WW International Inc., previously known as WeightWatchers, surged by the most in more than seven years after striking a $132 million deal for a telehealth provider, a move that helps the company tap into the burgeoning market for a new class of weight-loss drugs.
(Bloomberg) — WW International Inc., previously known as WeightWatchers, surged by the most in more than seven years after striking a $132 million deal for a telehealth provider, a move that helps the company tap into the burgeoning market for a new class of weight-loss drugs.
WW’s shares jumped by 79%, the most since October 2015, as the acquisition of Sequence, a platform that offers clinical access to prescription weight-management medications, helped investors look past slumping revenue. The stock, which at one point in 2018 traded north of $100 per share, had fallen to about $4 before Tuesday’s rally after years of stock declines amid lackluster subscriber trends.
For WeightWatchers, the deal marks a shift to incorporating an emerging class of drugs that have drawn rampant social media attention and sparked shortages.
“This appears to be an acknowledgment of a key competitive threat that could change the dynamics of the WW’s business meaningfully overtime,” Morgan Stanley analyst Lauren Schenk, who holds an equal-weight rating on the stock, wrote in a note to clients.
The new class of drugs, known as GLP-1s, has electrified Wall Street as they showed significant weight-loss benefits in studies. Demand for Novo Nordisk A/S’s obesity drug Wegovy drove the Danish drugmaker to forecast record profit, while Eli Lilly and Co.’s Mounjaro, which is currently FDA approved for diabetes, helped lift the stock to being among the top performers in large-cap health care last year.
BMO Capital Markets analyst Evan David Seigerman, who covers drugmakers like Lilly, wrote in a note that the move “concretizes what we view as a cultural shift in how we think about weight loss — from relying on behavioral modification and community support to treating metabolic dysregulation as a medical condition.”
“WeightWatchers does not participate in fads or quick fix trends that we do not view as healthy or sustainable, even when they are highly popular. But we view the use of certain prescription weight management medications under the guidance of a medical professional very differently,” Chief Executive Officer Sima Sistani said on the company’s earnings call.
“This is a market in which we are well positioned to lead as it builds off our core program strengths and competitive moat.”
–With assistance from Katrina Lewis and Janet Freund.
(Updates with closing price.)
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