Hims & Hers Is Giving Up Its Most Profitable Product to Partner With Novo Nordisk

NEW YORK, April 3 -

Hims & Hers Health reported gross margins (the share of revenue left after covering the direct cost of making or buying its products) of 73.8% on $2.3bn in trailing revenue. Those numbers look like a telehealth company firing on all cylinders. They're actually the last snapshot before the most profitable product in the company's history gets pulled from the shelf. HIMS stopped advertising compounded semaglutide and pivoted to a Novo Nordisk partnership, becoming one of at least five branded Wegovy resellers. The move didn't reduce risk. It surrendered the only structural advantage that justified the stock's growth multiple (the premium investors pay for fast-growing companies).

What Wall Street Believes

Wall Street sees the Novo partnership as a masterstroke. The consensus price target sits at $24.15, implying 26% upside from today's $19.14. The thesis: HIMS resolved its legal overhang around compounded GLP-1s (a class of weight-loss drugs that mimic a natural gut hormone), gained access to a massive branded semaglutide TAM (total addressable market, or the full pool of potential customers), and can cross-sell its 2mn+ subscriber base into FDA-approved weight loss products at scale. The 28% revenue growth consensus for FY26 bakes in GLP-1 acceleration as Wegovy subscriptions layer onto the existing dermatology and sexual health base.

Here's the flaw nobody wants to model: revenue is not the variable that matters. HIMS's compounding operation was a vertically integrated pharmacy play. The company manufactured the product, owned the margin stack, and sold directly to consumers (DTC) with zero intermediary. Under the Novo deal, HIMS wraps a $149/month membership around Novo's $249-329/month Wegovy. Novo sets the drug price, controls supply allocation, and captures pharmaceutical economics. That's not a partnership. That's a channel agreement with a supplier who just launched its own competing DTC subscription through NovoCare.

What the Numbers Actually Show

The margin math is straightforward and brutal. Compounded semaglutide cost HIMS roughly $25-35 per month to manufacture and sold at $199 per month, producing gross margins north of 85%. Under the branded model, HIMS collects a membership fee and earns a distribution spread on Wegovy, but Novo captures the pharmaceutical margin. Even generous estimates put HIMS's blended gross margin on branded GLP-1 revenue at 25-40%. That's less than half the compounded product it replaced. The trailing 73.8% gross margin reflects a revenue mix that is actively deteriorating with each quarter the transition progresses.

"The company will no longer advertise compounded GLP-1 offerings on its platform or in its marketing, and existing patients will have the opportunity to transition to FDA-approved medicines when determined clinically appropriate by their providers. Compounded semaglutide will continue to be available through the platform on a limited scale."

"Limited scale" is doing a lot of work in that sentence. HIMS isn't keeping compounded semaglutide as a real revenue line. It's winding down the product while telling investors to focus on the branded opportunity. But that branded opportunity comes with a problem the compounded business never had: competition for the same shelf space. Novo simultaneously signed telehealth distribution agreements with Ro, WeightWatchers, and LifeMD, and launched its own NovoCare DTC subscription. HIMS isn't an exclusive distribution partner. It's one of five resellers, and the supplier has its own storefront.

The earnings trajectory already shows cracks. HIMS beat estimates by 66% two quarters ago ($0.20 vs $0.12 expected). It beat by just 6% the following quarter ($0.17 vs $0.16). Then it missed by 39% last quarter ($0.06 vs $0.10). That deceleration isn't random. It traces the timeline of the compounded semaglutide wind-down. The product that powered the earnings beats is the same product being retired.

How This Reshapes the Business

Model this out. HIMS generated $111mn in trailing free cash flow (cash left over after running and investing in the business) on $2.3bn in revenue, a 4.8% FCF margin. That figure reflects the blended economics of high-margin compounded products and lower-margin branded distribution. If GLP-1 revenue shifts entirely to branded Wegovy distribution and the blended gross margin on that segment settles at 30-35% (generous for a reseller model), overall company gross margins could compress 800-1200 basis points (each basis point is one-hundredth of a percentage point) over the next four quarters. At 73.8% today, that puts HIMS in the low 60s, a margin profile closer to a pharmacy benefits manager than a high-growth telehealth platform.

