Arena, Vivus, and Orexigen: The Obesity Drug Debate Continues

Sometimes you need to look at where you've been to understand where you're going. And I believe this is particularly true for investors in obesity drugmakers like Arena Pharmaceuticals, Inc. (NASDAQ: ARNA  ) , Orexigen Therapeutics, Inc. (NASDAQ: OREX  ) , and VIVUS, Inc. (NASDAQ: VVUS  ) .

Unless you have been hiding under a rock, you know there is a lively and ongoing debate about each of these companies' respective obesity medications, in terms of their regulatory and commercial futures. While Arena's Belviq and VIVUS's Qsymia gained approval with the U.S. Food and Drug Administration, or FDA, over a year ago, neither drug has lived up to its billing sales-wise.

Complicating the matter further, Orexigen's Contrave is also widely expected to gain approval in the U.S. next year, and its potential effect on the marketplace is unknown. This third player could help develop the ailing obesity drug market, or it could push out its competitors altogether. Simply put, only time will tell.

Wall Street has nonetheless been resolute in its steadfast belief that none of these current medications have blockbuster potential. And with an estimated 36% of adults in the U.S. now qualifying as potential consumers of these drugs, Wall Street's view has baffled the retail crowd.

To understand Wall Street's outlook, I think it's best to take a deep look at the past and look ahead to the future of obesity medications.

A brief history

You might think Wall Street's downtrodden view of obesity drugs stems from the well-publicized problems associated with fenfluramine, rimonabant, and perhaps even sibutramine. In short, these three drugs all had nasty, and even life-threatening, side-effects that led to their failure. But this view would be incomplete.

The truth is that obesity medications have a history of serious adverse effects that extends well over a hundred years. In 1893, for example, doctors experimented with thyroid pills to treat obesity, resulting in numerous cases of hyperthyroidism. In 1936, the medical community thought amphetamines might do the trick. Although they were excellent at producing weight loss, they turned out to be wildly addictive.

Undeterred, the success of amphetamines at treating obesity beget the so-called Rainbow pill in 1967. The Rainbow pill is a mixture of amphetamines, thyroid hormone, barbiturates, among other naughty ingredients. Although hindsight is 20/20, it's not surprising that the primary side-effect of the Rainbow pill is death.

After the Rainbow pill debacle, doctors avoided pharmaceuticals altogether and started recommending very low-calorie diets for the treatment of obesity. This treatment consisted of consuming between 300 calories to 500 calories per day. And not surprisingly, the unwanted side-effect was, well, death.

The future of obesity medications?
NeuroSearch is a small Danish biopharma developing tesofensine for the treatment of obesity. Tesofensine is an anti-convulsant that exhibited severe weight loss as an unexpected side effect when the drug was being investigated as a treatment for Parkinson's and Alzheimer's diseases. After failing to show much benefit for patients suffering from central nervous system disorders, NeuroSearch decided to explore the drug's potential as a treatment for obesity.

To date, the drug has completed a handful of mid-stage trials with the results being nothing short of impressive. So far, tesofensine appears to have a similar safety profile as the currently approved cadre of obesity medications, yet it produces twice as much placebo-adjusted weight loss than VIVUS's Qsymia. As a refresher, Qsymia produces the highest level of weight loss, whereas Belviq and Contrave are tied for second.

Despite these impressive clinical results, you may never see this drug get approved. Because of the rigorous safety requirements for obesity medications, the pivotal late-stage trials for these drugs tend to have enormous price tags. Such an expensive trial is most likely out of the reach of NeuroSearch's capabilities. So it would be up to a well-funded partner to pick up the development torch.

Foolish final thoughts
With experts predicting that a safe and effective obesity medication could generate sales topping $4 billion a year, nearly every big pharma, from Amgen to Pfizer, has attempted to develop a drug at some point. Nonetheless, the big players have now decided that the regulatory and commercial headaches are simply not worth the effort.

And this is why Wall Street is so overtly negative on the current generation of obesity drugmakers. In short, this sentiment has been fomented by dozens of failed drugs over the last hundred plus years. So while pharma companies may continue to chase the dream of a blockbuster obesity medication, it's far from a certainty that one will come to pass.

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Read/Post Comments (4) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 27, 2013, at 3:49 PM, marp11 wrote:

    not much to debate anymore..2 duds ::2 generics with one that hasn't even got approval AND might not..

    and the other with no partner and no money and no sales after 18 months,,

    THEN THERE IS BELVIQ ARNA EISAI

    do what you want.. we know which one will be huge in 2014,,,and you do too..tell your masters...ITS OVER

  • Report this Comment On December 27, 2013, at 3:50 PM, marp11 wrote:

    WALL STREET ONLY NEGATIVE ON ARNA

    BECAUSE THEY SHORTED THE WRONG COMPANY....they are screwed hard

  • Report this Comment On December 27, 2013, at 3:51 PM, marp11 wrote:

    ooopppp 6.00 option friday for arna,,

    see you at 7 plus next friday

  • Report this Comment On December 28, 2013, at 12:41 AM, biogemfinder wrote:

    What debate? There is no debate except in our head and a created one. We are talking about a novel drug that was approed after 13 years - Belviq vs others which are reformulated and combos of existing drugs that are available as generics and with known and established toxicities or side effects. Its just the quack journalists like you guys and the misguided and disingenuous financial analysts who are doing the job for was thugs and manipulators who continue to try to confuse the situation. By all standards and fairness, belviq has been misrepresented and lied about that some retail and even tutes are confused and are carious to buy shares of arena. In the end..no matter how much manipulation through the so called blogs and analysis you guys try, truth will prevail and I believe that year is 2014!

    Belviq is competing for the last 7 months against qsymia which has been there for more than 16 months and you sound as if Contrave will be approved and will have traction and will be prescribed. WHY?? Both Qsymia and Contrave (if it gets approved) ahve ingredients that are available as generics and have known and nasty side effects. Did you see the recent article related to allergic problems due to Bupropion? How do you think that will go with EU and FDA not to mention the other cardiovascular problems and others that FDA and EU will be closely looking into?

    Another BS about marginal efficacy of Belviq is laughable. There has never been a side by side comparison to be 100% certain that's the case..those numbers are based on placebo-adjusted numbers and guess what? in real life the only thing that matters is the bathroom scale and your own base weight! No one compares that to some placebo. And another fact that intentionally gets omitted is that they are average numbers whether you completed the trials or if you responded or not?

    2014 will be the year where there will be a lot more clarity in terms of who wins who loses, or if all lose or all win! My bet unlike most of the WS thugs and hedge-funds is with Belviq along with the 60% owners - the retailers. If arena does not turn out to be successful, I will reconsider trading or owning ANY biotechs in the future!

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