WW International (NASDAQ: WW) - what we all know and love as Weight Watchers - is making a much more radical change in its business line than it might at first seem here. WW stock is up 60% on their takeover of Sequence, which is a telehealth provider specialising in the new weight loss drug Ozempic. At first sight that looks like a great deal of mutual benefit. Sequence gains access to the vast WEight Watchers' network, WW then also gains the profits of that expansion. Further, Weight Watchers customers gain access to a drug that actually works in reducing weight.
Ozemic being, of course, that diabetes drug so recently in favour as a method of losing weight. It's also the first really effective clinical method of weight loss other than bariatric surgery - which is a bit severe for those just want to lose 10 to 20 lbs. So, it looks like a great deal all around and so the jump in the combined stock price.
WW International stock price from NASDAQ
Whether this is truly a good idea or not depends upon how cynical we are about the Weight Watchers business model. Someone who goes to WW once, loses weight and never returns is not a profitable customer. The costs of gaining the customer in the first place are vastly greater than what is charged in that one visit. What makes money is repeat consumers. People who got to Weight Watchers for months, even years - those are the ones that make the profit. Another way to put this is that WW makes money not out of people losing weight, but out of those who do not lose weight.
Now that is cynical, yes, but there's also more than just a hint of truth to it. Which means that if we've now got that same company selling a true weight loss drug - that Ozempic - then how much is this going to cannibalise the extant business?
On the other hand, of course, we can also muse that if the drug really works then the old method of going to meetings which didn't work isn't going to survive long anyway. The conclusion being that this WW Int. pivot to Ozempic via Sequence might well be transformative - but which bit is it that's going to get transformed?
