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WeightWatchers gets into prescription weight loss business

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WeightWatchers' stock soared Tuesday after the company said it is getting into the prescription drug weight loss business with the acquisition of Sequence.

Sequence is a telehealth provider that offers users access to drugs used to treat diabetes and obesity under the brand names including Ozempic, Wegovy and Trulicity. The drugs all work by the same mechanism: They trigger the release of insulin, block sugar production in the liver and suppress appetite.

WeightWatchers offers subscribers meal plans with the goal of losing excess weight. With the acquisition of Sequence, it is tapping into a red-hot market for prescription drugs that address obesity, and broadening what it offers to customers.

"With our science-backed lifestyle program and Sequence's tech platform – which puts complex, slow insurance processes on tech rails – this is an unmatched opportunity for us to create an integrated product offering," said Sima Sistani, CEO of WeightWatchers, in a statement.

The company's telehealth play comes as the company struggles to reverse its sliding subscriber numbers and bolster its existing user base. The company ended the fourth quarter of 2022 with 3.5 million subscribers, down from the 4.2 million users it reported earlier last year, according to a securites filing

The company's stock tumbled roughly 75% over the course of 2022, but surged almost 80% Tuesday after the Sequence deal was announced.

Ozempic and Wegovy are different versions of the same drug, known as semaglutide. They're both given as once-weekly injections. Ozempic is approved only to treat diabetes, although it has been increasingly prescribed for off-label use. Wegovy was approved in 2021 to treat obesity in adults, and late last year to treat the condition in adolescents 12 and older.

Use of drugs for weight loss causes shortage 02:59

Obese patients lost an average of roughly 15% of their body weight after a little more than a year of using the drug, according to a 2021 study published in the New England Journal of Medicine. 

Although the Food and Drug Administration approved semaglutide in 2017, interest in the drug has surged only recently after a number of viral social media posts touted the drug as "Hollywood's worst kept secret," among other claims. The "Ozempic" hashtag has racked up 622 million views on TikTok. 

In a clinical trial, adults who used Wegovy lost about 15% of their initial body weight, while teens lost slightly more. For best results, the drugs should be combined with diet and exercise, experts say. Trulicity is a different drug, dulaglutide, used to treat diabetes in adults and children ages 10 and older. It's not approved to treat obesity.

The off-label use of semaglutide, spurred by social media posts, led to a shortage of the drug for most of last year. Novo Nordisk said supplies are being replenished, but many diabetes patients still report trouble accessing the drugs they need.

Both Ozempic and Wegovy can cause possible side effects, the company reports. They include possible thyroid cancer, pancreatitis, kidney and gallbladder problems. The most common side effects are nausea, vomiting, diarrhea, stomach pain and constipation.

Obesity prevalence rose from 30.5% from the 1999-2000 period to 41.9% for 2017 through March 2020, according to the Centers for Disease Control and Prevention. The prevalence of severe obesity surged from 4.7% to 9.2% for the same periods.

The estimated annual medical cost of obesity in the U.S. was almost $173 billion in 2019 dollars, according to the CDC. Annual medical costs for adults who had obesity were $1,861 higher than medical costs for people with healthy weight.

"This deal brings access to prescription drug solutions for weight loss to WW's historical focus on behavior modification model," wrote UBS analyst Michael Lasser. "This is a significant change in the business. While the deal could bring considerable upside, it also carries sizable risks."

Lasser said that WW's business has been disrupted over the last several years and is now trying to take big steps to course correct.

"We think it will take time to see if this action really produces a change in the company's fortunes," he said.

WW International, based in New York, will pay $106 million for Sequence, which served about 24,000 members across the U.S. as of February, with annual revenue of about $25 million.

CBS News' Elizabeth Napolitano contributed to this report.

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