WW International Inc. Share Plunge Following New Digital Healthcare Platform Launch by Eli Lilly and Co.
WW International Inc., commonly known as WeightWatchers, experienced a significant drop in shares on Thursday after pharmaceutical giant Eli Lilly and Co. launched a new digital health-care platform offering weight-loss drugs, posing a potential threat to the wellness company’s key area of growth.
Shares in WW International tumbled 11% on Thursday, marking the biggest one-day drop since October 19. This decline comes on the heels of an 11% slump on Wednesday after Barclays Plc issued a sell-equivalent rating for WW, expressing concern that the company is still in the early stages of transitioning to a more digital-focused model.
The stock for WW International had more than doubled last year as the company acquired telehealth obesity-drug provider Sequence in March, tapping into the growing market for weight-loss medicines known as GLP-1s. Despite this, analysts tracked by Bloomberg are projecting the stock to gain another 74% over the next 12 months.
Lilly’s new service, LillyDirect, will connect patients with obesity, diabetes, and migraines with doctors for prescriptions, and offer home delivery of certain medications through third-party pharmacies, posing a challenge to WW International’s market position. This move also caused shares in other companies providing online access to prescription weight-loss drugs, such as LifeMD Inc. and Hims & Hers Health Inc., to slide on Thursday.
Analysts at Barclays and Guggenheim Securities LLC believe that the decline in WW shares might be overdone, as consumers are likely to trust established brands for weight-loss solutions. Stephanie Davis, an analyst at Barclays, stated, “while a pharmaceutical manufacturer is likely at the top of the list, we view WW as one of a few trusted brands given their established decades-long history in the weight-loss space.”
D.A. Davidson & Co. analyst Linda Bolton Weiser noted that LillyDirect could have an advantage if weight-loss drug supply shortages continue, as it would have the first dibs on the drug supply. However, she emphasized that the winners and losers in the space will be determined by who can provide the best offerings and support for people pursuing weight loss, and believes that WW has the “strongest brand equity in weight loss.”
The launch of LillyDirect by Eli Lilly and Co. has clearly rattled the weight-loss industry, and it remains to be seen how this new digital health-care platform will impact the market in the long run.
With assistance from Angel Adegbesan, this article was updated to provide additional analyst commentary.
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