Diabetes and obesity are so closely related for so many millions of people, physicians and investors now sometimes talk about the "diabesity" epidemic. There are a lot of drugs out there for one condition or the other, and now San Diego-based Orexigen Therapeutics (Nasdaq: OREX) is attempting to make a case that its experimental drug could be a potent new treatment against both conditions.

Orexigen is putting forward its strongest evidence to support that notion today at the annual meeting of the American Diabetes Association in Orlando, FL. This study, of 505 patients, found that patients lost an average of 5 percent of their body weight over a year on the Orexigen treatment, compared with 1.8 percent weight loss for those on a placebo. While that data wasn't as compelling as many investors hoped for, researchers found an important secondary benefit. About 44 percent of those on the Orexigen treatment reached a healthy threshold of blood sugar control, compared with 26 percent on a placebo.

Orexigen is engaged in a fierce three-way battle with San Diego-based Arena Pharmaceuticals (Nasdaq: ARNA) and Mountain View, CA-based Vivus (Nasdaq: VVUS) for supremacy in a new wave of weight loss drugs. All three have turned in applications to the FDA. Orexigen has completed four pivotal trials with a combined 4,500 patients, and U.S. regulators have set a deadline of Jan. 31 to complete their review and determine whether to clear the product for sale in the U.S. While the company is seeking approval of its drug for weight loss, Orexigen is also hoping that it will be able to get a leg up in the marketplace by pitching its secondary benefits for diabetes, heart disease, and other ailments related to being overweight.

"You are basically getting a 2-for-1 benefit here," says Dennis Kim, Orexigen's senior vice president of medical affairs. "It's often recognized in the minds of physicians, but there hasn't been a tool that would deliver both benefits. Physicians often accepted that you need to treat their [blood sugar levels] but you can't often address their weight. Most diabetes therapies actually cause weight gain."

It's true that many diabetes drugs are related to weight gain, although one well-known exception to that rule is San Diego-based Amylin Pharmaceuticals' (Nasdaq: AMLN) exenatide (Byetta), a diabetes drug that has been shown to help patients patients lose some weight.

There really shouldn't be anything scientifically magical about what Orexigen is doing to improve weight loss and obesity. Its drug, to be marketed under the name Contrave, is a combination of naltrexone and buproprion, which acts on hunger signals. The drug isn't specifically designed to act on pancreatic beta cells that control insulin. Scientists believe that the Orexigen drug is able to help with blood sugar simply because many studies have shown that when people lose weight, their insulin resistance and blood sugar control naturally improves, Kim says.

The magnitude of improvement on patients' blood sugar control looks decent, according to results being presented today by Priscilla Hollander of Baylor Medical Center. Patients entered the study with an average measurement of hemoglobin A1C levels—a key marker of blood sugar control—of around 8 percent. Diabetes specialists consider a 7 percent A1C score to be normal. Among those patients who got the Orexigen drug, they reduced their scores by an average of 0.6 percentage points, compared with a 0.1 percentage point improvement for those on the placebo. While it's always somewhat problematic to compare drugs in different clinical trials, that 0.6 percentage point drop stacks up competitively with primary diabetes treatments like Amylin's exenatide and Merck's (NYSE: MRK) sitagliptin (Januvia), Kim says.

Still, like with any drug, there are side effects that need to be taken into account. About 9 to 10 percent of patients who got the Orexigen drug dropped out of the study because of nausea, Kim says, which is about double the rate seen in other studies of the treatment. The company believes that occurred because many of the patients entering the obesity-and-diabetes study, known as COR-Diabetes, were also taking metformin, a common treatment. Patients in the study also reported vomiting, constipation, and dizziness.

As part of this study, Orexigen captured a whole slew of health measurements, such as waist circumference, cholesterol levels, and blood triglycerides. Kim noted that obese patients who also have diabetes are considered tougher to treat than patients who are just trying to lose weight.

But any drug that helps, especially a daily pill like the one from Orexigen, has potential to treat a lot of people and make a lot of money. An estimated two-thirds of Americans are considered overweight or obese, according to the Centers for Disease Control and Prevention. Another huge group of people -- 24 million in the U.S. -- are estimated to have diabetes, according to the American Diabetes Association (ADA). Without some major change to people's lifestyles, the number of people with diabetes is expected to almost double to 44 million over the coming 25 years, according to the ADA. So even if Orexigen can only capture a small sliver of this market, the potential is huge.

"Hopefully we can get on the radar screen of practicing diabetes specialists, so they are thinking of weight loss as a strategy, rather than just traditional glucose lowering agents that often cause weight gain," Kim says.

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