Hims & Hers (HIMS-9.34%), the millennial-skewed telehealth company, saw its stock tumble nearly 9% on Tuesday, as the company braces for big regulatory shifts in the weight-loss drug industry.
Hims stock took a hit just a day after the U.S. Food and Drug Administration (FDA) updated a page on its website outlining its concerns with the use of what it calls “unapproved GLP-1 drugs.” GLP-1 drugs are a class of drugs, made popular by Novo Nordisk’s (NVO+1.21%) Ozempic, which mimic hormones that regulate blood sugar and suppress appetite.
The FDA warned Monday that the use of unapproved versions of these drugs including compounded versions can “be risky for patients, as unapproved versions do not undergo FDA’s review for safety, effectiveness and quality before they are marketed.”
Back in May, Hims & Hers started selling compounded semaglutide — the active ingredient in Novo Nordisk’s Ozempic and Wegovy — for just $199 a month. That’s a big difference compared to Ozempic’s $1,000 list price and Wegovy’s $1,349 price tag. Compounding means a pharmacy or physician customizes an approved drug to fit an individual patient’s needs. The company’s total sales grew 69% last year to $1.5 billion.
Hims & Hers was able to sell this off-brand version because of recent shortages of GLP-1 drugs. Normally, the Food, Drug, and Cosmetic Act prohibits making drugs that are just copies of commercially available ones. However, when drugs are in shortage, the U.S. Food and Drug Administration (FDA) doesn’t consider them commercially available.
Now that the Ozempic shortage is over, Hims & Hers will have to stop selling “essential copies” of compounded semaglutide this year.
The FDA said it will start citing companies and healthcare providers that continue to offer “essential copies” of compounded semaglutide starting May 22 or after a judge rules on a lawsuit from the industry group Outsourcing Facilities Association — whichever comes later.
“We will have to start notifying customers in the coming month or two that they will need to start looking for alternative options on the commercial dosing,” Hims & Hers CEO Andrew Dudum told investors during a call in February.
Still, Hims & Hers has other avenues to explore. The company could continue to offer more personalized semaglutide formulations and shift its focus to older generic weight-loss drugs.
Additionally, on Tuesday Bank of America Securities (BAC+0.68%) analyst Allen Lutz adjusted the firm’s price target for Hims & Hers by $1 to $22 — notably $12 below the stock’s opening price that day. Lutz maintained an “underperform” (sell) rating.
Lutz noted that while overall sales grew 124% year over year in February, GLP-1 medications now make up about 45% of the company’s online revenue. Meanwhile, growth outside of GLP-1s has slowed, with core sales increasing just 30% in February — down from 40% in the fourth quarter and 47-50% in the third.
“Slowing core growth is an important barometer as semaglutide could exit the model at any time and now represents close to 50% of sales,” Lutz wrote.
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