The shares of Hims & Hers Health (HIMS) continued to fall on Tuesday afternoon after a warning letter from the U.S. public health regulator to the online telehealth company became public. The stock declined nearly 7% to around $50 as of 1:00 p.m. EDT.
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In the letter, which is dated September 9, the U.S. Food and Drug Administration (FDA) said Hims & Hers’ claims about its compounded semaglutide products on the website forhers.com are “false or misleading,” as such products are not approved by the agency.
Compounded drug products are custom-made medications created by combining or altering ingredients to meet a patient’s unique needs. Semaglutide, one such ingredient, is found in popular weight-loss drug Wegovy and the diabetes medication Ozempic, both of which are made by Danish pharmaceutical company Novo Nordisk (NVO).
Semaglutide works by copying a natural hormone called GLP-1. It sends signals to the brain to reduce appetite, helps the stomach digest food more slowly, and boosts insulin release to lower blood sugar.
FDA Warns of ‘Misbranded’ Products
However, the FDA, in the letter addressed to Hims & Hers’ CEO, Andrew Dudum, emphasized that the company’s claims contravene rules about making such products available for interstate commerce.
“The following claims concerning your compounded semaglutide products appear on your website: ‘Weekly injectable GLP-1 with the same active ingredient as Ozempic and Wegovy’ and ‘Clinically proven ingredients.’ Compounded drug products are not FDA-approved, ” noted George Tidmarsh, the director for drug evaluation and research at the FDA.
“Your claims imply that your products are the same as an FDA-approved product when they are not. As a result, these claims are false or misleading, and your products are therefore misbranded,” Tidmarsh added. Consequently, the agency urged Hims & Hers to act promptly to address the violations, including halting the use of the flagged language on its products, or risk legal action.
U.S. Goes Hard on Drug Ad Practices
The FDA’s letter became public a day after the agency’s commissioner, Martin Makary, lambasted Hims & Hers’ Super Bowl ad from February. The U.S. health official noted that the ad violated federal rules by promoting weight-loss treatments without stating the potential risks involved.
However, a spokesperson for Hims & Hers in response argued that the ad was not to promote a particular product. Instead, they noted, it was targeted at highlighting the problem of obesity.
FDA’s letter comes about a week after the Trump administration instructed regulators to go harder on drug ads targeted at consumers.
Is HIMS Stock a Good Buy?
Turning to Wall Street, Hims & Hers’ shares have a Hold consensus rating on TipRanks, based on two Buys, eight Holds, and two Sells assigned by 12 Wall Street analysts over the last three months. The average HIMS price target is $49.40, which is a 2.14% potential downside risk from the current level.
