Fool contributor extraordinaire Stephen Simpson beat me to the punch last week in writing about Arena 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
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
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.
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 are Motley Fool Income Investor recommendations.