Shares of WW International (WW -11.13%), formerly Weight Watchers International, tumbled 11.4% through 1:10 p.m. ET on Thursday at the same time as Eli Lilly (NYSE: LLY) stock resumed its relentless march back toward its 52 week high.
These two events are not unrelated.
Zepbound vs. WeightWatchers
Lilly stock has been buoyed in recent days by the enthusiasm for the company’s new Zepbound weight loss drug, which competes with Novo Nordisk‘s Wegovy and Ozempic, and threatens WW’s business model of facilitating long-term weight loss over time, by offering consumers the attractive prospect of weight loss by injection. This morning, Lilly gave WW International investors a new threat to watch out for, announcing its LillyDirect e-commerce platform, permitting patients to get prescriptions via telehealth appointments, and then order “direct home delivery of select Lilly medicines through third-party pharmacy dispensing services.”
Is WW International stock a sell?
So you can imagine why that might make investors just the teensiest bit nervous.
Moreover, the company is not in a particularly good position to fight off this threat. Unprofitable in 2022 and 2023, and expected to keep losing money into 2024, WW International remains loaded with debt — about $1.4 billion net of cash on hand, which is more than twice the company’s current market capitalization.
Analysts still think the company can turn things around and resume generating profits in 2025. But when you consider that WW’s revenue has been shrinking for five straight years — and that this was already happening before big pharma began inventing whole families of magical weight loss drugs — I have to admit that things aren’t looking great for the company right now.
And those promises of a profit in 2025 could be as hard to keep as sticking to a New Year’s resolution to lose weight.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
