Weight Watchers International Inc (WTW)

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Weight Watchers International Inc. (WTW)

JPMorgan Global Healthcare Conference

January 11, 2012; 11:30 am ET


Ravi SachDev - JPMorgan

Dave Kirchhoff - CEO of Weight Watchers International Inc.


Ravi SachDev

Hi everyone. I’m Ravi SachDev from JPMorgan. I am very excited to have with us today one of the companies that we think is changing the healthcare system; Dave Kirchhoff and the Weight Watchers team.

I’ll turn it over to Dave in one second. Just as a reminder today, please turn off your cell phones and we will be doing questions-and-answers in the Sussex Room. Dave.

Dave Kirchhoff

Thanks Robbie. I trust that you all made responsible breakfast decisions today, but just know, this is Weight Watchers; we believe in empathy and support, so this is a no judgment zone.

This is our second year. Well, first standard, the regular forward-looking statements; you guys know the drill. This is our second year presenting at the JPMorgan Healthcare Conference. Last year in some respects was sort of our coming out if you will as a healthcare company and it is a logic that we are finding increasingly compelling.

But if I take a step back and I look at where we are as a company, as an organization, that has a very simple mission, which is to help people sustainably loose weight by adopting a healthier lifestyle. It is a company that for close to 50 years has traditionally been a direct-to-consumer company. It’s what we’re good at.

It is a business. We have a core face-to-face group support business that has tremendous brand recognition, high satisfaction, high recommendation rates, highly scaled and just the most unbelievable group of people, who are facilitating our group support meetings week-in and week-out, who are all former success -- who are all successful members themselves.

Over the past five years we also had the benefit of having what we believe was one of the best Internet businesses anywhere, which is Weight Watchers online; tremendous growth, tremendous margins, tremendous satisfaction. It’s been a big driver in terms of both, top and bottom line performance for the company and when I look at those things together from a traditional consumer product services company, this is an organization with tremendous prospects.

It is a company with an amazing business model, variable cost, high margin, negative working capital, extremely high return on invested capital, low CapEx, tremendous economics and increasingly it’s also becoming a company that we believe is going to be standing at the center of healthcare. It is undeniable, the need for addressing conditions like obesity and all the conditions that flow for that and we believe that we are uniquely suited to be the key frontline solution for addressing the obesity epidemic.

Speaking of obesity, many of you have probably seen some of these maps of the United States from the CDC, which shows the prevalence of obesity getting consistently worse across the country. I’ll point out the fact that in 1990 Colorado was the thinnest state in the Union, but I will also point out the fact that in 2010, that 1990 version of Colorado would have been the heaviest state. It speaks volumes as to how bad things have gotten over the past 20 years and our projections are it’s going to continue getting worse.

The Lancet, there was a publication in The Lancet just this past fall that suggested give or take for next 20 years, 10 or 20 years that obesity rates in the US could pass the 50% mark. It is a condition that affects countries around the globe. It’s not just an American phenomenon. There’s a lot of countries that are giving us a run for our money, including some unexpected places. You’ve heard the expression ‘French women don’t get fat,’ don’t believe it; they do.

The slope of the line is the same. It’s just the Y intercepts are different. If you look at average BMI across countries and the fact that we’re actually, what we believe is going to be a massive obesity epidemic in China, really goes to speak to this, that with affluence comes an obesogenic environment, with that comes obesity and with that comes disease.

Specifically if you look at the healthcare system as a whole, statistics that many of you are well familiar with, $2.5 trillion spent per year, 75% of which go to the treatment of chronic disease. Chronic disease in turn depending on condition is driven 50% to 80% by lifestyle.

So here is the difficult reality of the environment we’re in; is that you cannot have long term healthcare cost containment, without going about the business of getting Americans to make different choices in their daily life. This applies to smoking; it applies to the foot choices we make; it applies to how we exercise or not; it applies to a lot of difficult things that are difficult to address and I’ll talk about that in a little bit.

A specific example in terms of the impact of obesity that many of you are familiar with is going to be Type 2 diabetes. You recall that map of the United States. It shows prevalence of obesity in different states and the concentration in the South Eastern wall and below. If you look at this hot map from the CDC in terms of diabetes incidents rates, you can see that these things are obviously highly correlated.

Read the rest of this transcript for free on seekingalpha.com