Their plan to do
that? Jumping on the growing global trend of obesity. Pharmaceutical
firms believe consumers are moving away from fad diets and look
forward to a surge in sales from prescription medicines that promise
to help consumers lose weight.
In the United
States alone, there is a need for something that can tackle the
nation's problem with its citizens being overweight. According to the
Centers for Disease Control and Prevention (CDC), more than two
thirds of Americans are overweight and more than one third – 78
million U.S. adults – are considered to be obese. That percentage
is forecast to climb to 42 percent by 2030.
A study last year
indicated that obesity accounts for $190 billion in annual medical
costs, which is quite a burden on the U.S. healthcare system. The CDC
estimate is that obesity costs the U.S. economy $147 billion annually
in medical expenses.
Companies Looking to Fatten Up
Several
drug companies are moving forward in the battle against Americans'
expanding waistlines. One company, Vivus (Nasdaq:
VVUS), last autumn it launched its weight loss drug Qsymia. The
company's president, Peter Tam, told the Financial Times “It's been
a very challenged category, but there is a feeling we have to do
something about obesity with the realization that it is a medical
epidemic.”
The
last diet drug approved – Xenical from Switzerland's Roche
Holding AG (NASDAQOTH: RHHBY) –
was approved in 1999. The FDA has held to a very high standard for
diet drug approvals since the withdrawal of “fen-phen” in 1997.
That drug, created by Wyeth, was found to cause heart valve problems.
This caused Wyeth, now part of Pfizer, to set aside reserves of $21
billion for legal bills and payments from lawsuits.
But
now apparently, the FDA agrees with Mr. Tam and is moving forward.
Last year, it also approved another diet drug, Belviq, which will be
launched very soon by Arena Pharmaceuticals (Nasdaq:
ARNA). Arena's partner on Belviq is Japanese pharmaceutical company
Eisai (NASDAQOTH:
ESALY).
A
third company, Orexigen Therapeutics (Nasdaq:
OREX), is preparing to submit its Contrave diet drug for FDA approval
again after previous rejections. It also has a Japanese partner,
Takeda Pharmaceutical (NASDAQOTH:
TKPYY).
But investors
shouldn't worry about the prior FDA rejections. Qsymia and Belviq
were also rejected by the FDA before receiving approval. Senior
biotech analyst with Cowen, Simos Simeonidis, told the Financial
Times “There has been a very significant and rather sudden shift in
the views of the regulator (FDA) over the past year.”
Lingering Problems
The changing of
the FDA's hard stance against diet drugs is good news for these
companies. But several problems still remain.
One is the limited
effectiveness of these diet drugs. The weight loss impact of Qysmia
and Belviq was found to be 10% and 6% respectively. Those results
were under ideal conditions with tight medical supervision too.
The second problem
is bigger – the risk of side effects. Diet drugs have had history
of unwanted side effects with fen-phen being the worst example.
The current
generation of diet drugs also has side effects. Roche's Xenical is
also only moderately effective while producing unwanted side effects
like oily stools. It is now sold over-the-counter as Alli by GSK,
which has been trying to unload it for months now. But no buyers have
stepped forward.
Qysmia can cause
birth defects. So Vivus had to agree to a tight monitoring program
with the FDA in order to gain approval.
But the more
widespread the use of Qysmia and other diet drugs becomes (with usage
perhaps not so closely monitored by physicians), the door opens wider
for misuse of the drugs. Consumers may not only become disappointed
by results but litigious if side effects become apparent.
That is likely one
major factor keeping the stock price of company like Vivus near its
52-week low despite the approval from the FDA.
This article originally appeared on the Motley Fool Blog Network. Make sure to read all my article for the Motley Fool at http://beta.fool.com/tdalmoe/.
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