Hims to cut 4% of workforce amid ban on weight-loss drug copies

Hims & Hers (HIMS.N) will lay off 4% of its workforce (68 employees) following the FDA ban on mass-produced compounded versions of Novo Nordisk's Wegovy, a weight-loss drug. This ban, effective May 22, has already led to a 14% drop in Hims' share price. While Hims seeks new growth opportunities, including a potential agreement with Novo Nordisk, analysts remain concerned that Hims' strategy of offering customized Wegovy copies may face legal challenges from Novo Nordisk.

Analysis

Hims & Hers is implementing a 4% workforce reduction, equating to 68 employees, directly responding to the U.S. Food and Drug Administration's (FDA) ban on mass-produced compounded copies of Novo Nordisk's weight-loss drug, Wegovy, which became effective May 22. This regulatory change has already precipitated a 14% decline in Hims' share price. The company had previously benefited significantly from offering these compounded Wegovy versions, which contributed to a 111% year-over-year revenue increase in the first quarter of 2025 and accounted for $200 million of its $1.5 billion revenue in 2024. In response, Hims is exploring new growth avenues, including treatments for low testosterone and menopause, and offerings for longevity and sleep, alongside seeking a potential agreement with Novo Nordisk for patient access to Wegovy. Despite these strategic shifts and plans to hire for long-term growth roles, Hims' strategy of offering "customized" copies of Wegovy, featuring different dosages or titration plans, faces skepticism. Analysts, such as Jailendra Singh from Truist, note that this personalization approach may not sufficiently meet the clinical exemption criteria for compounding and could encounter legal challenges from Novo Nordisk. The FDA's decision to end the allowance for compounded copies was based on Wegovy no longer being in shortage, a status declared in February after an initial shortage declaration in 2022.

Key Decisions for Investors

• Investors should acknowledge the material adverse impact on Hims' revenue and stock valuation stemming from the FDA's ban on compounded Wegovy copies, which was a significant prior growth driver.
• Exercise caution regarding Hims' proposed strategy of offering 'customized' GLP-1 formulations, given the potential for legal challenges from Novo Nordisk and uncertain regulatory acceptance of this approach.
• Closely monitor Hims' ability to successfully execute its diversification into new therapeutic areas, such as low testosterone and menopause treatments, and the progress of any potential collaboration with Novo Nordisk, as these are critical factors for its future growth prospects.