Sometimes you don't have to look very hard for an investment idea. Pardon the pun, but obesity is a pretty big problem in the U.S. You certainly don't need to work at Weight Watchers or a gym to see that Americans are overweight.
While gyms and diets are certainly one way to fix the problem, they don't seem to be doing a whole lot of good; Americans have become more overweight with each passing year. Ultimately, Americans might get out of this mess the same way we got fat in the first place -- a lazy fix, in the form of a drug.
You'd think that weight-loss drugs would create a multibillion-dollar market, but that hasn't happened yet.
Part of the problem is that the drugs just don't work terribly well. In clinical trials supporting Abbott Laboratories'
The other problem is that the current drugs have side effects that drive prospective patients away. For example, GlaxoSmithKline's
In the works
The FDA's refusal to approve Sanofi-Aventis' Acomplia for marketing in the U.S. broke the field wide open. The first company to gain approval could open up the market, although me-too drugs that work better or have better side-effect profiles could easily overcome the first mover's initial advantage.
Farther behind in the pack, Amylin Pharmaceuticals
Risk vs. reward
The biggest problem for obesity-drug makers might not be the amount of pounds the drugs shed, but their safety in doing so.
All drugs have some side effects, but the acceptable level of side effects is generally tied to how likely one is to die of the disease. Thus, anti-cancer drugs can gain FDA approval with horrible side effects -- think hair loss and nausea -- but drugs that treat less severe diseases aren't as liberally approved.
Given the history of side effects for weight-reducing drugs, investors should be cautious about the value they ascribe to drugs in the pipeline until all the long-term safety data is in. Waiting to invest might not fatten up your wallet as much, but it'll sure keep you from losing your shirt -- a side effect of failed phase 3 trials.
More Foolish drug-investment ideas:
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Fool contributor Brian Orelli, Ph.D., wouldn't mind losing a few pounds. He doesn't own shares of any company mentioned in this article. Even when printed on 60 lb paper, the Fool's disclosure policy is lightweight.