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Morgan Stanley Identifies Weight Loss Stock as Top Pick Despite Impact of the Ozempic Effect

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WW International Confronts Challenges of Anti-Obesity Medications with Strategic Moves

WW International, the parent company of Weight Watchers, has been grappling with the impact of game-changing anti-obesity medications on its business. However, CEO Sima Sistani has been proactive in addressing this existential crisis. Despite a recent 11% stock decline, Morgan Stanley has named WW International as its top pick among small- and mid-cap internet stocks, recognizing the company's impressive transformation over the past year.

Sequence Telehealth Platform and Access to GLP-1 Medications

WW International's acquisition of the telehealth platform, Sequence, has played a crucial role in navigating the challenges posed by anti-obesity medications. Sequence provides subscribers with access to GLP-1 medications such as Novo Nordisk's Wegovy and Ozempic. Analyst Lauren Schenk highlights the potential of Sequence to monetize existing demand, especially with the FDA's upcoming action on Eli Lilly's Mounjaro/tirzepatide obesity label expansion.

Stabilizing Core Business and Revenue Concerns

WW International has focused on stabilizing its core weight loss business by closing down its low-margin consumer products segment. The company has also witnessed more members opting for lower-cost long-term memberships, impacting revenue. However, Schenk believes that these strategic steps will make the company's marketing spending more efficient and ultimately boost profits.

Interest in Appetite-Suppressing Weight Loss Drugs

The market has shown significant interest in Novo Nordisk and Eli Lilly's new class of appetite-suppressing weight loss drugs. However, challenges such as high costs and limited supply have strained access to these medications. Despite these bottlenecks, Schenk remains optimistic about the growth of Sequence subscribers and expects growth acceleration as shortages subside.

Positive Developments for WW's Sequence Business

Lilly's expectation of FDA approval for tirzepatide and Novo Nordisk's efforts to address supply issues are positive developments for WW International's Sequence business. Novo Nordisk's progress in convincing insurance companies to cover the drug also bodes well for WW's efforts. Schenk estimates that around 6 million current or lapsed WW subscribers would qualify for obesity medication treatment, indicating a significant potential market. In conclusion, WW International is actively addressing the challenges posed by anti-obesity medications through strategic moves such as the acquisition of Sequence and focusing on its core business. Despite recent stock fluctuations, the company's transformation and potential for growth make it an attractive choice for investors. The developments in the appetite-suppressing weight loss drug market further support WW International's efforts to provide effective solutions to its subscribers.

WW International's Strategic Response to Anti-Obesity Medications

WW International's strategic response to the rise of anti-obesity medications offers valuable insights for new businesses in the health and wellness sector. Despite facing significant challenges, the company has managed to navigate this new landscape effectively, demonstrating resilience and adaptability.

Adapting to Market Changes

The company's acquisition of the telehealth platform, Sequence, is a key example of this adaptability. By providing subscribers with access to GLP-1 medications, WW International has been able to capitalize on the growing demand for these treatments. This move suggests that new businesses should consider leveraging technology and innovative partnerships to stay relevant in a rapidly evolving market.

Stabilizing Core Business

WW International's focus on stabilizing its core weight loss business also provides a lesson for new businesses. By closing down its low-margin consumer products segment and encouraging long-term memberships, the company has streamlined its operations and focused on its strengths. This strategy could be particularly beneficial for new businesses looking to establish a strong foundation in a competitive market.

Growth Opportunities in the Weight Loss Drug Market

The growing interest in appetite-suppressing weight loss drugs presents a significant opportunity for new businesses. Despite challenges such as high costs and limited supply, the potential for growth in this market is substantial. WW International's optimism about the growth of Sequence subscribers indicates that new businesses could benefit from exploring opportunities in this area.
Key Takeaways
Overall, WW International's strategic response to the challenges posed by anti-obesity medications highlights the importance of adaptability, focus, and innovation for new businesses. By closely monitoring market trends and being willing to pivot as necessary, new businesses can navigate challenges and capitalize on emerging opportunities in the health and wellness sector.
Story First Published at: https://www.cnbc.com/2023/11/03/ozempic-effect-has-hurt-a-weight-loss-stock-thats-still-a-top-pick.html
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