WeightWatchers shares fall as company struggles to adapt in the era of obesity vaccines

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Shares of the company behind WeightWatchers fell sharply on Friday after it cut its sales outlook and announced a major restructuring to fend off the challenge from a new generation of anti-obesity drugs.

WW International said on Thursday it was implementing a “significant streamlining” of its business to cope with the “rapidly changing landscape,” as it reported a 4% drop in quarterly profit and an 11% drop in sales.

The New York-listed company’s shares fell 17 percent in pre-market trading on Friday, bringing its share price down more than 90 percent over the past 12 months.

The company’s new cost-cutting campaign comes after the company, founded in 1963, began distributing anti-obesity drugs called GLP-1 agonists last year, transforming from a direct-to-consumer food company to a hybrid digital health business. It now manages drugs including Eli Lilly’s Zepbound and Novo Nordisk’s Wegovy.

“To win in this dynamic GLP-1 environment, we are completely restructuring the way we operate to accelerate our path to becoming the leading digital healthcare provider,” CEO Sima Sistani told analysts after the update on Thursday.

The company plans to save $100 million annually through the restructuring, which includes cutting 40 percent of senior executive positions. The company said the restructuring will cost about $12 million to $15 million in the second half of the current fiscal year.

The company began distributing GLP-1 last year through its acquisition of telehealth company Sequence, which allows it to prescribe the drug to customers through a new arm of the company called the WeightWatchers Clinic, which combines a behavior-change program with medication.

But drug shortages, the rise of synthetic GLP-1 — an alternative version of the injectable drug — and growing competition from other health care companies have challenged this new strategy.

Sistani said the number of their competitors has increased 50 percent since 2023, and many of them already offer compounded medications. WeightWatchers has always said it does not offer alternatives to its customers, but when asked on the call if that would change, Sistani did not rule it out.

“[US Food and Drug Administration] “Approved medications are our preferred route,” she said. “However, with shortages expected to persist for some time and insurance coverage in a precarious state, we are exploring alternative routes to best serve our members.”

The US company’s second-quarter revenue, at $202 million, was lower than expected. And the group cut its full-year sales target from between $830 million and $860 million, to “at least” $770 million.

However, second-quarter earnings were better than expected, with adjusted earnings of $38 million compared to analysts’ estimates of $33 million.

Barclays analysts said that while the restructuring could bring long-term benefits, “the change is not without significant implementation risks, particularly when implemented in a difficult macroeconomic context”.