35% share price crash sparks wave of lawsuits Hims & Hers (HIMS.US) management charged with misleading investors

The Zhitong Finance App learned that the sudden termination of a brief partnership between Hims & Hers Health (HIMS.US), which focuses on providing telemedicine services and personalized health products through online platforms, and NVO.US (NVO.US), a global leader in diet medicine, has led to increasing investor lawsuits against this telemedicine company.

This week, a group of shareholders filed a lawsuit against Hims & Hers in San Francisco federal court. According to media reports, the so-called derivative lawsuit filed on Monday alleges that the Hims & Hers board of directors and its executives published false and misleading information about the company's financial status and business operations, as well as future performance guidelines.

In June of this year, Danish pharmaceutical giant Novo Nordisk terminated a cooperation agreement that was only signed for about two months. Previously, the two sides reached a cooperation so that members of Hims & Hers can obtain its weight loss drug Wegovy, which has the title of “magic drug for weight loss” through the direct sales platform NovoCare Pharmacy. Affected by this, Hims & Hers shares plummeted about 35% in a single day.

After the partnership was forced to end, and HIMS initially viewed it as the first step in a long-term partnership, Hims & Hers investors filed two securities class actions in the same court last month to claim compensation for the sharp drop in stock prices.

The dramatic short-term collaboration between Hims & Hers Health and Novo Nordisk from a “flash marriage” to a “flash break” triggered a sharp drop in the former's stock price, an investor class action lawsuit against Hims & Hers Health, and a “war of words” between the two sides.

Investors then filed several securities class actions against Hims & Hers in San Francisco federal court, alleging that the company underdisclosed the importance of cooperation and compliance risks.

The cooperation between Hims & Hers Health and Novo Nordisk's Wegovy lasted only two months and broke down due to disputes over the legality and marketing of the compound drug, triggering a single-day sharp drop in the former's stock price and multiple investor lawsuits. The impact on the fundamentals of Hims & Hers Health's performance is mainly reflected in legal/brand costs and uncertainty about the future supply of genuine Novo Nordisk GLP-1 products; if litigation and liability are limited and gross profit continues to decline, it will put real pressure on medium-term profits.

Wegovy's active ingredient semaglutide (semaglutide) has been allowed to be mixed for some time due to shortages. The US FDA removed semaglutide from the shortage list in June, and Novo Nordisk immediately asked Hims & Hers to stop selling the mixed version; however, Hims & Hers continued to supply it later, causing disputes. If compound Wegovy cannot be sold in the future, and the supply of genuine products is limited due to the breakdown of cooperation with Novo Nordisk, the growth rate of high-margin weight reduction tracks may slow down, and gross margin may continue to decline from 79% in 2024 (2025Q1 has dropped to 73%).

Additionally, class action lawsuits and brand repairs or boosting operating expenses erode adjusted EBITDA. The market has yet to quantify potential compensation, yet compliance lawsuits by telemedicine companies of similar size are often settled at the level of tens of millions of dollars.