Getting Fat from Obesity

1
2004 HBS Health Conference

• Getting Fat from Obesity
• The Business of Weight Loss
• Mark Francis
• Managing Director
• Rosetta Stone Ventures
• November 5, 2004
• Boston

2
Agenda

• Overview
• Impacts
• The Obesity Marketplace
• Current Issues
• Discussion and Q A

3
Overview Definitions

• Body Mass Index (BMI) weight in kilograms
  divided by the square of height in meters
• Overweight
• BMI 25.0 29.9
• Obesity
• BMI 30.0
• 30 pounds above healthy weight
• Extreme/Morbid Obesity
• BMI 40.0
• 100 pounds above healthy weight

4
Overview Examples
5
Overview Trends
6
Overview Trends
7
Impacts

• CDC data shows 65 of Americans are overweight or
  obese.
• 34 are overweight (BMI 25 to 29.9)
• 27 are obese (BMI 30 to 39.9)
• 4 are morbidly obese (BMI 40)
• In 2004, CDC reported that premature death due to
  obesity emerged as the second leading cause of
  death in the U.S. (300,000 deaths)

8
Impacts

• An October 20, 2004 Health Affairs article
  reported that obesity alone accounted for 12 in
  the growth of all health care spending between
  1987 2001
• A 2003 RAND analysis showed that health care
  costs for obese workers were 36 more than normal
  weight individuals
• Health Affairs reported that obese people account
  for an increase in spending of 27 vis-à-vis
  normal weight individuals
• NIH reports that costs related to obesity ranges
  between 91 - 117 billion annually

9
The Obesity Marketplace s

• November 3, 2004 Wall Street Journal article
• 60 million Americans are obese
• 9 million Americans are morbidly obese
• 85,000 entities are competing in the
  marketplace for a piece of the 40 billion in
  spending (2002)
• The market is huge, very dynamic, fragmented, and
  controversial
• Growth is expected to remain strong

10
The Obesity Marketplace
11
The Obesity Marketplace
Source Marketdata Enterprises, 2003.
12
The Obesity Marketplace Competitors

• Commercial Vendors
• Weight Watchers
• Jenny Craig
• Online/Web-based Providers
• eDiets
• Heartcenteronline.com
• Weight Watchers
• Jenny Craig
• Atkins.com
• Meal Replacement Vendors
• HMR
• Optifast
• Slimfast
• Weight Watchers

• Medically Supervised Programs
• Mayo Clinic
• Lindora
• Weight Loss Clinics of Michigan
• Johns Hopkins Weight Loss Programs
• Wellness/Health Promotion/DM firms
• Staywell
• Health Solutions
• Health Dialog
• Leade Health
• Partners in Corporate Health
• Pharmaceuticals/Drugs
• Sibutramine
• Orlistat
• Xenical

13
Current Issues Market Trends

• Weight Watchers, Inc. is THE dominant player
• Retail and Commercial market segments are highly
  competitive, yet fragmented
• Corporate and Health Plan channels are immature
• Emerging competitors include online providers,
  disease management firms, and health plans
• The power of fad diets cannot be overlooked can
  dramatically impact the industry (Atkins)

14
Current Issues Market Trends

• Increased medicalization of obesity
• 16 obesity drugs in the development pipeline
• Medicare announced in 2004 that it will consider
  reclassifying obesity as a disease reviewing
  policies, coverage, and coding implications
• Gastric bypass surgery is surging in popularity
• From 40,000 to 100,000 procedures in 2 years
• BCBS of North Carolina launched multifaceted
  obesity treatment program, including surgery
• BCBS Florida will stop coverage in 2005

15
Discussion and QA

• Getting Fat from Obesity The Business of Weight
  Loss
• Thoughts and comments
• Are there opportunities to compete in this
  marketplace?
• Is this an attractive sector? Why or why not?
• What other factors are at play? (genetics,
  environment, etc.)
• Where would you focus your efforts? Why?
• Will there ever be a magic bullet/pill?
• Thanks! My email mfrancis_at_post.harvard.edu