Arena Pharmaceuticals (NASDAQ: ARNA), Vivus Inc (NASDAQ: VVUS) and Orexigen Therapeutics Inc (NASDAQ: OREX) are developing drugs that battle obesity. With 1.6 billion people overweight worldwide, the first drug to gain FDA approval would go blockbuster with ease, rewarding shareholders handsomely.
Results from the most recent Gallup-Healthways Well-Being Index, revealed that 63.10% of adults in the United States were either overweight or obese in 2009. More than 1.6-billion people worldwide are considered overweight according to the World Health Organization. With such widespread weight problems it is no surprise that so many pharmaceutical companies are making efforts to develop weight loss drugs. Several companies have unsuccessfully brought these “miracle” weight loss drugs to market.
Highly Effective Qnexa Blocked by Safety Concerns
Vivus Inc (NASDAQ: VVUS) was the first pioneer in the experimental obesity drug area. Its drug Qnexa was denied with an FDA panel voting 6-10 against approval. Qnexa is a mixture of two existing drugs and demonstrated higher efficiency than Locaserin. However, that increased efficiency was matched by an increased concern over safety. A few negative side effects of the drug are birth defects, depression, and a high heart rate.
After the vote against approval of Qnexa shares tanked from a high of $13.68 to a low of $4.69. Consequently, shares of Arena rallied 10 percent after hours , while Orexigen shares slid 10 percent. Orexigen’s drug Contrave has some resemblance to Qnexa in that each drug is a compound of two different drugs. For Vivus that combination was Phentermine and Topiramate.
Risks Outweigh Benefits of Arena’s Lorcaserin
Arena Pharmaceuticals (NASDAQ: ARNA ) is the leader in experimental weight loss drug development. Its clinical development program is famous for its obesity drug Lorcaserin. After much optimism among analysts the drug failed to gain approval from the FDA. The 5-9 vote against approval not only failed the drug, but also set the bar high for future drugs.
After trial data came in showing 5.80% body weight loss investors were excited. However, after comparing that to a 3.70% placebo effect results didn’t look that appealing. Add to that concerns of valvulopathy (heart valve damage) and cancer when taken for long periods of time. The lack of efficiency coupled with reasonable health concerns added up to a case of poor risk versus reward. The disapointing news sent shares to $1.51 from a previous high of $8.00.
Will the FDA Go 3 for 3 by Blocking Contrave?
Orexigen Therapeutics Inc (NASDAQ: OREX ) also has an obesity drug set for FDA review later this year. Its drug Contrave is a cocktail of two different drugs – Wellbutrin and Naltrexone. Contrave is arguably the most effective drug with average body weight loss of 9.30%. However, side effects accompany this drug as well. Many patients reported nausea, headaches and constipation.
Will The FDA give Contrave the nod of approval? Many investor don’t think so based on high standards set by the failures of two previous drugs. Some investors think miracle diet drugs are pointless since they will never be as safe as exercise combined with diet change. This sure seems to be the case with Abbot Laboratories drug, Meridia recently being pulled off the shelf. While weight loss results are there, harmful side effects heavily offset the positives of taking these experimental obesity drugs. The companies mentioned make great long term speculative investments, but could continue punishing investors in the short to mid-term.