Revolutionary anti-obesity drugs have posed nothing short of an existential crisis for Weight Watchers’ parent company, WW International, since they arrived on the scene, but CEO Sima Sistani has faced that challenge head on. Despite an 11% drop in the stock on Friday, Morgan Stanley said it believed the company “has undergone an incredible transformation over the past year” and named the stock its top pick among small-market Internet stocks. and mid-cap. “Sequence has quickly and profitably become one of the leading players in the GLP-1 telehealth space, while turning WW’s GLP-1 bear case into a bull case,” analyst Lauren Schenk wrote in a research note Friday, referencing a telehealth platform that WW has accepted. buy in March. Sequence gives subscribers access to GLP-1 drugs such as Wegovy and Ozempic from Novo Nordisk. “With all eyes on the FDA’s upcoming action on the expansion of (Eli Lilly’s) Mounjaro/tirzepatide obesity label (expected by (the end of the year)), there are catalysts that could unlock supply and help Sequence monetize existing demand,” Schenk wrote. . On Thursday, WW reported a larger-than-expected drop in third-quarter revenue and warned that its annual sales would likely fall to the lower end of its expected range. Schenk said concerns about WW’s declining average revenue per user “seem overblown” and created a buying opportunity for the stock. WW shares are up nearly 90% year to date, but have fallen more than 30% over the past month. Schenk’s price target of $13 implies the stock could rebound 78% from Friday’s close. “We believe the lifetime value of (subscribers) acquired in the third quarter was higher than expected, but the pace of recognition of this value is slightly longer,” she said. Stabilizing its core business WW has focused on stabilizing its core weight loss business. It is closing its low-margin consumer products business, which sold snacks, recipe books and other products. Additionally, during the last quarter, more members took advantage of lower-cost long-term memberships, which hurt revenue. Schenk said the moves made the company’s marketing spending more efficient, which would help boost profits. Meanwhile, WW is working on developing Sequence after closing the deal in April. At the end of the third quarter, it had 45,000 clinical subscribers. There has been enormous interest in Novo and Lilly’s new class of appetite suppressant weight loss drugs, which have been proven to help patients lose weight faster and easier. However, access to these drugs has been restricted by several factors, including their high cost and limited supply. WW YTD mountain WW shares in 2023 Schenk said she is encouraged by Sequence’s subscriber growth despite bottlenecks and thinks that bodes well for accelerating growth as shortages ease. ‘attenuate. This week, Lilly said it expects the Food and Drug Administration to remain on track to approve tirzepatide for obesity by the end of the year. The company has been working aggressively to increase its manufacturing capacity, after seeing the problems Novo Nordisk was having keeping its GLP-1 drugs in stock. Since May, Novo has restricted sales of the lowest starting doses of Wegovy to ensure that patients already taking the drug have the supply they need to continue their treatment. Separately, Novo said this week that it has gained ground in convincing insurance companies to cover the drug, which has a list price of about $1,350 per month. Both of these developments are positive for WW’s Sequences business. Schenk estimates that about 6 million current and non-current WW subscribers would be eligible for treatment with anti-obesity drugs.