By Amina Niasse

(Reuters) -Hims & Hers Health (HIMS) is betting that the cash-pay market for weight-loss drugs will drive up customer demand although some analysts see a need for the online website to adjust to changing competition in the U.S.

Hims has thrived in the market for cheaper compounded versions of highly in-demand weight-loss drugs, such as Novo Nordisk's (NVO) Wegovy. This was allowed by the U.S. Food and Drug Administration when those drugs were in shortage. But with the end of supply constraints, the agency said sales of compounded versions had to stop by May 22.

“With the semaglutide shortage declared over, Hims now has to transition its model to generate growth from other products within its broad weight-management program,” said Michael Cherny, a healthcare analyst at Leerink, using the chemical name for Wegovy as well as Novo's Ozempic and Rybelsus.

Hims shares fell 14% in the week after the FDA's deadline and are down around 18% from a peak in February.

Hims said it is now selling "personalized" dosages of Wegovy, starting at around $165 a month, under rules allowing it for clinical reasons such as decreased side effects. Hims also sells liraglutide, a generic version of an older Novo diabetes drug that also causes weight loss, as well as branded Wegovy and Eli Lilly's (LLY) rival Zepbound.

But analysts question whether the offerings actually qualify as "personalized" and say it is unclear if Novo, which has said mass production of copies is breaking the law, will allow it.

Instead, they say, Hims should pivot to work with insurers, something a company spokesperson said it has no plans to do. Hims rivals Ro and Noom, which also describe compounded products as personalized, do work with insurers.

CVS Health and Cigna announced new strategies for weight-loss drugs, by limiting which it will cover or out-of-pocket costs.

Leerink's Cherny said any expansion of insurance coverage for the drugs would lessen the need for cash-pay vendors and compounders, stymying Hims' growth. Hims could miss growth targets if customers go elsewhere, he said.

The company has targeted revenue of $6.5 billion by 2030. Analysts are forecasting Hims 2025 revenue of $2.4 billion, up from $1.5 billion in 2024, and earnings of 65 cents a share, according to LSEG data.

Hims CEO Andrew Dudum told investors last month that many consumers choose cash-pay options because their insurance deductibles for the weight-loss drugs are too high.

He said the company is targeting these so-called under-insured consumers and plans to offer more personalized products after purchasing a diagnostic lab that can help identify potential new patients for its service. New offerings include low testosterone and menopause treatments. It is also expanding in the UK and Europe.