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Hims & Hers (HIMS-21.32%) stock took a steep dive, dropping more than 27% Tuesday morning — even after the millennial-focused telehealth company reported soaring sales for 2024 just the night before.
Hims & Hers reported a striking 69% jump in sales for 2024, reaching $1.5 billion. But despite the strong growth, investors appear rattled by the looming loss of a key sales driver later this year.
Last May, Hims & Hers began offering compounded semaglutide — the active ingredient in Novo Nordisk’s (NVO+0.11%) Ozempic and Wegovy — for just $199 a month, far cheaper than Ozempic’s $1,000 list price or Wegovy’s $1,349 tag. Compounding refers to the customization of an approved drug by a pharmacy or physician to meet the specific needs of an individual patient.
The company was able to sell this type of off-brand version due to shortages of the branded drugs. Typically, the Food, Drug, and Cosmetic Act prohibits compounding drugs that are just copies of commercially available medications. However, drugs that are in shortage are not considered by the U.S. Food and Drug Administration (FDA) to be commercially available.
But with those shortages now resolved, Hims & Hers will likely have to stop offering it. On Friday, the FDA updated its drug shortage list, marking branded versions of semaglutide as fully available. The FDA said it will start citing companies and healthcare providers that still offer patients “essential copies” of compounded semaglutide in the next 60 to 90 days.
For its part, Hims & Hers said it will stop offering its current iteration compounded semaglutide after the first quarter.
“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 on Monday evening.
Instead, the company will focus on weight-loss pills and a generic version of liraglutide — an older GLP-1 drug taken daily instead of weekly like newer options. It may also potentially offer customized versions of semaglutide with personalized dosing or alternative administration methods, which would allow it to stay compliant with drug laws.
Hims & Hers said that its full-year revenue, excluding its GLP-1 offerings , the class of drug to which semaglutide belongs, rose 43% year-over-year to over $1.2 billion. It also projected that its sales in 2025 will reach $2.3 billion to $2.4 billion.
Hims & Hers was founded in 2017, known as just “Hims” at the time, as a platform for men to get prescriptions online for erectile dysfunction and hair loss medications. Since then, it has expanded to offer treatments for men and women to address skin care, anxiety, and overall sexual health.