Hims & Hers Health Inc. (HIMS) experienced a significant 24-hour plunge of 6.21% in its stock price during Wednesday's trading session. The sharp decline comes as investors react to regulatory changes and market developments that could substantially impact the company's weight-loss drug business.

The U.S. Food and Drug Administration (FDA) is set 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 competitive 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 companies like Hims & Hers. As the landscape of the weight-loss drug market rapidly evolves, investors appear to be reassessing the growth prospects of the company, leading to the significant stock price drop.