Key Takeaways
- The FDA has signalled an end to the temporary allowance for compounded GLP-1 drugs as shortages of branded versions like Wegovy and Ozempic are resolved, creating significant regulatory risk.
- Telehealth firms such as Hims & Hers Health (HIMS), which have heavily relied on selling cheaper compounded GLP-1s, face a direct threat to a key revenue and growth driver.
- HIMS reported impressive 46% year-over-year revenue growth in Q1 2025, but its stock dropped 25% in one day following an FDA announcement, highlighting its vulnerability to regulatory shifts.
- The company’s future strategy may require pivoting to partnerships with branded drug manufacturers, which could compress margins, or diversifying into other wellness categories to offset potential losses.
The intensifying regulatory focus on compounded GLP-1 drugs, used widely for weight loss and diabetes management, poses a significant challenge to telehealth companies like Hims & Hers Health Inc. (HIMS). With the U.S. Food and Drug Administration (FDA) resolving shortages of key medications such as semaglutide and tirzepatide in early 2025, the justification for compounded versions—often produced by pharmacies and distributed through telehealth platforms—has diminished. This shift could severely impact the revenue streams of firms that have capitalised on these drugs during supply constraints, with HIMS potentially facing a reckoning as regulators tighten the noose on unapproved formulations.
Regulatory Landscape: A Closing Window for Compounded Drugs
Compounded GLP-1 drugs, which replicate patented medications like Wegovy and Ozempic, have been a lifeline for patients amid shortages since 2022. However, the FDA’s announcements in February and April 2025, confirming the resolution of shortages for semaglutide and tirzepatide respectively, signal the end of this workaround. Under federal law, compounding is permissible only during shortages or for specific patient needs not met by approved drugs. With supply stabilising, the legal basis for mass production of these alternatives is eroding, and the FDA has expressed growing concern over the safety and efficacy of unapproved versions, citing risks to patients from inconsistent quality controls.
Recent reports indicate that regulatory gaps have allowed unsafe compounded drugs to proliferate, prompting calls for stricter enforcement. This pressure, noted in various industry analyses and echoed in broader financial discussions on platforms like X (as seen in posts by accounts such as Pivotal_Capital), underscores the urgency for the FDA to act. The agency’s inaction on illegal compounding has been flagged as a public health risk, with a bipartisan group of lawmakers reportedly urging intervention as of July 2025. For companies reliant on these drugs, the regulatory horizon looks increasingly hostile.
Impact on Hims & Hers Health: A Business Model at Risk
Hims & Hers Health, a telehealth platform offering compounded GLP-1 drugs as part of its weight loss portfolio, has seen explosive growth in recent quarters. According to the company’s Q1 2025 earnings (January to March), revenue surged 46% year-over-year to $278.2 million, with specialty treatments including weight loss solutions contributing significantly to subscriber growth. However, the reliance on compounded drugs, which are cheaper than branded alternatives, leaves the firm vulnerable to regulatory changes. Industry estimates suggest that compounded GLP-1 sales could account for a substantial portion of HIMS’ weight loss segment, though exact figures remain undisclosed in public filings.
The stock market has already reacted to the shifting landscape. Following the FDA’s February 2025 declaration on semaglutide, HIMS shares dropped 25% in a single session, reflecting investor concerns over the sustainability of its compounded drug offerings. While the company has diversified into other wellness categories, the potential loss of this high-margin segment could dent profitability. For context, HIMS reported a net income of $11.1 million in Q1 2025, a stark improvement from a $10.1 million loss in Q1 2024, but margins remain thin at under 5%. Any disruption to a key revenue driver like GLP-1 drugs could reverse these gains.
Comparative Analysis: HIMS in the Telehealth Sector
To gauge the broader implications, a comparison with peers in the telehealth and pharmaceutical space is instructive. Below is a table summarising key financial metrics for HIMS and a competitor, Teladoc Health (TDOC), for Q1 2025, based on data from Bloomberg and company filings.
| Company | Revenue (Q1 2025, $M) | YoY Growth (%) | Net Income (Q1 2025, $M) | Primary Revenue Driver |
|---|---|---|---|---|
| Hims & Hers Health (HIMS) | 278.2 | 46.0 | 11.1 | Specialty Treatments (incl. GLP-1) |
| Teladoc Health (TDOC) | 646.1 | 2.6 | -81.9 | Virtual Care Services |
While HIMS outperforms Teladoc in growth, its dependence on a niche, regulatory-sensitive product line contrasts with Teladoc’s broader service-based model. If compounded GLP-1 drugs are curtailed, HIMS may struggle to replicate this growth trajectory, whereas Teladoc’s challenges appear more operational than regulatory.
Looking Ahead: Strategic Pivot or Regulatory Reckoning?
