Shares Of Weight Watchers Parent Surge 60% After Pivot To Ozempic

Topline

Weight Watchers parent WW International’s share price rallied 64% on Tuesday after acquiring a company largely dedicated to helping patients get weight-loss drugs like Ozempic, as one analyst predicted WW International’s $100 million acquisition deal will help reawaken the struggling diet-focused company.

WW International’s then-CEO Grossman speaks in 2018.

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Key Facts

WW International closed on its purchase of the weight loss telehealth provider Sequence Monday after markets closed, after previously announcing it entered an agreement last month.

The acquisition spurred Goldman Sachs analyst Jason English to upgrade WW International from a hold to a buy, upping his price target for the stock more than 200% from $3.80 to $13 in a note to clients Monday night.

Shares of WW International surged to $6.77 in Tuesday trading, with Goldman’s rating still implying further 90% upside for the stock.

The “new obesity drug on-ramp solution” provided by Sequence could be a “catalyst for a turnaround” for WW International to acquire customers and improve its top and bottom lines, English wrote, as the company’s stock is down more than 90% from its 2018 peak.

The acquisition could be a “feeder” into Weight Watchers “behavioral science-backed legacy platform when the consumer stops taking the drug but wants to avoid adding the weight back,” English added.

Key Background

Sequence connects customers with doctors who can prescribe semaglutide drugs like Ozempic and Wegovy, popular for their effectiveness at helping people lose weight, though some criticize the viral nature of the drugs for causing a shortage of the treatments for patients most in need, as the drugs are primarily used to treat Type 2 diabetes rather than weight management. A study published in October in Nature found individuals taking semaglutide drugs lost about 15% of their body weight over a two-year period, compared to a 3% drop for the control group. The acquisition comes at a crucial juncture for WW International as a company, with revenue down nearly 50% over the last two years. Goldman upped its forecast for WW International’s revenue next year by more than 30% thanks to the company’s pivot, also hiking its profit projection by 22%.

Crucial Quote

“This move concretizes what we view as a cultural shift in how we think about weight loss—from relying on behavioral modification and community support (central to WW’s strategy) to treating metabolic dysregulation as a medical condition,” BMO analyst Evan David Seigerman wrote about WW International’s acquisition of Sequence last month.

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