WeightWatchers’ stock soared on Tuesday after the company said it is getting into the prescription drug weight loss business with the acquisition of Sequence.
Sequence is a telehealth provider that offers users access to drugs used to treat diabetes and obesity under such brand names as Ozempic, Wegovy and Trulicity.
The drugs all work by the same mechanism: They trigger the release of insulin, block sugar production in the liver and suppress appetite.
WeightWatchers offers subscribers meal plans with the goal of losing excess weight. With the acquisition of Sequence, it is tapping into a red-hot market for prescription drugs that address obesity and broadening what it offers to customers.
“It is our responsibility, as the trusted leader in weight management, to support those interested in exploring if medications are right for them,” CEO Sima Sistani said in a prepared statement late Monday.
What are Ozempic and Wegovy?
Ozempic and Wegovy are different versions of the same drug, known as semaglutide.
They’re both given as once-weekly injections. 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 a clinical trial, adults who used Wegovy lost about 15 per cent of their initial body weight, while teens lost slightly more.
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 ages 10 and older. It’s not approved to treat obesity.
The off-label use of semaglutide, spurred by social media posts, led to a shortage of the drug for most of last year. Novo Nordisk said supplies are being replenished, but many diabetes patients still report trouble accessing the drugs they need.
Both Ozempic and Wegovy can cause possible side-effects, the company reports. They include possible thyroid cancer, pancreatitis, and kidney and gallbladder problems.
The most common side-effects are nausea, vomiting, diarrhea, stomach pain and constipation. Obesity prevalence rose from 30.5 per cent from the 1999-2000 period to 41.9 per cent for 2017 through March 2020, according to the U.S. Centers for Disease Control and Prevention (CDC). The prevalence of severe obesity surged from 4.7 per cent to 9.2 per cent for the same periods.
Currently, Wegovy and Saxenda are approved drugs for obesity in the United States, with tirzepatide also widely expected to be approved for it later this year.
In December, Eli Lilly CEO David Ricks called the drug one of its “generational opportunities.” The drug was last year approved for diabetes, for which it is sold under the brand Mounjaro.
The Dose17:26Why is Ozempic getting so much attention?
High cost of obesity
The estimated annual medical cost of obesity in the United States was almost $173 billion US in 2019 dollars, according to the CDC.
Annual medical costs for adults who were obese were $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 behaviour modification model,” wrote UBS analyst Michael Lasser.
“This is a significant change in the business. While the deal could bring considerable upside, it also carries sizable risks.” Lasser said that WW’s business has been disrupted over the last several years and is now trying to take big steps to course correct.
“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 served about 24,000 members across 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 Tuesday up 79 per cent.