Hims & Hers ($HIMS) saw its partnership with Novo Nordisk come to a sudden end last month after the Danish drugmaker terminated their distribution agreement, accusing the telehealth firm of deceptive marketing practices and of selling unauthorized compounded versions of the weight loss drug Wegovy.
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Since then, says Morgan Stanley analyst Craig Hettenbach, there’s an “increased focus on both the legal and business implications that could influence the stock.”
Meanwhile, in April 2025, Eli Lilly filed several lawsuits, accusing telehealth firms of selling unapproved and illegal versions of its widely used weight loss medications.
To gauge the potential impact on HIMS, Hettenbach consulted with legal specialists who have expertise in Lanham Act false advertising and unfair competition cases – a key federal law governing trademark disputes and deceptive marketing practices.
The experts explained that 503A compounding is meant for personalized medications – only for patients who cannot use FDA-approved drugs or in the case of shortages – with each prescription supported by clear clinical need and produced in small batches. One expert urged clients to halt large-scale GLP-1 compounding once the shortage ends, citing heightened legal exposure, while another left room for limited group-based customization but cautioned that legal precedent is sparse.
As litigation unfolds, both experts agreed that courts may allow cases against compounders to proceed, even if some are initially dismissed, given the potential for claim amendments or refiling. They discussed arguments around legal standing, such as Buckman Preemption, which might favor compounders in some respects but leave room for companies like Lilly to pursue claims under the Lanham Act. For example, in the Strive Pharmacy case, Lilly alleges the sale of unapproved compounded versions of its drug and misrepresentation of their quality, a claim that could have standing under the Lanham Act. Both experts also emphasized that state deceptive trade practice laws are designed to protect consumers, not necessarily competitors like Lilly.
Additionally, while the possibility of a preliminary injunction from Lilly was considered, both experts doubted its likelihood without clear proof of irreparable harm. This means compounding pharmacies may continue operations as legal proceedings drag on, with outcomes dependent on the facts uncovered during discovery.
Given this cloud of legal uncertainty, Hettenbach remains cautious on HIMS shares, assigning an Equal-weight (i.e., Neutral) rating with a $40 price target, implying a 20% downside from current levels. (To watch Hettenbach’s track record, click here)
Hettenbach’s caution is shared across the Street. 7 other analysts also rate HIMS a Hold, joined by 2 Sells and just a single Buy, resulting in a consensus Hold rating. The $39.22 average price target implies a one-year decline of ~22%, underscoring the cautious stance as the legal process plays out. (See HIMS stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.