Recasting WeightWatchers for the era of weight-loss jabs is akin to Facebook overhauling its social media site for mobile, or Netflix moving from DVDs to streaming, Sistani argued.
“There was a time in that transition where the market wasn’t necessarily following where they were in their turnaround,” she said. “We’re in that moment right now.”
Traditional WeightWatchers members, such as Rod Zimmerman, combined in-person meetings with a points-based system to control their weight. The Chicago air cargo manager is sticking to its Core system after losing 207lbs of his 396lbs, saying he does not want to “try to fix something that’s not broken”.
But within a year of the US Food and Drug Administration’s 2021 approval of the weight-loss drugs known as GLP-1 agonists, the threat of them breaking WW’s business model became clear. WW lost more than a quarter of a billion dollars in 2022 as its subscriptions dropped more than 15 per cent to 3.5 million, though it did not draw a connection between that reversal and the new drugs.
In 2023, it responded by spending US$106m to acquire Sequence, a telehealth company that gave it the capacity to prescribe GLP-1 drugs, which it rebranded as WeightWatchers Clinic.
The deal helped Sistani and her team increase full-year subscriber numbers for the first time in three years to 3.8 million, up 7 per cent from 2022. With just 67,000 subscribers by last December, Clinic is in its infancy, but it is growing rapidly and was on track to beat first-quarter guidance, the company said recently.
The rise and fall of WeightWatchers
Sistani describes the new WW as a judgment-free “weight health” company embracing “a full spectrum of solutions”.
Its proposition, coupling its traditional behaviour-change programme with medication where appropriate, is backed by multiple medical studies, said Fatima Cody Stanford, an obesity medicine physician and associate professor at Harvard Medical School and Massachusetts General Hospital.
“Patients have the best outcomes when they combine lifestyle modifications — optimal diet and exercise — with these anti-obesity medications,” she said.
That view was echoed by Tricia Bryan, a WeightWatchers member who has lost 17lbs since pairing the Core programme with a Clinic prescription for Eli Lilly’s Zepbound. “The medication is a tool. It’s not a miracle drug,” the 38-year-old small-business owner from Georgia said, pointing to lifestyle changes she has made alongside the injections.
But some investors believe selling discipline against a shot is a losing game when big pharma companies are competing to meet the demands of the one in eight people worldwide who are classed as obese. The rise of rival telehealth companies has also called WeightWatchers’ positioning into question.
“A lot of people saw the telemedicine component as an antidote to WeightWatchers’ foes, but I saw a very competitive market that they were entering,” said Stephanie Davis, a healthcare technology analyst at Barclays.
Davis points to a long list of “more nimble” telehealth companies that also provide access to GLP-1 drugs, such as Noom, a direct-to-consumer weight-loss company with comparable subscription pricing to WW. Noom was last valued at US$3.7 billion in 2021, and is likely to go public this year, according to PitchBook.
WW’s US$1.3b net debt — nine times its earnings before interest, tax, depreciation and amortisation — also worries some market participants who believe the company may face unmet financial obligations or cash flow problems before its clinical business can grow to scale.
But “the clock is not running out”, said Jack Wallace from Guggenheim Securities. WW has attractive, long-term debt agreements with no maturities due before 2028, US$109m of cash as of the end of 2023, and an undrawn US$61m revolving credit facility. Any rumours that the company is at risk of defaulting are “flatly untrue”, he said.
WeightWatchers Clinic, which Wallace called the company’s single largest opportunity, is acquiring subscribers at a faster pace than the growth in US GLP-1 prescriptions, suggesting it is taking market share, he said.
About 70 per cent of Clinic sign-ups since December are from existing or lapsed members, according to the company. “That’s incredible distribution of basically free marketing,” said Wallace, who calculated that a member converting from the Core programme to a Clinic subscription becomes three to four times more profitable for WW.
Sistani knows such a transition takes time which she may not have. “We’re positioning the company for the long-term health of the business and the market doesn’t necessarily operate that way,” she said. “If I do that work for our membership, then results will be there, and eventually the market will reflect it.”
Guggenheim’s Wallace said: “As long as they do what they guided they will be fine. But they basically have a year to prove the market wrong.”
Written by: Anna Mutoh
© Financial Times
