The news: Novo Nordisk is terminating its short-lived partnership with Hims & Hers. The drugmaker is accusing Hims of illegally selling knockoff versions of Wegovy, while deceptively marketing its compounded GLP-1 products.

Catch up quick: Hims teamed up with Novo in April to offer Wegovy to its members at a big discount if they paid with cash at Novo's D2C pharmacy. This partnership happened right after the FDA took Novo's and Eli Lilly's popular GLP-1 drugs off the shortage list. That meant companies like Hims largely had to stop prescribing their own compounded versions of these brand-name meds. However, Hims stated it would still prescribe personalized GLP-1s to patients who met specific health requirements, and said Novo knew all about this when they made their deal.

Inside Novo’s accusations: The drugmaker said that Hims’ tactic of personalizing weight loss drugs misleads consumers and doesn’t comply with the law that prohibits mass sales of compounded medications. Hims’ promotion and sale of compounded Wegovy puts patient safety at risk, per Novo.

Hims CEO Andrew Dudum responded with a post on X, accusing Novo of pressuring the company to steer patients to Wegovy even if it wasn’t the best choice. Dudum said that Hims “refuse[s] to be strong-armed by any pharmaceutical company’s anticompetitive demands.”

Why it matters: Novo’s termination of the partnership is a significant blow to Hims. Hims hoped it could retain customers who wouldn’t be eligible for compounded weight loss drugs by offering them discounted Wegovy.

Hims recently shared that around 200,000 new customers signed up for their weight loss programs last year, and it was expecting revenues from this part of its business to almost triple year-over-year. However, neither Lilly nor Novo is willing to partner with Hims to offer brand-name GLP-1 medications at a discount. This is a bit of a blow, especially since these two drugmakers are working with Hims' competitors. This situation is likely why Hims' stock took a massive hit, plummeting over 30% on Monday—its worst day ever as a public company.

Our take: Novo and Lilly were recently in a position of vulnerability as companies like Hims could offer cheaper, compounded GLP-1s that cut into the drugmakers’ sales. That market power has completely shifted, with the pharma companies back in control.

Novo and Lilly now influence which D2C healthcare companies can offer brand-name weight loss drugs for a significantly reduced price. Meanwhile, Hims will likely regret its choice to keep prescribing personalized GLP-1s when its competitors are cooperating with Novo’s and Lilly’s conditions. And we wouldn’t be surprised to see a lawsuit coming from Big Pharma, which would make a challenging situation even worse for Hims.

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