(Bloomberg) — Hims & Hers Health Inc. shares posted their best week on record as a new partnership with Novo Nordisk A/S fuels fresh optimism about the company’s future in weight-loss drugs.
The San Francisco-based company’s stock climbed about 57% this week, rallying in four of the past five trading sessions.
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Earlier this week, the telehealth company said it would work with Novo to sell blockbusters Ozempic and Wegovy on its platform, ending a feud between the firms. Novo also agreed to drop a lawsuit it filed against Hims last month. In return, Hims will no longer advertise compounded versions of Novo’s drugs, but it will still sell copies of Ozempic and Wegovy if a doctor says a patient needs them.
“This deal alleviated near term concerns while almost putting Hims back on the right path for long-term growth with a branded partner,” Needham & Co analyst Ryan MacDonald said in an interview.
Investors are betting that the pact with Novo will likely drive growth and chart a path forward for the telehealth company that had been embroiled in legal and regulatory setbacks. And that this time, the agreement will stick.
Novo ended its initial partnership with Hims in June, accusing it of using “deceptive marketing.” At the time, Novo executives said Hims wasn’t stepping back enough from its practice of mass marketing compounded versions of the weight-loss drugs. Investors dumped Hims’ stock as questions grew about the firm’s weight-loss business as well as the risk of lawsuits from the Danish company.
The selloff worsened early this year when Novo sued Hims for launching a copycat version of the Wegovy pill, even after Hims swiftly pulled it from the market following regulatory threats. Hims also gave a weaker-than-expected profit outlook for the first quarter. That led to a 46% plunge in February, a record monthly drop. The stock was down 52% year-to-date, erasing $3.8 billion in market value, before the partnership was announced on Monday.
“With Novo coming back to the table and Hims sort of changing its policy on compounding, there is a more optimistic long-term future for Hims’ business,” said MacDonald, who raised his recommendation on the stock to buy from hold.
Transition Period
At least four analysts have upgraded their ratings on the stock this week. Yet Wall Street remains overwhelmingly cautious, with only five out of 17 analysts tracked by Bloomberg recommending investors buy the stock. About 11 others recommend holding.
