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Weight loss startups ride the Ozempic, Wegovy wave

Fearful of missing out on the craze surrounding drugs like Ozempic and Wegovy, VCs are eyeing opportunities in weight care and management startups.

In fall 2022, TikTok was being flooded with videos of users recounting their experiences with Ozempic and Wegovy, members of a new class of weight loss drugs, spurring on a cultural sensation.

Evan Richardson remembers the moment the wave hit his startup, Form Health.

“All of a sudden our cost of customer acquisition just went through the floor,” he recalls, estimating that it dropped between 90% to 95% across six months. “Our company has probably grown 4x to 5x in the last 12 months.”

Form Health develops lifestyle coaching plans for weight loss that can include prescribing medication. The company, which previously needed to convince patients of GLP-1 drugs’ effectiveness, is now grappling with a shortage of them, Richardson said. In January, the startup raised $22.9 million at a $62.9 million valuation led by M13, according to PitchBook data.

“It’s now all part of the zeitgeist,” Richardson said.

What began as a viral trend has morphed into the biggest blockbuster movement in a generation for pharmaceutical giants such as Novo Nordisk, the creator of Ozempic and Wegovy. It also has become a lucrative opportunity for startups and their investors. Fearful of missing out and aware of the risks, VCs are eyeing opportunities in weight care and management via both telemedicine and coaching amid the rush of consumer interest.

“There’s very much this sort of gold rush mentality that is happening right now,” Richardson said. “There are so many folks that have poured into this space and are all telling a similar story.”

 


Lark, an AI weight loss startup, has raised a total of $199.75 million, and Calibrate, a telemedicine provider of weight loss drugs, has accumulated $170 million, according to PitchBook data. Zoe, another weight loss startup, has raised $103.28 million. WW, formerly known as Weight Watchers, bought Weekend Health’s Sequence, a weight management platform, in March for $132 million to help the established brand pivot online. Sequence prescribes Ozempic and Wegovy.

Richardson likened the fundraising mood to the recent VC bull market, when investors were writing checks at a quick clip.

“In so many ways it feels like things haven’t changed that much,” he said. “General interest is very high.”

‘Perverse incentives’

Investors are aware of the risks that come from racing to cash in on new drugs.

“I fear there might be some perverse incentives,” said Santé Ventures principal Eric Epstein. “What’s most profitable for the business may not be in the best interest of the patients that you’re serving.”

Some investors stress caution against investing in startups that are solely about getting drugs into patients’ hands.

“To me, the ultimate goal is not maximum efficiency,” said Jennifer Neundorfer, founding partner of January Ventures. “As anything gets faddish and capital runs in and people rush to move faster, we need to make sure we’re doing all this in service of patients’ outcomes.”

Neundorfer said the biggest opportunity of the current weight loss craze has been how the public has shifted from viewing obesity as a lifestyle choice to a disease. That, she says, has opened up investment in management, treatment and care.

“These drugs have changed the conversation,” she said. “The way people are approaching business has pretty rapidly shifted.”

An overlooked cause

Weight loss treatment is nothing new. Investors have poured money into older digital platform and device startups like Withings, MyFitnessPal and Lose It while large incumbents such as WW and Jenny Craig have struggled to follow consumers online. Amid all this, obesity rates continue to rise in the US, where it contributes to several leading causes of death.

But the emergence of GLP-1 drugs has spurred an intense focus on weight management.

“It’s been historically a fairly overlooked space,” said Epstein. Investors had largely turned away from obesity management, Epstein said, because of their inability to hook consumers and generate a profit.

Many point out, however, that the current craze is not only about the drugs—that the conversation around weight loss has shifted. “We’d be here whether or not GLP-1s existed or not,” Richardson says. He estimated that roughly a third of Form Health’s patients have been prescribed GLP-1 drugs.

Investors see the horizons opening up, spurred on by the conversations these drugs have started.

As Epstein put it: “This is a moment where there’s a ton of opportunity.”


Featured image by Drew Sanders/PitchBook News

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    About Jacob Robbins
    Reporter Jacob Robbins covers artificial intelligence and the venture capital ecosystem for PitchBook. Based in Seattle, Jacob is originally from Massachusetts and holds dual degrees in political science and cinema studies from the American University. His work has previously appeared in Air Mail and Business Insider.
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