Will it pay off?

I’ve never seen a single product announcement cause so much consternation among investors.

Even the most bullish Hims & Hers $HIMS ( ▼ 3.33% ) investors think this pill, a compounded GLP-1 pill, was such an aggressive move that they sold their shares.

Novo Nordisk $NVO ( ▼ 2.12% ) is upset.

The FDA chief is upset.

We are still piecing through all of the information but here’s what I think we know so far.

To cut to the chase, I’m not selling my shares now, but I am on notice.

The reason Hims & Hers has been able to sell GLP-1s the way they do is because of the compounding rules as they’re written. Compounding is allowed because there are numerous reasons why a standard, branded product may not be right for a person.

That may be because a product is prescribed off-label — like Ozempic was when it was a diabetes treatment that was found to work for weight loss — or because there’s been no FDA approval for a specific cohort of users, like children. There may also be reasons a specific commercial, FDA-approved product isn’t available everywhere, like in rural areas where having the active pharmaceutical ingredients (APIs) on hand may be possible, but not in every commercial dosage.

So, the law was written to allow compounding to increase prescription flexibility for doctors:

I think what Hims & Hers is doing is pushing this compounding law to its logical conclusion, for better or worse.

I think they’re technically operating legally, but they’re mass compounding and selling at scale, which isn’t what the compounding law was intended for. That may mean what they’re doing is technically legal, which is likely their defense.

But they’re in a grey area, and just because they can doesn’t mean they should.

Is that better or worse than Big Pharma gouging Americans for every penny just because they can?

One of the points of confusion yesterday was how Hims & Hers could introduce an oral GLP-1 without copying Novo Nordisk’s patented SNAC technology. This was the first fear that Hims & Hers was blatantly breaking the law by making something illegal.

It took a while to get an answer to what they were doing, but it appears Strive will actually be compounding the GLP-1 and encapsulating it in what’s called "liposomal technology.”

In short, it’s like a little bubble the targeted molecule sits in while it goes through your stomach, allowing enough to reach your intestines or bloodstream. And depending on the formulation of the liposome (if I’m saying that right), the molecule can be released quickly or last a long time. Here’s a better explanation from Strive themselves:

I don’t know if this would put the pressure of compounding on Strive, who appears to be producing the pill, or Hims & Hers.

And if this is effective, is a liposomal delivery applicable for all kinds of peptides (GLP-1s are a peptide)? We know Hims & Hers is very interested in peptides, so this could be an initial test of the viability of liposomal technology for peptides.

I will note that early on Thursday Novo Nordisk’s first reaction was that Hims & Hers’ GLP-1 pill wouldn’t work because it didn’t use SNAC. In theory, this is just an alternative solution.

It’s too early to know the full answer, and Hims & Hers needs to give some answers to clear up questions about the viability of this solution.

Here’s where the drama (and stock declines) really begin. After the market closed on Thursday, Dr. Marty Makary, head of the FDA, tweeted out this:

That was then followed by this statement directly saying Makary’s tweet was directed at Hims & Hers.

This caused Hims & Hers stock to drop again after hours on Friday.

And Hims & Hers has responded by pulling some of the marketing around the GLP-1 pill (which it probably should have done to start).

But that’s not where the FDA story ends.

Late in the day, the FDA put out this statement:

This is scary on its face, and investors responded accordingly. But I’m not certain that “mass marketing” a compounded treatment is necessarily illegal if a compounded solution is “medically necessary”, which is up to the prescribing doctor.

And I’m not sure there’s evidence that Hims & Hers’ marketing is misleading. It could be, but if the liposomal technology is effective and efficacious, the marketing may be true as it pertains to weight loss.

Is the FDA saying compounded GLP-1 should be illegal? That seems to go against the law as written.

But the law was likely also not written with the intent to mass-compound GLP-1s. In that case…change the law.

I know it’s hard to change laws in the U.S., but if Hims & Hers is operating legally, that’s a problem with the law, not Hims & Hers. I assume this would be Hims & Hers’ defense, but it’s also where I’ve come out in researching this topic over the last two days. If you don’t want compounding at scale, make it illegal.

Let’s say Hims & Hers is in the wrong, though.

What could FDA action mean?

As I understand it, there are three potential outcomes:

The question now is, what is the FDA’s next step? Is the statement above a strongly worded letter, or is it a warning that something as serious as criminal penalties is coming?

At some point, we have to trust the management of a company not to do something stupid. But did they?

On the Board of Directors is the former COO of Novo Nordisk, Chair of the FDA Alumni Association, who was also Global Head of Regulatory Excellence at AstraZeneca, and former CEO of The Cleveland Clinic.

Would they have signed off on such an aggressive move knowing it was illegal?

Eli Lilly recently lost lawsuits against Willow Health and The RXCompound Store related to compounding. Will the FDA and Novo Nordisk want to enter long, protracted litigation with Hims & Hers, which could set a precedent that would allow an expansion of compounding if they lose?

Remember, Novo Nordisk did not sue Hims & Hers last year when they had a falling out over compounding. Why?

How will this play out legally?

We don’t yet know.

What bothers me as an investor is Hims & Hers pushing this point when it could threaten everything being done to build a healthcare platform.

Earlier this year, it introduced cancer screening, and I think there’s an opportunity to tie more up-to-the-minute data and feedback into the Hims and Hers apps.

But the company is going to war over compounding?

I see this company as a potential platform. Compounding is a tool to get there.

I’m just not sure it’s the hill Hims & Hers should die on.

The stock market certainly thinks the loss of GLP-1s would be devastating for Hims & Hers. But would it?

In the company’s Q3 2025 guidance for the full year, management said that weight loss would be “at least $725 million” in 2025.

If the company lost all of its weight loss business, which includes non-GLP-1 products as well, that would leave about $1.625 billion in revenue. On top of that, the company has over $1 billion in cash and positive cash flow, at least for now.

In a worst-case scenario, does Hims & Hers have to pay a hefty fine and have to give up compounding GLP-1s?

If it is forced out of compounding at scale, it would impact competitors as well, so the net loss may not be as big as it seems.

Will the company win and get the ability to expand compounding even further?

Does the FDA go “scorched earth” and try for criminal charges? That seems unlikely to me.

There’s a lot of uncertainty, and I understand why investors are concerned. But I would ask one question:

Do consumers care?

Or counterintuitively, do consumers want to support a company fighting Big Pharma?

I don’t know the answer to any of these questions, but I also don’t think it’s a slam dunk that Hims & Hers comes out of this worse off. It’s possible they’re the “people’s champion.”

Of course, I may be seeing a dip in the stock price through rose colored glasses and not as evidence that my thesis has blown up in the last 48 hours.

I’m going to be monitoring this one closely. Sometimes, doing nothing is the right thing. Hims & Hers hasn’t responded forcefully yet, and the FDA and Novo Nordisk haven’t officially filed any lawsuit (as far as I’m aware), so we don’t know all of the cards that will be played.

But this is what I think we know now, and this week’s actions by Hims & Hers raise questions about whether management is playing 4D Chess or pushing it too far for everyone’s comfort.

Expect more from me on this in the future because I honestly don’t know whether I should sell it all and take my losses or double down. TBD!