WeightWatchers going into prescription weight loss business with telehealth provider acquisition

Shares of WeightWatchers rose on Tuesday after the company said it is entering the prescription weight loss business with the acquisition of Sequence.

Sequence is a telehealth provider that offers users access to medications used to treat diabetes and obesity under brand names such as Ozempic, Wegovy and Trulicity.

These drugs all work by the same mechanism: They cause the release of insulin, block the production of sugar in the liver and reduce appetite.

WeightWatchers offers customers meal plans with the goal of losing excess weight. With the acquisition of Sequence, it is tapping into the red-hot market for prescription drugs that address obesity and broadening what it offers to customers.

“It is our responsibility, as a trusted leader in weight management, to support those interested in exploring if these drugs are right for them,” CEO Sima Sistani said in a prepared statement on Monday.

What is Ozempic and Wegovy?

Ozempic and Wegovy are different versions of the same drug, known as semaglutide.

Both are given as injections once a week. Ozempic is approved only to treat diabetes, although it has been increasingly prescribed for off-label use.

Wegovy was approved in 2021 to treat obesity in adults, and late last year to treat the condition in adolescents 12 and older. In clinical trials, adults using Wegovy lost about 15 percent of their initial body weight, while teenagers lost more.

For best results, the drug should be combined with diet and exercise, experts say. Trulicity is a different drug, dulaglutide, used to treat diabetes in adults and children 10 years and older. It is not approved to treat obesity.

Off-label use of semaglutide, fueled by social media posts, led to a shortage of the drug last year. Novo Nordisk says supplies have been replenished, but many diabetes patients still report problems accessing the drugs they need.

Ozempic and Wegovy can cause side effects, the company reports. These include thyroid cancer, pancreatitis, and kidney and gallbladder problems.

The most common side effects are nausea, vomiting, diarrhea, abdominal pain and constipation. The prevalence of obesity increased from 30.5 percent from the period 1999-2000 to 41.9 percent for 2017 to March 2020, according to the US Centers for Disease Control and Prevention (CDC). The prevalence of severe obesity increased from 4.7 percent to 9.2 percent for the same period.

Currently, Wegovy and Saxenda are the drugs approved for obesity in the United States, with tirzepatide also expected to be approved later this year.

In December, Eli Lilly CEO David Ricks called the drug one of his “generational opportunities.” The drug was approved last year for diabetes, sold under the Mounjaro brand.

The high cost of obesity

The annual medical cost of obesity in the United States is nearly $173 billion in 2019 dollars, according to the CDC.

Annual medical costs for obese adults are $1,861 higher than medical costs for people of a healthy weight.

“This deal brings access to prescription drug solutions for weight loss to WW’s historical focus on behavior modification models,” wrote UBS analyst Michael Lasser.

“This is a significant change in the business. While the deal can bring a lot of value, it also carries considerable risk.” Lasser said that the WW business has been disrupted over the last few years and is now trying to take a big step for the right course.

“We think it will take time to see if this action really produces a change in the company’s fortunes,” he said. WW International, based in New York, will pay $106 million for Sequence, which serves about 24,000 members in the U.S. as of February, with annual revenue of about $25 million. The acquisition is expected to close in the fiscal second quarter.

Shares of WW International Inc. closed at 79%.