' practices, particularly regarding the sourcing and marketing of compounded semaglutide, the active ingredient in Wegovy.

Citi analysts, in a research note released shortly after the announcement, underscored the heightened legal risks now facing Hims & Hers. The firm suggests that Novo Nordisk might adopt a more aggressive legal strategy, mirroring the actions taken by Eli Lilly (NYSE: LLY) to protect its intellectual property and market share in the diabetes and weight-loss drug space. This potential legal battle adds a layer of uncertainty to Hims & Hers' future, potentially diverting resources and impacting investor confidence.

Despite the negative sentiment surrounding the partnership's termination, Citi's financial outlook for Hims & Hers' fiscal year 2025 remains relatively unchanged. The firm estimates that the vast majority of the company's projected $725 million in weight-loss revenue will still originate from compounded semaglutide, rather than branded Wegovy. However, this reliance on compounded drugs introduces its own set of challenges, particularly in light of recent regulatory developments.

What Next?

Earlier in 2025, the FDA declared that the shortage of semaglutide had been resolved, effectively curtailing the legal basis for compounding pharmacies to produce and sell unapproved versions of the drug. This resolution has already forced Hims & Hers to adjust its strategy, and the termination of the Novo Nordisk partnership further complicates the situation.

From a financial perspective, Hims & Hers has demonstrated impressive revenue growth in recent quarters. In the first quarter of 2025, the company reported a 111% annual revenue increase, with sales of GLP-1 weight-loss drugs contributing significantly to its overall performance.

The company's subscriber base also continues to expand, reaching 2.4 million, a 38% increase year-over-year. However, concerns remain about the company's gross margins, which contracted to 73% in the first quarter, down from 82% in the previous year.

If we are looking for silver linings amidst the clouds, the loss of the Novo Nordisk partnership, whilst undoubtedly a setback, could force Hims & Hers to innovate and develop more sustainable, long-term strategies. Perhaps, this will push them to focus on securing partnerships with other pharmaceutical companies, or to invest more heavily in developing their own proprietary formulations.

For those with longer term hold periods, the impressive 71% gains that are maintained year-to-date will no doubt offer some buffer to today's sell-off, however painful.