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Weight Watchers Isn't Swallowing Biotech Cure

Ineffective pills and the costs of obesity will bring spending back to weight loss, an executive says.

NEW YORK (TheStreet) -- Despite all the attention being paid to such biotechs as Arena (ARNA) - Get Arena Pharmaceuticals, Inc. Report, Orexigen (OREX) and Vivus (VVUS) - Get VIVUS, Inc. Report, there is no magic pill for weight loss, says Weight Watchers (WTW) - Get Weight Watchers International, Inc. Report CEO David Kirchhoff.

Kirchhoff recently stopped by


to talk about the potential competition from weight loss pills, the company's social networking strategy and Weight Watchers latest marketing campaign.

Are Americans cutting back on slimming down?


There is no doubt that the recession has had some impact as consumers have cut down on discretionary spending everywhere. But I think that will turn around in the long term. The health care costs of obesity and the health care costs of an unhealthy lifestyle cannot be denied. So we believe that will take care of itself over time.

Weight Watchers increased its marketing spending in the second quarter. Was that money well spent?


We spent more money in the second quarter than we did the previous year. We think the money was absolutely well spent. We had a new celebrity spokesperson in Jennifer Hudson, as well as a new round of advertising that performed a lights-out improvement versus what we saw in the first quarter. So to us it was a fantastic investment.

Lately there has been a lot of talk about pills for weight loss. How is Weight Watchers dealing with this latest threat?


Pills have been around forever. They come and they go. I wish there was a magic pill that would make all this go away and the obesity issue go away, but nobody believes that. And we believe that fundamentally lifestyle is still the primary way you deal with the issue of obesity, which is where we are focused.

What is your outlook for the rest of the year and into 2011?


We are incredibly excited about what we have going into the new year. We have a new program coming out. We are revamping and revitalizing our retail infrastructure over the coming two to three years. And we have a lot of other initiatives that we think are going to go a long way in terms of further driving the relevance of Weight Watchers.

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What is Weight Watchers doing with regard to social networking?


Weight Watchers has been an active player on the Net since 2001. We were one of the very first subscription models out there. We now have over a million active subscribers. It's over a $200 million business for us with terrific margins, and it operates in multiple countries. We've been doing it for almost a decade. We're obviously heavily involved in social networking. In fact I would even say that Weight Watchers was one of the original social networking companies. So this is where we live.

There is a very high percentage of Weight Watchers stock that is held short. What would you say to the shorts, because a lot of them are worried about the debt load?


We feel with the cash flow of the business, we are very comfortable with our leverage. We think that it is very manageable for where we are. In terms of the prospects for the stock, I stay focused on doing what I can to drive long-term shareholder growth, which is about revitalizing and making our brand stronger. Since we are at the center of one of the most vexing health issues around, I have absolutely no doubt that over time we will drive terrific long-term shareholder value creation.


Reported by Gregg Greenberg in New York


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