That margin compression flows directly to the bottom line. If gross margins fall to 63% on $2.9bn in consensus FY26 revenue, gross profit drops from roughly $2.14bn at current margins to $1.83bn. That's a $310mn hole that operating leverage (the ability to spread fixed costs over more revenue) alone cannot fill. At 11.6x forward earnings, HIMS looks cheap only if you believe the forward earnings are real. But the forward estimates were built on a margin structure that management just voluntarily dismantled. Q2 2026 will be the first full quarter where the new mix shows up. If gross margins print below 68%, the re-rating begins.

The Bull Case, and Why It Still Falls Short

The bull case has three legs worth respecting. First, HIMS's 2mn+ subscriber base creates cross-sell opportunities. A customer acquired through weight loss may buy dermatology or sexual health products at the old margin structure. Second, the legal risk of compounded semaglutide was real and growing. The FDA's on-again, off-again enforcement created binary risk that the Novo deal eliminates. Third, branded GLP-1 revenue could scale to a size where even thin margins on enormous volume generate large absolute profit dollars, the Amazon model applied to telehealth.

Each argument has merit. None solves the core problem: HIMS gave up pricing power. When you compound your own product, you set the price and own the margin. When you resell Novo's product alongside four other telehealth companies and Novo's own DTC channel, Novo sets the price, Novo controls supply, and Novo decides tomorrow whether to squeeze your margin or cut you out entirely. The cross-sell thesis is real, but it requires acquiring customers profitably through a weight loss funnel that now has worse unit economics (the revenue and cost of serving each individual customer). You can't cross-sell your way out of a broken acquisition model.

The Bottom Line

Hims & Hers didn't partner with Novo Nordisk. It surrendered its only structurally differentiated margin source in exchange for shelf space in a store that Novo owns, operates, and is actively stocking with competing sellers. The 73.8% gross margin is a trailing indicator from a business model that no longer exists. At $19.14, HIMS is priced for a margin structure it voluntarily abandoned, and the Street's 26% implied upside assumes the new economics work at least as well as the old ones. They can't. Reseller margins don't match compounder margins. The stock needs to reprice to its new reality as a telehealth distributor, not a vertically integrated compounder. Watch the Q2 gross margin print. If it starts with a six, the $24 price target evaporates. Run the free Hims & Hers Health, Inc. deep-dive →

Basis Report does not hold positions in securities discussed. This is not investment advice.

Frequently Asked Questions

What was Hims & Hers compounded semaglutide gross margin before the Novo deal?

HIMS manufactured compounded semaglutide in-house at an estimated cost of $25-35 per month and sold it direct-to-consumer at $199 per month, implying gross margins of roughly 85% or higher. This was the company's highest-margin product and a key driver of the trailing 73.8% blended gross margin.

How does the Novo Nordisk Wegovy partnership change HIMS unit economics?

Under the new model, HIMS earns a platform fee and distribution spread on branded Wegovy rather than capturing full pharmaceutical margins on self-manufactured product. The $149/month membership wraps around Novo's $249-329/month Wegovy, with Novo retaining drug economics. Estimated gross margins on branded GLP-1 revenue fall to 25-40%, less than half the compounded product it replaced.

Is Hims & Hers the exclusive telehealth distributor for Novo Nordisk Wegovy?

No. Novo Nordisk signed distribution agreements with at least four other telehealth partners — Ro, WeightWatchers, LifeMD — and launched its own DTC subscription through NovoCare. HIMS is one of several resellers competing for the same branded Wegovy market, with Novo retaining full optionality to adjust terms or cut partners out.

When will the HIMS margin compression from the Novo deal become visible in earnings?

Q2 2026 earnings will be the first full quarter reflecting the new revenue mix as compounded semaglutide winds down and branded Wegovy distribution scales. If the reported gross margin falls below 68%, it would confirm the structural margin compression thesis and likely trigger a repricing of the stock's forward earnings multiple.

What is the bull case for HIMS despite lower GLP-1 margins?

Bulls argue the 2mn+ subscriber base creates cross-sell opportunities into higher-margin dermatology and sexual health products, the Novo deal eliminates FDA enforcement risk around compounded drugs, and scaled branded GLP-1 volume could generate large absolute profit even at thinner margins. The counterargument: acquiring customers through a weight loss funnel with worse economics undermines the cross-sell thesis at its foundation.