Health-wise, obesity is a major concern because it substantially elevates a person's chances of contracting life-threatening conditions such as Type II diabetes and heart disease. Obesity also has a substantial negative impact on the economy by adversely affecting health care costs, worker productivity, and not surprisingly, transportation costs. Taken together, the various economic impacts cost the United States an estimated $200 billion per year.
After more than a decade of political inaction, policymakers finally appear to be taking the consequences of obesity seriously. The best evidence of this dramatic shift in policy is the Food and Drug Administration's approval of two obesity medications last year. Specifically, the FDA approved Arena Pharmaceuticals' (NASDAQ:ARNA) Belviq, and VIVUS' (NASDAQ:VVUS) Qsymia as treatments for weight management in severely obese adults.
These two obesity drugs are the first to be approved by the FDA in more than a decade due to the poor safety record of previously approved drugs. Even so, there will probably be three FDA approved drugs by 2014 as Orexigen (NASDAQ:OREX) seeks approval for its medication Contrave.
Will there be a blockbuster among the current crop of anti-obesity drugs?
Arena's FDA-approved drug Belviq is an appetite suppressant with modest efficacy. The company partnered with Japanese drugmaker Eisai to market Belviq in North America, where it was launched last summer. As the initial launch targeted a limited number of obesity specialists, the sales numbers so far have been unimpressive. To increase sales, Eisai is hiring 200 additional reps and launching a series of high profile ads in the coming weeks. So the next two to three months should be telling about Belviq's prospects as a potential blockbuster.
VIVUS' sales of Qsymia are also way off the blockbuster mark. Since being launched over a year ago, the drug has struggled to penetrate the obesity market due to labeling and marketing restrictions. The poor performance of Qsymia has led to a dramatic shake-up in the boardroom of late, with 3 different CEOs taking the reins in the last 3 months. While CEO Zook reportedly left due to health concerns, this turmoil certainly doesn't help to stabilize the company or help implement its plan to increase Qsymia sales. Specifically, management is actively looking for an experienced marketing partner for Qsymia. To date, however, big pharma hasn't expressed much interest, which doesn't bode well for Qsymia's blockbuster aspirations.
Orexigen is expected to seek FDA approval for Contrave before the end of year. Contrave is currently being evaluated in a cardiovascular outcomes trial called the Light Study. In 2011, the FDA rejected Contrave because of safety concerns, and drug looked to be dead on arrival at that point. Because of political pressure to approve more anti-obesity meds, however, the FDA informed Orexigen that they would be open to a "smaller" cardiovascular outcomes trial than previously requested. With interim results in hand, Orexigen is thus pushing for FDA approval in order to join the race to become the first anti-obesity blockbuster. Orexigen is also seeking approval for Contrave in Europe, with a possible approval in 2015. With Contrave's rivals struggling to gain market share in the United States, its blockbuster aspirations may very well hinge on an European approval.
Why aren't obesity medications selling like hotcakes?
The main issue is that doctors still view obesity as condition best treated through behavioral modification. In general, doctors are more prone to focus on a patient's attitudes toward diet and exercise rather than turning to pharmaceuticals. The reason for this prevailing attitude is that studies have shown that diet and exercise are the only long-term solutions for weight management. Indeed, that's why both Belviq and Qsymia have been approved as adjuncts to a reduced-calorie diet and increased physical activity, not as substitutes for a healthy lifestyle. To date, the weight of the evidence suggests that none of these companies have a blockbuster obesity drug in hand, despite the enormous potential size of the obesity market. Foolish investors would thus be wise to look elsewhere in the biopharma space for out-sized gains.
George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.