Novo Nordisk Drops Lawsuit Against Hims & Hers After Drug Deal

Novo Nordisk Drops Legal Challenge to Hims & Hers, Forging Path to Branded Drug Sales

Novo Nordisk has dismissed its lawsuit against telehealth provider Hims & Hers, resolving a dispute over the marketing of compounded versions of its weight-loss drugs, Wegovy and Ozempic. The move follows an agreement where Hims will now sell Novo Nordisk’s branded semaglutide medications – both injectable and oral – through its platform at standard market prices, effectively ending its promotion of cheaper, compounded alternatives. Shares of Hims soared as much as 50% in premarket trading on the news, while Novo’s Copenhagen-listed stock climbed 1.7%.

The legal battle began in February when Novo Nordisk sued Hims, alleging patent infringement related to semaglutide, the active ingredient in its blockbuster drugs Ozempic and Wegovy. Novo took issue with Hims’ launch of a $49 copycat Wegovy pill, significantly undercutting the price of Novo’s own branded version. Hims quickly withdrew the compounded pill after facing pressure from Novo and the U.S. Food and Drug Administration (FDA), which signaled a crackdown on compounding pharmacies offering unauthorized versions of the drugs. Reuters reported on Hims’ reversal course following FDA scrutiny.

The Compounding Loophole and Supply Constraints

Hims had been capitalizing on a regulatory loophole allowing the sale of compounded drugs even when a branded version is available, provided there’s a documented shortage. While initial supply constraints did exist for semaglutide, Novo Nordisk has since resolved those issues by ramping up manufacturing capacity. Despite this, Hims continued to market its compounded versions, arguing they were “personalized” medications and therefore legally distinct. This argument, however, did not withstand scrutiny from Novo Nordisk and ultimately the FDA.

Novo Nordisk’s CEO, Mike Doustdar, told CNBC that the company decided to drop the court proceedings, but reserved the right to reinstate the lawsuit if necessary. “We have decided to drop the current court proceedings and, of course, we reserve to bring that back if need be, but I don’t foresee that happening,” Doustdar stated. He emphasized a shift in Hims’ approach, noting that the telehealth company has agreed to cease advertising and marketing compounded GLP-1 drugs to the general public, reserving them for “rare cases where they’re needed.”

Financial Implications and Market Response

The immediate market reaction was strongly positive for Hims & Hers. The 50% premarket surge in its stock price reflects investor confidence in the new partnership with Novo Nordisk and the potential for increased revenue through the sale of branded medications. While the financial details of the agreement between Novo Nordisk and Hims were not disclosed, the move is expected to provide Hims with a more stable and legally sound revenue stream. CNBC’s stock quote page for Hims & Hers shows the significant impact of the news on the company’s valuation.

For Novo Nordisk, the agreement secures its patent protection for semaglutide, which is currently protected in the U.S. Until 2032. The company now has over 600,000 Wegovy pill prescriptions, according to Doustdar, demonstrating strong demand for its weight-loss medications. He also dismissed concerns about potential limitations on Wegovy pill uptake due to dietary restrictions, stating that consumer interest remains high.

A History of Collaboration and Conflict

This isn’t the first time Novo Nordisk and Hims have explored a partnership. Last year, the two companies initially collaborated to offer discounted weight loss injections to Hims’ customers. However, Novo Nordisk terminated the agreement after just two months, citing “deceptive” marketing practices by Hims that allegedly put patient safety at risk. This prior experience underscores the complexities of the relationship between the two companies and the importance of clear guidelines and oversight in their current collaboration.

The Broader Landscape of GLP-1 Medications

The dispute between Novo Nordisk and Hims highlights the rapidly evolving market for glucagon-like peptide-1 (GLP-1) receptor agonists, a class of drugs used for treating type 2 diabetes and obesity. Drugs like Ozempic and Wegovy have seen explosive demand, leading to supply shortages and the emergence of compounded alternatives. The FDA’s increased scrutiny of compounding pharmacies reflects concerns about the safety and efficacy of these unauthorized versions. CNBC’s coverage of the initial lawsuit details the FDA’s concerns about untested compounded medications.

Hims CEO Andrew Dudum acknowledged the accelerating demand for anti-obesity drugs and emphasized the company’s commitment to expanding its offerings. “The demand will continue to accelerate with the new assortment that’s coming out, and the assortment really does serve the needs across affordability, personalization, form factor that historically, even just six months ago and 12 months ago did not exist,” Dudum told CNBC. Hims is actively seeking partnerships with other biotechnology and pharmaceutical companies to bring new therapies to its platform.

What’s Next: Transitioning Patients and Expanding Access

Hims will now facilitate a transition for its existing patients currently using compounded semaglutide to FDA-approved medications, as deemed appropriate by their healthcare providers. The company will focus on selling Novo Nordisk’s branded Ozempic and Wegovy through its telehealth platform, aligning with standard pricing practices. The success of this new partnership will depend on Hims’ ability to effectively manage the transition and maintain its customer base while adhering to regulatory guidelines. The agreement also signals a broader shift in the market towards greater regulation and oversight of compounded GLP-1 medications, potentially limiting access to cheaper alternatives but ensuring patient safety and product quality.