Less Dumb Investing

The fight over copycat versions of blockbuster weight-loss drugs is heating up, but the window for these compounded medications is closing.

Hims & Hers Health—a telehealth company known for aggressive marketing of ED and hair-loss treatments—just made a big move by running a Super Bowl ad. The message? The obesity epidemic is a rigged game where the healthcare system keeps effective weight-loss drugs out of reach to maximize profits.

The ad, set to Childish Gambino’s “This Is America,” positions Hims & Hers as a champion of affordability, selling a compounded version of semaglutide, the active ingredient in Novo Nordisk’s Wegovy and Ozempic. The company claims its versions are “doctor-trusted” and “formulated in the U.S.A.,” playing to the idea that they’re offering a more accessible alternative to the brand-name drugs.

Of course, the backlash was immediate. Before the ad even aired, PhRMA, the pharmaceutical lobby, called it “misleading.” Senators Dick Durbin (D-Ill.) and Roger Marshall (R-Kan.) fired off a letter to the FDA, calling it deceptive and arguing it lacked proper disclosures on side effects.

Hims & Hers defended the ad, saying it was meant to highlight a public health crisis and the lack of access to life-changing medications. But the bigger picture is clear: there’s a multibillion-dollar battle brewing over compounded versions of GLP-1 drugs, and it’s only growing.

Regulators have allowed compounding to continue because Novo Nordisk’s Wegovy—and previously Eli Lilly’s Mounjaro—have been in shortage. That’s the key here. When a drug is on the FDA’s shortage list, pharmacies can legally compound and sell alternative versions to meet demand. This isn’t some regulatory loophole; it’s an explicit carve-out that allows compounded drugs to be sold under specific conditions.

Hims & Hers has capitalized on this reality, turning shortages into a major business opportunity. Over the past year, its sales have skyrocketed, pushing its stock up over 300% and bringing its market cap close to $10 billion.

Novo Nordisk has finally admitted that compounded versions of its drug are making an impact. On a recent earnings call, U.S. Chief David Moore acknowledged the growing threat and said the company is working with regulators to “curtail compounding.” But for now, with Wegovy and Ozempic still on the shortage list, compounding remains fair game.

Eli Lilly’s Mounjaro and Zepbound, however, are no longer considered in shortage, which is why Hims & Hers doesn’t sell compounded versions of those drugs. Once Novo gets its supply up and off the list, the compounded versions of semaglutide will likely be forced off the market.

For Hims & Hers, the Super Bowl ad isn’t just about selling weight-loss drugs; it’s about cementing its customer base while the window is open. The company is playing a familiar playbook—similar to Uber’s early days—exploiting regulatory gaps, building a massive user base, and creating a scenario where regulators will face pushback if they try to shut it down.

But this isn’t just about politics or public perception. There’s a hard stop coming. Once Novo Nordisk ramps up production and gets off the shortage list, compounded versions of its drugs will no longer be allowed in mass production. The law is clear: compounding is permitted under shortage conditions, but once supply stabilizes, these alternatives have to go. That’s why Hims & Hers doesn’t touch compounded Zepbound—it knows the line it can’t cross.

Hims & Hers and competitors like Ro are using this moment to build their brands, attract customers, and make as much money as possible while they still can. They’re also hoping that by the time compounded semaglutide is phased out, they’ll have a locked-in customer base willing to shift to other weight-loss medications.

Investors should keep this in mind. The current surge in revenue and stock price is heavily tied to a temporary opportunity. If and when Novo Nordisk meets demand, compounded semaglutide sales will plummet, and companies like Hims & Hers will have to adjust their strategies.

For now, though, they’re taking full advantage of the compounding exception. And as long as Wegovy and Ozempic remain on the FDA’s shortage list, the battle rages on.