Dozens of startups have jumped into the weight-loss market this year as weight-loss drugs, including Wegovy and Ozempic, have exploded in popularity.
However, investors and analysts believe that only a few companies have what it takes to make it big in the market, and next year may determine which one comes out on top.
As uncertain insurance reimbursements and drug shortages continue to plague startups prescribing these GLP-1 drugs, investors are hesitant to back more companies focused on writing these prescriptions, especially early-stage startups. Instead, venture capital firms told Business Insider that the healthcare companies best positioned to capitalize on the weight-loss drug craze have been around for years and already have large platforms.
The few companies with enough cash and brand recognition to withstand Ozempic’s distribution challenges, WeightWatchers, Noom and Ro, can expect to compete for market dominance next year.
“These companies are already at scale, and now there’s a race around who’s going to win,” said Sari Kaganoff, director of consulting at Rock Health.
How do the heavyweights compare?
WeightWatchers stands out from Noomi and Ro with its 60 years of experience. In March, the company announced the acquisition of GLP-1 prescription platform Sequence, bringing the conversation about Ozempic’s business to the big leagues.
WeightWatchers had 4 million paying subscribers in the third quarter of this year, generating $203.5 million in revenue during the period. Sequence’s revenue is just a fraction of that, with $10 million in orders in the third quarter.
But WeightWatchers announced that it has invested in weight-loss drugs by launching its own behavioral program for patients, Ozempic, in December. The company says the new program complements weight loss prescriptions given through Sequence integration or the patient’s primary care physician. WeightWatchers stock jumped 10% after the announcement.
Like WeightWatchers, Noom has been firmly established in the weight loss market since 2008. The startup, which focuses on psychology-based weight loss with behavioral coaching, most recently raised $540 million in Series F funding in 2021 at a $3.7 billion valuation.
Noom faced significant operational challenges last year when it underwent three rounds of layoffs between April 2022 and January 2023. The startup quietly launched a program prescribing GLP-1s at the beginning of the year, BI reported in March. Noom then publicly announced the program in May.
Although Noom is the best-funded healthcare startup focused exclusively on weight loss, it’s not clear how many patients the company has or how its GLP-1 prescription program has fared against market challenges.
Ro, on the other hand, offers treatment for various diseases outside of obesity. The startup made its name by prescribing erectile dysfunction drugs online and most recently raised $150 million in February 2022 at a whopping $7 billion valuation.
Ro launched its own weight-loss drug prescription program in January. The startup faced many challenges as it grappled with the new care model, with many patients complaining of delayed responses from Ro providers or difficulty getting drugs, BI reported in June.
Still, former employees told BI at the time that it showed early signs of being Ro’s fastest-growing program ever. Ro told BI in December that it has continued to improve the program since launch.
Data and trades decide who wins
As patients, health plans and employers grapple with the high costs of GLP-1 drugs, companies that can demonstrate their approach produces long-term weight loss will have an advantage next year, analysts told BI.
Clinical studies show that most patients regain most of the weight lost during GLP-1 treatment when they stop taking the medication. Kaganoff said some companies make bets that they can get people to lose weight and keep it off, but seem to lack the data to back up the claim.
“Right now most companies say they can do it, they think they can do it, but they haven’t necessarily published robust peer-reviewed studies,” he said.
Next year, the most important thing for these companies will be to collect and analyze real-world data from their patients.
In particular, contracts with employers and health plans could rely on this data as evidence of companies’ ability to save payers money. Noom and WeightWatchers both offer their platforms directly to patients and through employers and health plans, while Ro only sells its services to patients online.
Startups like Noom and Ro could also be shopped next year if their programs don’t gain enough traction, said Aaron DeGagne, healthcare analyst at PitchBook Data.
“Many companies will benefit from this opportunity. The market is there, it’s growing, companies are benefiting,” Kaganoff said. “It’s just tricky to tell who has the right model and the right operator team to do the long haul.”
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