The path forward for Hims & Hers Health hinges on its ability to adapt. One option is to partner with branded drug manufacturers like Novo Nordisk or Eli Lilly to distribute approved GLP-1 medications, though this would likely compress margins due to higher costs. Alternatively, the company could double down on other wellness offerings—hair loss and mental health treatments remain strong performers—but these may not offset the potential loss of GLP-1 revenue in the near term. A third, riskier route is to challenge regulatory boundaries by continuing to offer compounded drugs under specific exemptions, though this invites legal and reputational hazards.
From a market perspective, investor sentiment will likely remain jittery until clarity emerges on enforcement. The FDA’s historical reluctance to crack down on compounding during shortages has emboldened telehealth firms, but with political pressure mounting in 2025, the days of regulatory leniency may be numbered. For HIMS, a stock trading at a forward price-to-earnings ratio of approximately 49 as of July 2025 (per FactSet data), the valuation assumes continued growth that may prove unsustainable under tighter rules. A touch of dry humour might note that betting on compounded drugs now feels akin to investing in a sandcastle before high tide.
In conclusion, the regulatory spotlight on compounded GLP-1 drugs represents a critical juncture for Hims & Hers Health. While the company has thrived on the accessibility and affordability of these medications, the FDA’s evolving stance and resolved shortages threaten to upend this model. Investors and analysts alike would be wise to monitor enforcement actions in the coming quarters, as the outcome could redefine the telehealth landscape.
References
- FactSet. (2025, July). Hims & Hers Health Inc. Financial Metrics and Valuation Data. Retrieved from FactSet database.
- Fierce Healthcare. (2025, February 21). Hims & Hers stock falls 25% as FDA curtails compounded GLP-1s. Retrieved from https://www.fiercehealthcare.com/health-tech/fda-declares-semaglutide-shortage-over-spelling-end-compounded-glp-1-market
- Food and Drug Administration (FDA). (2025, April 28). FDA clarifies policies for compounders as national GLP-1 supply begins to stabilise. Retrieved from https://www.fda.gov/drugs/drug-safety-and-availability/fda-clarifies-policies-compounders-national-glp-1-supply-begins-stabilize
- Food and Drug Administration (FDA). (2025, May 30). FDA’s concerns with unapproved GLP-1 drugs used for weight loss. Retrieved from https://www.fda.gov/drugs/postmarket-drug-safety-information-patients-and-providers/fdas-concerns-unapproved-glp-1-drugs-used-weight-loss
- Forbes. (2025, July 8). A dose of disruption: How compounding pharmacies are challenging big pharma on GLP-1 drugs and drug patents. Retrieved from https://www.forbes.com/sites/sindhyavalloppillil/2025/07/08/a-dose-of-disruption-how-compounding-pharmacies-are-challenging-big-pharma-on-glp-1-drugs-and-drug-patents/
- Hims & Hers Health Inc. (2025). Q1 2025 Earnings Report. Retrieved from company investor relations page.
- Journal of General Internal Medicine. (2025). Clinical Trial Considerations for GLP-1 Receptor Agonists. Retrieved from https://link.springer.com/article/10.1007/s11606-025-09765-3
- National Law Review. (2024). GLP-1 Receptor Agonists Clinical Trial Considerations. Retrieved from https://natlawreview.com/article/glp-1-receptor-agonists-clinical-trial-considerations
- Pharmacy Times. (2025). Out of Shortage, Into Controversy: The Fight Over GLP-1 Compounding. Retrieved from https://www.pharmacytimes.com/view/out-of-shortage-into-controversy-the-fight-over-glp-1-compounding
- Pivotal_Capital [@Pivotal_Capital]. (2025, July). [Series of posts discussing regulatory pressure on compounded GLP-1 drugs]. X. Retrieved from https://x.com/Pivotal_Capital/status/1948775596214907228, https://x.com/Pivotal_Capital/status/1948777387216273914, https://x.com/Pivotal_Capital/status/1948738035106873717
- PR Newswire. (2025). New CMPI Report Finds FDA Inaction on Illegal GLP-1 Compounding Threatens U.S. Patients. Retrieved from https://prnewswire.com/news-releases/new-cmpi-report-finds-fda-inaction-on-illegal-glp-1-compounding-threatens-us-patients-302510125.html
- Stat News. (2024, August 29). For Hims & Hers, the GLP-1 party may be ending. Retrieved from https://www.statnews.com/2024/08/29/telehealth-hims-hers-glp-1-compounded-weight-loss-drugs-hurdles/
- TechTarget. (2025, July 25). FDA regulatory gaps fuel unsafe compounded GLP-1 drugs. Retrieved from https://www.techtarget.com/pharmalifesciences/news/366628024/FDA-regulatory-gaps-fuel-unsafe-compounded-GLP-1-drugs
- Teladoc Health Inc. (2025). Q1 2025 Earnings Release. Retrieved from https://investors.teladochealth.com/news-and-events/press-releases/press-release-details/2025/Teladoc-Health-Reports-First-Quarter-2025-Results/default.aspx
