Cedar Grove Capital Management (“CGCM”) is proud to offer its advisory management services through its separately managed account structure. CGCM specializes in a multi-strategy investment approach with an emphasis on small caps and below companies, as well as managing an opportunistic short book and other special situations. If you’re interested in learning more, please visit www.cedargrovecm.com or view our public research www.cedargroveresearch.com.
All information provided herein by Cedar Grove Capital Management, LLC (“CGCM”) is for informational purposes only and does not constitute investment advice or an offer or solicitation to buy or sell an interest in a private fund or any other security. CGCM may change its views about or its investment positions in any of the securities mentioned in this document at any time, for any reason or no reason. CGCM may buy, sell, or otherwise change the form or substance of any of its investments. CGCM disclaims any obligation to notify the market of any such changes.
On Friday, March 6th, Bloomberg reported that NVO had ended its feud with HIMS. There were absolutely no details regarding the announcement other than that NVO would sell its drugs on HIMS platform again. Not a single detail. Just information from someone with insider knowledge on the situation.
Neither NVO nor HIMS provided confirmation on the news, and the stock rallied ~40% in the remaining 26 minutes of Friday night trading after the announcement came out.
A Novo spokesperson said in an emailed statement that the company is "always in conversation with companies that can help improve patient access to FDA-approved medicines".
That left investors and traders to speculate on exactly what that meant, in the event it were true, aside from the lawsuit ending.
Yesterday morning, we got exactly what the announcement was about. In a press release from HIMS, they stated that they are shifting their weight loss strategy after striking a deal with NVO. The points are below.
HIMS will be able to sell its branded medications (pills and injectables) on the platform starting at the end of the month.
The company will no longer advertise compounded GLP-1 offerings on its platform or in its marketing.
Existing patients will have the opportunity to transition to FDA-approved medicines when determined clinically appropriate by their providers (more on this soon).
HIMS will continue to offer compounded GLP-1s, but only to a limited number of people who can’t be serviced by commercially available dosages.
Effectively, this eliminated the lawsuit (but NVO stated they could throw it back on, but don’t foresee that happening) by (sort of?) admitting that they shouldn’t have been prescribing all these compounded medications to patients and will now push the branded options.
There are obviously financial implications to this announcement, but it doesn’t sound like anything we haven’t already heard from before. A similar deal, that came last May, eventually died two months later after it was shown that HIMS had no intention of slowing down compounded GLP-1 sales or pushing NVO’s branded options.
Aside from the deja vu, below, we go into what we believe this shift means for HIMS strategy going forward and the financial implications from the news.
Disclaimer: Cedar Grove Capital Management (CGCM) does not have a position in HIMS and Hers Health (HIMS) at the time of this publication.
In our last HIMS report, dated February 9th, titled “Napoleon Watches Moscow Burn,” we highlighted the dependency on compounded GLP-1s and why FDA action could impair it, only to be greeted an hour later by a press release that NVO was suing HIMS for patent infringement.
While the market was right in shooting first and asking questions later (+41% on the day), we now know the details of the end of the feud, and we can start to think about what the potential implications are from the news and what that means for the stock from here on out.
Let’s first start with high-level assumptions before we go into the math of HIMS allegedly no longer being able to sell compounded semaglutide en masse.
We have no idea what the offering price will be. Still, it’s most likely similar to the previous arrangement and current arrangements with other telehealth partners, where the full price of the drug would go to NVO. Then there would be an incremental charge for a membership or support option that all goes to the platform. A “cost plus” model.
The press release also suggests that HIMS current GLP-1 user base will be moved to a branded option supported by NVO → how many is the question.
On a go-forward basis, HIMS will prescribe compounded GLP-1s to new customers in a limited amount (still legal) → no idea what that means.
They won’t be advertising their compounded drugs anymore, so this effectively means they’re going to have to be bidding against the same ad space, search terms, etc as everyone else → no edge or differentiation anymore from other major players.
We shared an iteration of the chart below with you all in that last report, but have updated it with the newest information for Q4’25. Using estimates for GLP-1 sales for Q3’25 and Q4’25, you can notice that the core business only grew a mere ~20% y/y while GLP-1s did all the heavy lifting.
Subscribe to Cedar Grove Capital Management to read the rest.
Become a paying subscriber to get access to this post and other subscriber-only research reports.
UpgradeA subscription gets you:
- 20 - 30 Subscriber-Only Reports per Year
- Small Cap and Below LONG Equity Research
- SHORT Equity, Special Situations, IPO Investment Research
- Earnings Updates, Thematic Research, and Quick Trade Ideas