Biotech's Race to Battle the Bulge
Three companies fighting for a piece of the obesity-drug pie.
The upcoming year promises to have biotech investors on their toes as three companies -- Vivus (VVUS), Arena Pharmaceuticals (ARNA), and Orexigen Therapeutics (OREX) -- battle over pieces of the obesity-drug pie.
(See, Obesity and ED: Two Big Markets, One Tiny Company.)
All three companies have been developing weight loss drugs over the past few years and the competition is coming to a head. Vivus and Arena both filed applications for approval of their drugs with the US Food and Drug Administration in the fourth quarter of 2009, and Orexigen is expected to put its drug into the approval pool in the first quarter of 2010.
These tiny companies (none have a market cap of more than $805 million) could all benefit from the over-sized market obesity presents. There are more than 72 million obese or overweight people in the US, about 20 million of those people are also diabetic -- a disease commonly associated with being overweight -- and another 1.6 million are expected to be diagnosed each year, according to the American Diabetes Association.
The weight-loss category is one of the only untapped markets for pharmaceuticals; if approved, this category of drugs could be the next, if only, blockbusters the sector has left to offer. According to a recent report by the Centers for Disease Control and Prevention, obesity-related health-care costs totaled $117 billion in 2000. Between 1987 and 2001, diseases associated with obesity accounted for 27% of the increases in medical costs.
Diet pills aren't a revolutionary idea for pharmaceutical companies, but none have been able to tap that golden combination of safety and efficacy. Historically, weight-loss drugs have been unpleasant to use, highly dangerous, and mostly ineffective. Wyeth’s Fen-Phen, while effective in causing weight loss, was withdrawn from the US market in 1997 after a slew of deaths occurred from extended use of the drug. Both Merck (MRK) and Sanofi-Aventis (SNY) have scrapped the development of obesity-treatment programs in recent years after the FDA determined that the side effects were too lofty compared with the minimal benefits.
But the next generation of diet pills has shown promise so far. Late-stage results from studies of Vivus’ weight loss drug Qnexa showed that patients lost an average of almost 15%, far more than achieved by Arena’s lorcaserin and Orexigen’s Contrave. FDA guidelines for anti-obesity drugs require that individuals treated with the drug show a 5% greater weight loss after a year than those receiving a placebo, or that at least 35% of patients on the drug achieve a 5% weight loss. Qnexa, which combines phentermine (an amphetamine-like appetite suppressant) and topiramate (an antiseizure medication), had limited side effects. But analysts worried that the topiramate component could cause central nervous system side effects and could limit the drug’s potential for long-term use.
Meanwhile, late-stage studies of Contrave showed that patients lost about 6% of their body weight, just mustering past FDA requirements for obesity treatments. The drug showed minimal side effects aside from nausea and headache, but did have several severe adverse events -- like seizure and gallbladder inflammation -- that could become a concern to the FDA.
Lorcaserin’s late-stage data showed that it was the least effective at 5.8%. The company hasn't yet released the data from a study of the drug in overweight patients with diabetes -- data that's readily available for the other two drugs.
“If all three obesity drugs come to the market over the next couple of years, we expect significant growth in the obesity market as multiple sales forces increase awareness of pharmacotherapy for obesity. However, the modest efficacy for lorcaserin may convince doctors and patients to try other drugs first,” said Leerink Swann analyst Steve Yoo in a note to investors.
Vivus and Orexigen are better bets for investors. Both companies have other late-stage drugs in the pipeline that they can fall back on if their obesity treatments become the biggest loser.
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