Hims Hers Health stock falls on FDA warning

Investing.com -- Shares of Hims Hers Health Inc (NYSE:HIMS) closed down 1.9% following the FDA’s issuance of a warning letter regarding compounded topical finasteride products, which are currently sold by the company for hair loss treatment. The FDA has not approved any topical finasteride treatments, which are typically available in spray format, and this warning may indicate potential future enforcement actions.

The FDA highlighted safety concerns associated with these products, noting adverse events reported between 2019 and 2024, including serious side effects like erectile dysfunction, depression, and suicidal ideation, even after discontinuing the use of these products. The FDA’s concerns extend to the potential for inadvertent exposure to others, particularly females, and the specific contraindication of finasteride in pregnancy due to risks of male fetal abnormalities.

The FDA’s alert does not prevent Hims Hers Health from continuing to sell the treatment, but it raises questions about the future of these products in the market. The agency has stressed that compounded drugs are not FDA-approved, which means their safety, effectiveness, or quality has not been evaluated before marketing.

BofA Securities analyst Allen Lutz maintained an Underperform stock rating and a $22.00 price objective on Hims Hers Health, commenting on the potential impact of the FDA’s alert. Lutz stated, "If patients are required to shift from a topical formulation to an oral alternative, HIMS could see elevated churn in the near-term, putting incremental pressure on the core franchise growth rate. We view HIMS as relatively better positioned than private peers to retain current customers given brand recognition and diversity of SKUs. Overall, it’s unclear if today’s FDA alert will result in any change to formulations by HIMS or its peers, but we flag given the elevated focus on growth trends in the core franchise."

Investors are now weighing the implications of the FDA’s warning on Hims Hers Health’s business model and growth prospects, as the company navigates the regulatory landscape for its hair loss treatments.

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