Hims & Hers Health Inc. (HIMS) stock plummeted 10.69% in pre-market trading on Thursday, as investors reacted to regulatory changes and market developments that could substantially impact the company's weight-loss drug business. The sharp decline comes amid growing concerns about the future of Hims & Hers' revenue stream from compounded weight-loss medications.

The primary catalyst for the stock's downturn is the U.S. Food and Drug Administration's (FDA) decision to end its policy allowing compounded copies of popular weight-loss drugs like Wegovy and Zepbound on May 22. This policy had previously benefited companies like Hims & Hers, which saw soaring sales of these compounded versions while the brand-name drugs were in shortage. The imminent policy change threatens to cut off a significant revenue stream for the company.

Adding to the pressure, health insurance giant Cigna announced on Wednesday that it will cap out-of-pocket costs at $200 per month for patients using brand-name Wegovy and Zepbound through an add-on to its pharmacy benefit management plans. This move could make the original drugs more accessible to consumers, potentially further eroding demand for compounded alternatives offered by Hims & Hers. Analysts at Truist Securities noted that the $200 monthly price point is "highly attractive compared to other price points in the market, including HIMS' compounded semaglutide at $399/month for 1-month subscription." The brokerage estimates about $721 million of weight-loss drug-related revenues for Hims & Hers in 2025, highlighting the significant impact these developments could have on the company's financial outlook.