WeightWatchers stock soared Tuesday after the company said it had entered the prescription weight loss drug 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 including Ozempic, Wegovy and Trulicity. All drugs work by the same mechanism: They stimulate the release of insulin, block the production of sugar in the liver and suppress appetite.
WeightWatchers offers meal plans to subscribers with the goal of losing excess weight. With the acquisition of Sequence, it is tapping into a hot market for prescription drugs that address obesity, and expanding what it offers to customers.
Shares of WW International Inc. soared. almost 70% on Tuesday.
“It is our responsibility, as a trusted leader in weight management, to support those interested in exploring whether medications are right for them,” CEO Sima Sistani said in a prepared statement Monday.
Ozempic and Wegovy are different versions of the same drug, known as semaglutide. They are both given as once-weekly injections. Ozempic approved only for the treatment of diabetes, although it is mostly prescribed for off-label use. Wegovy approved in 2021 in the treatment of obesity in adults, and late last year in the treatment of condition of teenagers 12 years old and above.
In a clinical trial, adults who used Wegovy lost about 15% of their initial body weight, while teenagers lost less. For best results, the drugs should be combined with diet and exercise, experts say. Trulicity is a different drug, dulaglutide, used to treat diabetes in adults and children age 10 and older. It is not approved for the treatment of obesity.
Off-label use of semaglutide, fueled by social media posts, led to widespread drug shortages last year. Novo Nordisk said supplies were being replenished, but many diabetes patients still reported trouble accessing the drugs they needed.
Ozempic and Wegovy may cause possible side effects, the company reports. These include possible thyroid cancer, pancreatitis, kidney and gallbladder problems. The most common side effects are nausea, vomiting, diarrhea, stomach pain and constipation.
The prevalence of obesity increased from 30.5% from the 1999-2000 period to 41.9% for 2017 through March 2020, according to the Centers for Disease Control and Prevention. The prevalence of severe obesity increased from 4.7% to 9.2% during the same period.
The estimated annual medical cost of obesity in the US is nearly $173 billion in 2019 dollars, according to the CDC. Annual medical costs for adults with obesity are $1,861 higher than medical costs for people with a healthy weight.
“This deal brings access to prescription drug solutions for weight loss to WW’s historical focus on the behavior change model,” wrote UBS analyst Michael Lasser. “This is a significant change in the business. Although the deal may bring great prosperity, it also brings great risks.”
Lasser said WW’s business has been disrupted over the past few years and is now trying to take major steps to correct course.
“We think it will take time to see if this action actually produces a change in the fortunes of the company,” he said.
WW International, based in New York, will pay $106 million for Sequence, which serves about 24,000 members across the US as of February, with annual revenue of about $25 million.
The acquisition is expected to close in the fiscal second quarter.
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