The partnership forged by Novo Nordisk (NVO) and Hims & Hers (HIMS) in April appeared to bring together two giant brands in the growing weight-loss market. It’s why the sudden fallout less than two months later stunned and stumped insiders.
Hims & Hers has leaned on compounding, which accounted for 15% of revenues last year, as part of the growth story it has pitched to investors. It accused Novo Nordisk of forcing it to “steer” patients to branded Wegovy, while Novo Nordisk accused Hims of steering patients to unapproved compounded or “copycat” drugs.
“In recent weeks, Novo Nordisk’s commercial team increasingly pressured us to control clinical standards and steer patients to Wegovy. We refuse to be strong-armed by any pharmaceutical company’s anticompetitive demands,” Hims & Hers CEO Andrew Dudum wrote in a post on X.
“We … will not compromise the integrity of our platform to appease a third party or preserve a collaboration,” he added.
The Food and Drug Administration (FDA) initially allowed compounded products on the market when both Eli Lilly (LLY) and Novo Nordisk were unable to produce enough of their GLP-1 drugs and faced shortages. However, after the shortages ended in recent months, the FDA made compounding illegal.
But compounding pharmacies claim they still have a right to produce if patients cannot take the branded products due to allergies or tolerability issues, which is allowed under FDA rules as a “personalized” medicine.
Hims & Hers declined to provide additional comment on the issue and declined an interview request.
Novo Nordisk, meanwhile, told Yahoo Finance in an emailed statement that it ended the collaboration because of the compounded semaglutide, which are copycats of Wegovy based on the same key ingredient but with other additives.
Hims & Hers “has failed to adhere to the law which prohibits mass sales of compounded drugs under the false guise of ‘personalization’ and are disseminating deceptive marketing that put patient safety at risk,” Novo Nordisk told Yahoo Finance in a statement.
Hims & Hers continues to ask patients if they are interested in “personalized” treatments when they seek GLP-1s on the site, which was the basis for Novo Nordisk’s pullback, according to Michael Schnell, healthcare M&A director at consultancy West Monroe.
The timeline
However, Novo Nordisk knew Hims & Hers would continue selling the copycats when it first announced the agreement in April, according to Dudum.
“We continue to expect the personalized semaglutide to exist on the platform. That’s something we’ve shared as of last call, and it’s something we shared earlier with Novo,” he said on an earnings call in May.
Novo Nordisk launched the partnership through CenterWell, Humana’s (HUM) mail-order pharmacy, which would dispense the drugs prescribed by three telehealth providers — one of which was Hims & Hers.
The agreement did not include any requirement for Hims & Hers to stop selling compounded semaglutide, Novo Nordisk confirmed to Yahoo Finance on Tuesday. And Hims & Hers never indicated it would stop selling the copycats.
In April, Hims & Hers began to add “branded tirzepatide” on its platform, noting that it was “in addition to oral medication kits, compounded semaglutide, and branded semaglutide,” according to Craig Primack, Hims & Hers senior vice president of weight loss.
Branded tirzepatide drugs are Eli Lilly’s weight-loss drug Zepbound and diabetes drug Mounjaro.
Hims & Hers is not part of Eli Lilly’s direct-to-consumer telehealth offerings, but it can sell the injectables through the normal wholesale acquisition process as it does for other drugs.
Hims & Hers CEO Dudum said on an earnings call in May that he had been in discussions to integrate with Eli Lilly’s platform with no success.
The move indicated a significant milestone for Hims & Hers, which began as a telehealth platform in 2017, catering to men’s health with off-patent products such as hair loss and erectile dysfunction drugs. Dudum suggested this could open doors to branded pharma opportunities.
“Over time, we expect wider collaboration across the industry, from pharmaceutical players, innovative leaders in diagnostic and preventative testing to world class providers. We look forward to providing future updates as this collaboration and others like it continue to evolve,” Dudum said.
Pressure on future growth
Whether this spat with Novo Nordisk could damage future pharma relationships for Hims & Hers remains to be seen.
Schnell said the move could indicate either that Dudum believes in staying true to the company’s roots as an access point for lower-cost drugs or, despite regulatory limitations, compounded GLP-1s could still be more profitable than selling branded drugs.
“If you’re him, you’re trying to reach some escape velocity here. Long term, he’s got to know that you cannot compound your way into being a fully mature company,” Schnell said.
Jefferies analyst Glen Santangelo wrote in an April note to clients that the move to work more with branded drugs was positive. However, he also noted that the outlook for Hims & Hers remained uncertain.
“A review of weight loss offerings on the HIMS website suggests a shift to branded GLP-1s … with less emphasis on personal compounding. We believe this was necessary to stay out of regulatory/IP [intellectual property] crosshairs. This shift has started to weigh on web traffic. While 1Q seems fine, we highlight traffic has slowed since the Super Bowl raising questions about [forward estimates],” Santangelo said.
Requests to follow up with Santangelo were not returned.
But with Hims & Hers now in a public tiff with Novo Nordisk, it remains to be seen how Hims & Hers performs.
“If he gets pushed off of compounding this way, it’s very difficult for a lot of the growth projections they have,” Schnell said.
The split with Novo Nordisk already cost Dudum his spot among billionaires — losing $400 million on Monday — as the company’s stock plummeted 35% Monday.
Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. That includes GLP-1s, of course. Follow Anjalee as AnjKhem on social media platforms X, LinkedIn, and Bluesky @AnjKhem.
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