Fool contributor extraordinaire Stephen Simpson beat me to the punch last week in writing about Arena Pharmaceuticals' (Nasdaq: ARNA ) positive phase 2b results on an obesity drug currently tagged APD356. So I won't trouble you with another opinion on that particular development (mine is not substantially different from Stephen's, anyway), but I would like to offer some valuable extra background for investors eager to make an investment in the prospect of slimmer living through pharmaceuticals.
King Kong-sized profits?
As Stephen noted, Arena isn't the only game in town. The 800-pound gorilla in the room right now, in fact, is Sanofi-Aventis (NYSE: SNY ) and its drug Acomplia (rimonabant), which is currently under review at the Food and Drug Administration. Acomplia has an entirely novel mechanism of action -- it's a selective cannabinoid CB1 receptor antagonist. That's cannabinoid, as in cannabis.
Yes, while stimulating those cannabinoid receptors gives you, like, you know, the munchies, blocking them appears to reduce appetite. Not only that, but Acomplia improves HDL ("good") cholesterol, controls blood sugar levels, and is reputed to also curb the urge to smoke. More to the point, a third of the patients who took it lost 10% or more of their body weight in one study. Yowza! No wonder at least one analyst has suggested that annual sales could hit $6 billion or more by the end of the decade.
The FDA has declined so far to schedule an advisory committee hearing for Acomplia, but the drug could be on the market some time in the first half of 2006.
Coming up the pipeline
Meanwhile, Nastech (Nasdaq: NSTK ) , in partnership with Merck (NYSE: MRK ) , is developing a molecule called peptide YY3-36 that is expected to begin phase 2 trials soon. This drug also offers a novel approach in that it's a natural gut hormone linked to satiety. That's what makes you feel satisfied after a good meal. Since YY3-36 is a big ol' protein, however, it can't be given as a pill. That's why Nastech has developed it as an intranasal spray, which is the company's specialty. Amylin Pharmaceuticals (Nasdaq: AMLN ) is also working with peptide YY3-36 and is ready to move into phase 2 as well. So far, there has been no conflict between these programs, but there could be some potential tussles over intellectual property as the products get closer to market.
Speaking of Amylin, its Symlin diabetes drug, already on the market, is in phase 2 development for obesity. It has to be injected, which perhaps makes it less appealing than some of the other options, but it has shown considerable promise in getting rid of unwanted pounds.
At Amgen (Nasdaq: AMGN ) , a compound called AMG076 is in phase 1 trials for obesity treatment. It is an MCHR1 receptor antagonist and goes after a class of neuron called MCH that is located almost exclusively in the hypothalamus. This part of the brain gets a lot of attention because it is responsible for regulating the visceral part of appetite. (But we humans, being the complex critters we are, get hungry for other reasons, too, including the presence of friends, an abundance of food, and working at home alone just 20 feet from the fridge.)
GlaxoSmithKline (NYSE: GSK ) is working on a dipeptidyl peptidase (DPP)-IV inhibitor compound called 823093, with a target submission date of 2008. Blocking DDP-IV allows natural levels of glucagon-like peptide-1 (GLP-1) to increase, thereby boosting satiety and fat loss. Amylin's Byetta mimics the effect of GLP-1 and has been shown to result in weight loss (and better blood glucose control), but it too must be given as an injection and causes considerable nausea in some patients. Increasing GLP-1 indirectly with an orally available small molecule (in pill form, that is) might make for a much more user-friendly drug.
Most companies working on DPP-IV inhibitors are going after Type 2 diabetes, but as we've seen, those compounds have applications in fighting obesity as well. Other companies working on DPP-IV inhibitors include Novartis, with Vildagliptin (LAF237) in phase 3; Merck, with Sitagliptin (MK-0431) in phase 2; Bristol-Myers Squibb, with Saxagliptin in phase 2; and OSI Pharmaceuticals, with PSN9301 in phase 2a.
Earlier this year, Swiss biotech company Cytos Biotechnology put a vaccine called CYT009-GhrQb into a phase 1-2 clinical trial. It induces antibodies against another hot obesity target, ghrelin, which is yet another hormone linked to eating behavior. It stimulates appetite and is naturally produced in the stomach, making it relatively easy to target. Studies have shown that infusing people with ghrelin increases hunger (and, by extension, eating). After meals, ghrelin levels typically fall. Obese people actually tend to have lower ghrelin levels than their lean counterparts, but the problem is that the ghrelin level doesn't drop off after eating, and that means the brain might not be getting a signal of fullness.
We'll have to wait longer to see the fruits of other promising areas in obesity research. One target, the melanocortin-4 receptor, is inspiring some active research, but no compounds I'm aware of have yet made it to the clinic. Roche, the maker of the fat-absorption blocker Xenical, has a compound called Ro27-3225 under preclinical study. One challenge in this area of research is that some melanocortin-4 agonists tested so far lead to painful, unyielding erections in men. And they tend to give you a tan. Maybe some folks wouldn't mind some of these side effects, but you can have too much of a good thing.
Too many targets?
As you can see, there are a lot of strategies behind the battle of the bulge. And this makes sense, since obesity is a complex, multifaceted condition. Our bodies didn't evolve in a landscape covered in escalators and Krispy Kreme franchises, after all, and it has many tricks for holding onto fat as a safeguard against famine. As a result, the odds for finding a magic bullet against fat are pretty long -- about as long as the list of ingredients on a box of Twinkies.
But that also means there's room for more than one successful drug. Arena has a promising drug on its hands, but it also has a lot of work left to do and a potentially very competitive field to play in. As a serotonin 5-HT2C receptor agonist, APD356 is attempting to suppress appetite by essentially the same means employed by Abbott Labs' Meridia and the notorious drugs Redux and fenflurimine. Not that APD356 is like those drugs -- it is more selective and may well be safer and more effective. But the FDA will be looking carefully for any heart valve disease in clinical studies, and that kind of thing just doesn't show up after a 12-week trial.
Still, things look good so far for Arena Pharmaceuticals. With a market cap still south of $500 million even after its run-up, it doesn't need a blockbuster to give investors multi-bag returns from these levels. Just remember that the development of obesity drugs has been marked more by disaster and disappointment than by rich financial rewards.
Right now, Arena's stock looks like junk food to me -- feel free to nibble sparingly, but realize that you may not want to look at yourself in the mirror if you overindulge.
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GlaxoSmithKline and Merck areMotley Fool Income Investorrecommendations.
Fool contributor Karl Thiel is a member of the Rule Breakers team. He does not own any of the companies mentioned in this article. The Fool has a disclosure policy.