The obesity-drug space is turning out to be tough sledding for Arena Pharmaceuticals (NASDAQ:ARNA) and VIVUS (NASDAQ:VVUS), with both of their respective FDA approved medications failing to meet market expectations in terms of prescription numbers. As a result, shares of Arena are down 39% since Belviq was approved in the U.S., and VIVUS's shares have now fallen 74% since Qsymia gained approval.

Looking ahead, the market should become even more competitive, as Orexigen Therapeutics and Novo Nordisk are both likely to launch their own obesity medications in late 2014. Put simply, investors need to think carefully about how competition may influence market dynamics, and whether the obesity space can support four approved medications.

With this in mind, here is a Foolish look at whether Arena or VIVUS is the better investment vehicle in the obesity drug space.

Breakdown of Arena
On the bright side of things, Arena is reasonably well capitalized, with around $230 million to $240 million in cash on hand. Moreover, the company is developing additional clinical candidates based on its GPCR platform, which was validated, at least partly, by Belviq's approval. Arena has also launched a number of clinical trials to expand Belviq's label for notable indications such as smoking cessation.

Regarding Belviq's current indication, investors can look forward to increased efforts by Arena's marketing partner Eisai (NASDAQOTH:ESALY). Specifically, Eisai has now doubled the number of sales reps to 400, print advertising doubled last January, and a TV ad campaign will be launched soon. Belviq should also see international launches in countries like Brazil and Mexico later this year. Most importantly, Eisai has been successful at increasing patient coverage for Belviq from industry heavyweights like Aetna and CVS Caremark.

On the not-so-sunny side, Belviq is nowhere near Eisai's stated sales goal of $250 million in the first year. In fact, Belviq sales probably won't even hit half of that goal. 

Breakdown of VIVUS
VIVUS is in decent financial shape, with about $143 million in cash on hand. Yet investors should keep in mind that the company does have a $200 million in securities available for sale agreement in place, which is both good and bad. Namely, VIVUS has enough money and securities available for sale to keep the company afloat for an extended period, but the sale of such a large number of shares will put continued pressure on the company's share price.

Script trends for Qsymia have seen a slow uptick year over year, but the launch has been anemic, to put it mildly. Qsymia will probably not even break $50 million in sales this year, and even more disconcerting is that the instability in upper management has given analysts the impression that the company doesn't have a clearly defined marketing plan in place.

Contrasting this view, VIVUS's new CEO, Seth Fisher, recently gave investors some guidance by stating that a major focus this year will be gaining Medicare Part D coverage for Qsymia. His belief is that if Medicare Part D starts covering obesity medications, it could trigger broader insurance coverage in general.

Turning to VIVUS's other assets, the company has an approved erectile dysfunction drug called Stendra (avanafil is its generic name), but its commercial performance hasn't been material to the investing thesis so far. Newly signed marketing agreements with Auxilium Pharmaceuticals and Sanofi may change this situation, but a lot of work needs to be done before avanafil will gain significant market share. Finally, VIVUS doesn't have much in the way of a clinical pipeline, giving Arena the clear edge on that front. 

Foolish takeaway
A side-by-side comparison of Arena and VIVUS highlights some of the stark contrasts between the two companies. Arena is clearly more than just its flagship obesity drug Belviq, and it's been able to hold off dilutive funding by partnering. By contrast, VIVUS has had major instability in upper management since launching Qsymia, and dilution appears to be very likely.

The saving grace for VIVUS going forward might be the drug's superior efficacy, but this may not matter if VIVUS doesn't find a partner soon. With two new drugs likely to hit the market later this year, VIVUS might find itself too far behind in the commercialization game to catch up.

So, as things stand now, I think the decisive winner in this biotech showdown is Arena. 

Obesity-drug makers look good in theory as an investment, but this stock is a real winner.
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George Budwell owns shares of Orexigen Therapeutics. 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 don't 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.

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