Shares of HIMS & HERS (HIMS) increased by 2.6% on Monday following the FDA’s release of a “green list” of global suppliers offering ingredients that meet GLP-1 standards. This announcement indicates that the company will begin to take on compound interest, allowing them to gather active ingredients and create customized versions of GLP-1 weight loss medications. Telehealth companies such as HIMS are adopting this strategy to provide their own versions of GLP-1 treatments from Novo Nordisk (NVO) and Eli Lilly (LLY).
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The FDA’s action might signal a shift in dynamics between Novo Nordisk and Eli Lilly. The broader availability of complex GLP-1 medications could diminish the demand for popular weight loss products like Wegovy, Ozempic, Mounjaro, and Zepbound. Consequently, NVO shares dipped by 1.7%, whereas LLY shares rose by 1.2%.
Novo and Lilly Defend Their Products
Both Novo Nordisk and Eli Lilly have voiced concerns regarding this new practice, arguing it undermines their business and breaches intellectual property rights. They have initiated lawsuits against smaller telehealth companies, pharmacies, and clinics but have not yet targeted HIMS directly.
The FDA’s new list doesn’t settle the ongoing dispute but does indicate regulatory backing for compounded practices under specific circumstances, which may alleviate some risks for HIMS, at least temporarily.
Legal Risks Appear Reduced
Market sentiment now suggests that it is improbable for Novo to pursue legal action against HIMS. Earlier this month, there was about a 70% expectation of a lawsuit, but that has now dropped to roughly 34%.
This reduction reflects increasing investor confidence that HIMS can maintain its weight loss drug operations without encountering significant legal issues.
Is HIMS a Worthwhile Investment?
Currently, Wall Street holds a cautious stance on HIMS & HERS Health Stock, resulting in a consensus rating of seven holds, two buys, and two sells. The average target price for HIMS stock is set at $49.00, suggesting a potential downside of about 1.29%.
