Hims & Hers Stock Crashes as Novo Lawsuit Confirms GLP-1 Enforcement Escalation

What happened

Novo Nordisk has filed a lawsuit against Hims & Hers, escalating legal risks around its weight-loss drug compounding practices, which the company had previously marketed aggressively. This follows the Feb 2026 episode where Hims rapidly launched and withdrew a compounded semaglutide pill under regulatory scrutiny, an event the DeepValue report flagged as a key enforcement risk. The stock has fallen over 50%, reflecting investor panic over the legal overhang that now dominates the narrative, overshadowing growth metrics. The lawsuit validates the report's bear scenario, which assigned a 35% probability to regulatory actions disrupting compounded GLP-1 supply and compressing margins. Consequently, Hims & Hers' investment story has decisively shifted from telehealth growth to a fraught battle with Big Pharma and regulators.

Implication

The lawsuit directly targets Hims & Hers' weight-loss business model, which drove recent ARPU growth but relied on legally precarious compounding, threatening core profitability. Legal proceedings could lead to injunctions or substantial fines, exacerbating the gross margin decline from 79% in Q3 2024 to 74% in Q3 2025 due to mix and shipping costs. Short sellers are capitalizing on this weakness, as seen in the stock's sharp drop, and may sustain pressure until regulatory clarity emerges. Management's ability to pivot to compliant alternatives, such as generic liraglutide, is now critical but uncertain given Novo's hostility and FDA constraints. Investors should reduce or exit positions, focusing on next-quarter disclosures for evidence of revenue impact and any legal resolutions before considering re-entry.

Thesis delta

The investment thesis shifts from a 'POTENTIAL SELL' based on regulatory risks to a more urgent sell as legal actions confirm enforcement escalation, increasing the bear scenario probability above 35%. Downside boundaries now appear more severe, with the $12 implied value in the bear case becoming a near-term target if lawsuits disrupt supply chains. Monitoring must intensify on quarterly ARPU and margin data, alongside any court outcomes, to assess if Hims can stabilize without compounded GLP-1s.