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Can Arena and VIVUS Profit From Glaxo's Troubles?

By Brian Orelli, PhD - Mar 31, 2014 at 7:12PM

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GlaxoSmithKline had to recall its obesity drug alli, but it isn't clear if Arena Pharmaceuticals and VIVUS will be able to benefit.

Last week, GlaxoSmithKline ( GSK -0.53% ) announced that it was on recalling its over-the-counter obesity drug, Alli, in the U.S. and Puerto Rico because it appears that some packages were tampered with. The drug remains on the shelf in Europe, where there doesn't seem to be a problem.

In the following video, Fool contributor Brian Orelli and health-care bureau chief Max Macaluso discuss how the issue is reminiscent of Johnson & Johnson's ( JNJ 1.46% ) troubles with Tylenol tampering in the mid-1980s, although GlaxoSmithKline seems to be in much better shape: No one has been hurt from the tampering, and Alli isn't nearly as big of a product as Tylenol was.

Depending on how long the drug remains off the market, the removal of Alli could be a boon to the new prescription obesity drugs Arena Pharmaceuticals' ( ARNA -6.81% ) Belviq and VIVUS' ( VVUS ) Qsymia. While the drugs provide more weight loss than Alli, the biotechs will only be able to gain sales if patients are willing to go to their doctor to get a prescription. The prescription drugs may also be more expensive than Alli, especially since the Belviq and Qsymia still aren't covered by many insurance plans.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

GlaxoSmithKline plc Stock Quote
GlaxoSmithKline plc
$41.25 (-0.53%) $0.22
Johnson & Johnson Stock Quote
Johnson & Johnson
$159.38 (1.46%) $2.29
Arena Pharmaceuticals, Inc. Stock Quote
Arena Pharmaceuticals, Inc.
$49.55 (-6.81%) $-3.62
VIVUS, Inc. Stock Quote

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