Sima Sistani, CEO, WW Worldwide, August 16, 2023.Scott Mlyn | CNBCWeightWatchers CEO Sima Sistani has despatched an inside memo to workers making an attempt to reassure them that the monetary place of the corporate is stable and its new scientific enterprise associated to the specter of GLP-1 weight reduction medication is rising sooner than anticipated.The memo, shared with CNBC, comes after heavy promoting in WW shares that has seen the inventory market worth of the long-lasting weight reduction firm fall to underneath $150 million amid considerations in regards to the firm’s debt load and its core weight reduction enterprise development prospects at a time of recent blockbuster medication like Novo Nordisk’s Ozempic and Wegovy, and Eli Lilly’s Zepbound.Within the memo, Sistani instructed workers she wished “to take a second to deal with among the breathless media protection.”Whereas the information on Feb. 28, concurrent with its earnings, that Oprah Winfrey was planning to go away the corporate’s board and donate all of her shares within the firm to a museum’s endowment had led to a 20%-plus drop on earnings day, shares stabilized later that week. However since then WW shares have suffered heavy promoting, dropping to a brand new 52-week low on Thursday. Over the previous one-month interval, shares are down 58 p.c. The inventory, resulting from its debt load and quick curiosity, in addition to the overall nervousness in regards to the affect of the brand new weight reduction medication, is topic to heightened volatility.Issues in regards to the firm’s important debt load have made new headlines in current weeks, nonetheless, the difficulty isn’t a brand new one and far of the debt isn’t due for years.”These headlines are sometimes simply hypothesis,” Sistani wrote to workers. “We’ve got sturdy liquidity and aren’t in a money crunch. We’ve got very engaging, long-term debt agreements, with no maturities due till 2028 and 2029.”Guggenheim Companions analysts wrote in a be aware on Thursday that they’re “unconcerned” about WW’s capacity to service its debt, which incorporates roughly $945 million excellent on a non-amortizing time period mortgage that matures in April of 2028, and $500 million of notes due in April of 2029.The corporate ended 2023 with roughly $109 million in money, in keeping with Guggenheim.At its present market cap, the close to $1.5 billion in debt is roughly 10 occasions the publicly traded worth of the corporate’s fairness.”Regardless of the excessive leverage, we imagine WW could have no drawback overlaying curiosity funds on the debt, and can in the end be in a significantly better place to recapitalize the corporate in 2-3 years after the Medical enterprise scales. Furthermore, we expect any worries a couple of recapitalization or default this yr are overblown,” the Guggenheim analysts wrote.Guggenheim maintains a purchase ranking on the shares and $12 worth goal. WW shares closed at $1.87 on Thursday.Final yr, WW acquired Sequence, since rebranded as WeightWatchers Clinic, as a option to confront the specter of the GLP-1 medication to its legacy enterprise by being able to attach sufferers with clinicians who can prescribe the medication and mix the medication with a broader weight-loss program. The FDA mandates the medication be used along with broader weight-loss food plan and train strategies.Sistani mentioned within the be aware to workers that because it reported on Feb. 28 and supplied steering for the yr, its GLP-1 associated clinicals enterprise has grown rapidly. “The truth is, we’re on monitor to beat our Q1 steering for Clinic subscribers,” she wrote.Whereas any sooner development for the clinicals enterprise is a plus, a number of analysts who cowl the inventory have instructed CNBC that the core weight-loss administration enterprise has to develop for buyers to show bullish on the inventory, given the dimensions of the legacy enterprise relative to the brand new clinicals effort.”WW is in a tricky spot,” mentioned one analyst consulted after the inner memo was shared, however who couldn’t remark for attribution resulting from considerations about truthful disclosure of the fabric info. “Sequence [the clinicals business now named WeightWatchers Clinic] ought to be the longer term. That is the GLP-1 playbook, however at this level it is nonetheless very small. If they’re speaking about upside to that small enterprise in and of itself, it isn’t significant. The larger challenge is the legacy enterprise continues to undergo and the corporate is overly levered.”When WW reported outcomes on Feb. 28, the corporate mentioned it had ended This fall with 3.8 million subscribers, together with 67,000 for scientific subscriptions, however its steering for the complete yr 2024 was complete subscriber development within the vary of three.8 million to 4.0 million, together with between 140,000 and 160,000 subscribers to WeightWatchers Clinic.”Turning round and completely reworking a enterprise isn’t for the faint of coronary heart!” Sistani wrote to workers. “As we keep centered on delivering for our members, the inventory worth will deal with itself,” she said. “I do know clickbait tales and their predictable, albeit momentary, market affect do not feel nice. However take pleasure, as a result of we are going to show the naysayers fallacious.”Oprah Winfrey mentioned in her assertion asserting her intentions to go away the WW board this upcoming Could and donate all of her shares to the Nationwide Museum of African American Historical past and Tradition that she would proceed to work with the corporate to de-stigmatize weight problems and give attention to weight reduction as administration of a continual situation (Oprah instructed Folks she began utilizing weight reduction medication in December). Subsequent Monday, Winfrey is scheduled to look in a nationwide primetime weight-loss particular on ABC.Guggenheim mentioned in its be aware on Thursday “we’d not be stunned if the particular incorporates optimistic commentary about pairing GLP-1 drug therapies together with a clinically-guided conduct modification program.” It famous that WW was amongst firms from the burden loss trade concerned within the TV occasion.Sistani was named to the inaugural CNBC Changemakers record, revealed in February.