Shares of Hims & Hers Health (NYSE: HIMS) took a sharp dive on Friday after the U.S. Food & Drug Administration (FDA) announced that the shortage of semaglutide, the active ingredient in Novo Nordisk’s (NYSE: NVO) Wegovy and Ozempic, has been resolved. This decision could significantly impact Hims & Hers, which has been capitalizing on the demand for compounded weight-loss medications under an FDA provision that allows compounding when the original drug is in short supply.
FDA’s 90-Day Grace Period for Compounders
Under the FDA’s 503B rule, drug compounders are permitted to mass-produce alternatives when the branded versions are difficult to obtain. However, with the shortage now resolved, the regulatory agency has made it clear that it will not take enforcement action against 503B compounders for the next 90 days, providing a temporary window before stricter regulations potentially take effect on May 22.
The news immediately sent ripples through the market, with HIMS shares plunging as investors reacted to concerns over the company’s ability to sustain its compounded weight-loss drug offerings.
Why This Matters for Hims & Hers
Hims & Hers has expanded its portfolio to include compounded versions of semaglutide-based weight-loss drugs, a move that positioned the telehealth company as a disruptor in the booming obesity treatment market. However, with the FDA signaling the end of the semaglutide shortage, the legal landscape for such offerings could change drastically, potentially eroding a lucrative revenue stream for the company.
Andrew Dudum, CEO of Hims & Hers, addressed the situation on X (formerly Twitter), stating that the company “will continue to offer access to personalized treatments as allowed by law” while “closely monitoring potential future shortages.”
Market Reaction and Investor Concerns
The resolution of the semaglutide shortage has broader implications for companies relying on drug compounding exemptions. Investors are now questioning whether Hims & Hers will be able to sustain growth in its weight-loss drug segment without the regulatory flexibility provided by 503B. As a result, the stock faced heavy selling pressure, reflecting uncertainty about the company’s future revenue prospects in this category.
The latest FDA announcement follows a similar move in October when the agency removed Eli Lilly’s (NYSE: LLY) weight-loss treatments, Mounjaro and Zepbound, from its shortage list. With regulatory tightening on the horizon, companies like Hims & Hers may need to pivot their strategies to maintain their competitive edge in the growing weight-loss treatment market.
As the 90-day grace period unfolds, all eyes will be on how Hims & Hers navigates this evolving regulatory landscape and whether new shortages emerge to potentially extend its compounding exemptions.
