Game-changing anti-obesity medications have posed nothing in need of an existential crisis for Weight Watchers parent WW International since they arrived on the scene, but CEO Sima Sistani has been confronting this challenge head-on. Despite an 11% dive within the stock Friday, Morgan Stanley said it thinks the corporate “has undergone an incredible transformation over the past 12 months,” and named the stock its top pick amongst small- and mid-cap web stocks. “Sequence has quickly and profitably change into one in every of the highest players within the GLP-1 telehealth space while flipping WW’s GLP-1 bear case to a bull case,” analyst Lauren Schenk wrote in a research note Friday, referring to a telehealth platform WW agreed to purchase in March. Sequence gives subscribers access to GLP-1 medications reminiscent of Novo Nordisk’s Wegovy and Ozempic. “With all eyes on the FDA upcoming motion for [ Eli Lilly ‘s] Mounjaro/tirzepatide obesity label expansion (expected by [year-end]), there are catalysts that would unlock supply and help Sequence monetize the present demand,” Schenk wrote. On Thursday, WW reported a deeper-than-expected decline in third-quarter revenue , and warned its annual sales would likely fall to the low-end of its forecasted range. Schenk said the priority concerning the drop in WW’s average revenue per user “seems overblown” and has created a buying opportunity for the stock. WW shares are up nearly 90% for the reason that start of the 12 months, but have dropped greater than 30% over the past month. Schenk’s $13 price goal implies the stock could rally 78% from Friday’s close. “We imagine the lifetime value of [subscribers] acquired in 3Q was in line to raised than expectations, however the cadence of recognizing that value is barely longer,” she said. Stabilizing core business WW has been focused on stabilizing its core weight reduction business. It’s closing down its low-margin consumer products business, which sold snack bars, recipe books and other products. Also, throughout the latest quarter, more members took advantage of lower cost long-term memberships, which hurt revenue. Schenk said these steps are making the corporate’s marketing spending more efficient, which is able to help profits. Meanwhile, WW is working to develop Sequence after closing on the deal in April . At the top of the third quarter, it had 45,000 clinical subscribers. There was huge interest in Novo and Lilly’s recent class of appetite-suppressing weight reduction drugs, which have proven to assist patients shed kilos more quickly and simply. Nevertheless, access to those drugs has been strained by several aspects, including their high cost and limited supply. WW YTD mountain WW shares in 2023 Schenk said she was encouraged by the expansion of Sequence subscribers despite the bottlenecks and thinks it bodes well for growth acceleration as shortages subside. This week, Lilly said it expected the Food and Drug Administration remained on target to approve tirzepatide for obesity by the top of the 12 months. The corporate has been working aggressively to bulk up its manufacturing capability , having seen the problems Novo Nordisk has had keeping its GLP-1 medications in stock. Since May, Novo has been restricting sales of the lower starting doses of Wegovy to make sure that patients already taking the drug have the provision they should proceed their treatment. Individually, Novo said this week it has been gaining ground in convincing insurance firms to cover the drug , which has an inventory price of around $1,350 per 30 days. Each developments are a positive for WW’s Sequence business. Schenk estimates that around 6 million current or lapsed WW subscribers would qualify for treatment with obesity medication.
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