blog post 8
Profit bonanza eludes companies chasing obesity business
Soaring diabetes rates, driven by increasing obesity, have fuelled profits at the Danish company for two decades, but now the company wants to tackle obesity head on by launching a treatment specifically to help patients lose weight. Obesity rates suggest a booming market. Yet it is proving surprisingly difficult for both drug makers and food companies to develop businesses directly addressing the problem.
In a global economic downturn, modestly effective weight-loss drugs and special diet foods are turning out to be a tough sell when a cheaper alternative is to eat less – or do nothing. Weak economies have curbed demand for pricey, specialist dieting schemes just as competition has exploded from a host of electronic apps that count calories for free – and securing insurance reimbursement has been an uphill fight for new drugs that cost around $160-$200 a month in the United States. Global sales of obesity drugs have halved in the last five years, and even though they are expected to climb again they will remain dwarfed by therapies to treat diabetes, as rates of type 2 disease – the kind linked to obesity – soar.
Weight Watchers, the leading weight loss company in the United States, is finding the going increasingly tough. Revenue has been roughly flat or down during six of the last seven quarters and the outlook for the next four is even worse. Last month, the company said that despite progress on cost-cutting, it expected full-year revenue to fall at a low double-digit percentage rate if recruitment trends failed to improve. Weight Watchers is battling a declining membership base, growing membership at rivals, and the rise of cheap or free smartphone applications and activity monitors.
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