To The Moon

Why Hims is on Solid Legal Ground to Continue Selling GLP-1s Even After the Shortage is Over

Morgan Stanley analyst Craig Hettenbach just dropped some exciting news for investors in mail-order pharmaceuticals!  

According to third-party data, downloads of the Hims & Hers apps skyrocketed 47% year-over-year in February—a massive surge in interest.  On Apple's App Store, Hims & Hers offers two distinct apps: Hims, focused on hair loss and sexual health, and Hers, catering to hair care and mental health. Morgan Stanley's research reveals that the Hers app dominated February's downloads, signaling a wave of new female customers.  

What’s behind the spike? A certain high-profile sporting event likely played a role, with targeted ads driving attention to weight-loss solutions. And with *Hers* offering GLP-1 weight-loss drugs as affordable alternatives to Novo Nordisk and Eli Lilly’s products, it’s clear that demand is heating up fast!

Revenue Projections: $Hims & Hers Health Inc.(HIMS)$  anticipates $2.3-2.4 billion in revenue for 2025, with $725 million attributed to its weight loss segment, including compounded GLP-1 drugs like semaglutide.

It's rare to find a high-growth mid-cap stock with a solid cash foundation, but HIMS stands out. The management prioritizes organic growth over debt-driven expansion, which is commendable. They've consistently maintained a net cash position—holding more cash than debt—while also expanding their free cash flow. At this stage, having minimal financial risk is a significant advantage.

Controversy: The FDA declared the semaglutide shortage over on February 21, 2025, raising questions about the legality of Hims continuing to compound and sell GLP-1s.

Legal Position: Despite risks, Hims appears to be operating within federal law and is well-positioned to defend against potential FDA enforcement actions or third-party litigation.

Introduction

On February 24, 2025, Hims & Hers Health, Inc. released its 2024-Q4 earnings report, projecting $2.3-2.4 billion in revenue for 2025—a nearly 60% increase from the previous year. A significant portion of this growth, approximately $725 million, is expected from its weight loss offerings, which include compounded GLP-1 drugs like semaglutide. However, the FDA’s announcement on February 21, 2025, that the semaglutide shortage had ended has sparked debate. Critics argue that Hims’ continued compounding of GLP-1s post-shortage could expose the company to legal and regulatory scrutiny from the FDA and Novo Nordisk, the maker of Ozempic and Wegovy. This report evaluates Hims’ legal standing and the sustainability of its business model.

Background

Financial Context

Guidance Details: Hims’ 2025 revenue forecast reflects strong growth, but analysts worry it may be overly dependent on compounded semaglutide sales.

Stock Performance: Hims’ stock surged to $73 in February 2025 but has since fallen to $30's range, reflecting a market cap of $7 to 8 billion—down from a peak tied to its weight loss success. Pre-weight loss pivot, its market value was $3.1 billion.

Business Model Shift: Previously focused on other health offerings, Hims’ pivot to weight loss has added $6 billion in market value, a gain now at risk if compounded GLP-1 sales are curtailed.

Weight Loss Strategy

Revenue Breakdown: CFO Yemi Okupe emphasized during the February 24 earnings call that the “steady state” weight loss portfolio will primarily feature oral solutions and liraglutide, with personalized semaglutide as a supplementary offering for specific clinical needs.

Legal Oversight: Hims’ decision to continue compounding likely underwent rigorous review by its legal team, led by a chief legal officer with extensive healthcare law experience from Google and private practice.

Market Dynamics

Consumer Demand: A GoodRx survey found 76% of Americans view GLP-1 drugs as too expensive, while Mercer’s 2025 survey showed only 42% of employers cover obesity medications, sustaining demand for affordable compounded alternatives.

Analyst Perspective: Needham Digital Health predicts ongoing consumer demand and legal delays in any compounding bans, supporting Hims’ GLP-1 revenue stream through 2025.

Legal and Regulatory Analysis

Federal Law and Compounding Exemptions

Under the Federal Food, Drug, and Cosmetic Act (FDCA), compounding pharmacies and outsourcing facilities can produce drugs during shortages or for personalized patient needs, provided they meet certain conditions:

Shortage Exemption: During the semaglutide shortage, compounding was explicitly permitted. Post-shortage, the FDA typically expects companies to cease unless a separate exemption applies.

Personalized Compounding: Hims justifies its continued GLP-1 production by offering personalized dosages to mitigate side effects—a practice that aligns with FDCA Section 503A, which allows compounding based on individual prescriptions.

FDA Guidance and Enforcement Risk

FDA Stance: The FDA’s February 21 announcement ending the shortage implies stricter oversight of GLP-1 compounding. However, the agency has historically allowed flexibility for personalized formulations when clinically justified.

Enforcement Likelihood: While the FDA could issue warning letters or pursue injunctions, Hims’ focus on personalized dosing and its legal team’s expertise suggest a defensible position. Legal action may also be delayed by court challenges, as Needham predicts.

Third-Party Litigation Risk

Novo Nordisk: As the patent holder for semaglutide, Novo Nordisk could sue Hims for patent infringement. However, compounded drugs for individual prescriptions are generally exempt from patent challenges under U.S. law, provided they aren’t mass-produced.

Short Sellers: Critics and short sellers may amplify scrutiny, but Hims’ modest reliance on personalized semaglutide (versus its broader weight loss portfolio) limits exposure.

Financial and Strategic Implications

Revenue Stability: With $725 million tied to weight loss, personalized semaglutide is a minority contributor compared to oral solutions and liraglutide, reducing overall risk.

Shareholder Confidence: Major stakeholders like BlackRock (13.55%), Vanguard (9.12%), and CEO Andrew Dudum (8.42%) signal strong institutional backing as of February 28, 2025.

Market Opportunity: Persistent demand for affordable GLP-1s, driven by high costs and limited insurance coverage, supports Hims’ strategy even post-shortage.

Conclusion

Hims & Hers is navigating a complex legal landscape by continuing to compound GLP-1s after the FDA declared the semaglutide shortage over. However, its focus on personalized dosing, backed by a robust legal team and aligned with federal compounding exemptions, positions it on solid ground. While risks of FDA enforcement or litigation from Novo Nordisk exist, these are mitigated by Hims’ diversified weight loss portfolio and the likelihood of legal delays. With $725 million in projected weight loss revenue contributing to a $2.3-2.4 billion total for 2025, Hims appears well-equipped to sustain its growth trajectory and defend its practices against challenges.

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