ANALYSIS-Hims expansion may not come in time for risky GLP-1 business

By Amina Niasse

NEW YORK, March 2 (Reuters) - Telehealth company Hims & Hers Health HIMS.N, known for its weight-loss drug business, is promising it can diversify away from its reliance on compounded GLP-1 sales in the U.S., but that may not happen soon enough for investors who are growing impatient.

Hims drew regulatory scrutiny last month with its plan to launch a $49 version of Novo Nordisk's NOVOb.CO brand-new Wegovy pill. It quickly reversed course after the U.S. Food and Drug Administration referred the company to the Department of Justice and threatened to restrict the ingredients that pharmacies mix to make their compounded versions.

The company also disclosed recently that it learned in February of a U.S. Securities and Exchange Commission investigation.

At the same time, the company is facing new costs from its U.S. business and expansion into eight countries, including the UK and Australia, making it unclear whether it can meet its growth outlook, three analysts said.

The company's CEO, Andrew Dudum, has said that despite regulatory pressure, it can sustain its weight-loss business. Dudum said Hims will adjust its business model to meet patient demands, "even in a draconian scenario of compounding GLP-1s not being there."

Hims predicted growth of over 15% in revenue in 2026, compared with actual growth of 59% in 2025.

Still, following a conference call to discuss quarterly results released on February 23, four analysts revised downward their share price targets, bringing the mean to $20.70 from $29.42 before the call, according to LSEG data. Shares closed at $14.52 on Friday.

"We see a lot of question marks on (Hims), including litigation with Novo Nordisk and potential regulatory changes to the compounding industry," said Kadyn Kim, an analyst at Morningstar.

Novo sued Hims over its compounded versions of its Wegovy and Ozempic drugs, made with the active ingredient semaglutide. Compounders are allowed to make personalized copies of drugs under U.S. regulation but not mass-produce them.

Hims & Hers declined to comment.

UNCERTAIN REGULATORY CHANGES AHEAD

Kim said the ongoing battle between Novo and Hims and the regulatory action could take over a year to resolve.

Hims said in a filing that it is unclear what actions the regulators may pursue.

Two industry experts said the FDA could add semaglutide to its "do-not-compound" list, which limits the creation of entire drug products due to safety, complexity or efficacy concerns.

The regulator could also update separate lists it maintains on which bulk ingredients are safe to use for personalized compounding, which has never been updated to include semaglutide despite the ingredient's broad use.

Rosalie Hoyle, a research scientist at health consultancy Avalere, said she expects the FDA to update or change its compounding guidance documents this year.

"The FDA could use it as an avenue to identify potential safety risks of using the active ingredient in compounding," said Hoyle.

The length and depth of federal investigations present unknown risks, said Jailendra Singh, an analyst at Truist: "There's always some risk they might find something else."

INTERNATIONAL EXPANSION TIMING

Hims has expanded into the UK through its six-month-old purchase of the UK's Zava and said last month it would spend up to $1.15 billion to buy Australia's Eucalyptus, which operates there and in Japan.

Eucalyptus and Zava both sell branded GLP-1s. Eucalyptus does not provide compounded versions, according to a spokesperson for Hims.

The companies also provide access to mental health and sexual health treatments, among others.

That can help it expand its non-weight-loss business, two analysts said, if the company integrates them well.

But for now, the expansion is squeezing profit.

In February, the company said on its conference call that its weight-loss business will experience a $65 million headwind for the first quarter. Hims has said its weight-loss business will partly drive its goal of reaching $6.5 billion in revenue by 2030.

Hims' chief financial officer, Yemi Okupe, said international markets have higher operating costs, but that the challenge will diminish as the company's international presence grows.

"I assume it takes Hims time and resources to build out its brand equity in new markets," said Kim.