Who’s Winning the Weight-Loss Drug Race?
Even though the market for obesity treatments is a large one, with approximately two-thirds of Americans overweight, no new long-term weight-loss drugs have been developed for the American market in more than a decade. But this year, three companies primed treatments for regulatory approval: Vivus (NASDAQ:VVUS), Arena Pharmaceuticals (NASDAQ:ARNA), and Orexigen Therapeutics (NASDAQ:OREX).
While Vivus launched its drug Qysmia at the end of September, ahead of rivals Arena and Orexigen, the race for the most successful treatment has not yet been won.
Since its release at the end of September, sales of Qysmia have been hampered by problems with distribution. Before the pill became available to consumers, analysts had worried about whether Qsymia would be covered by health insurers; even the company itself said that it did not expect health plans to agree to pay for the medicine. However, during the drug’s first week on the market, Bloomberg analysts reported that the drug was covered about a third of the time it was prescribed. Yet sales were still slow. The drug was only approved under a REMS (Risk Evaluation and Mitigation Strategy) by the FDA, which limited the drug’s availability to mail order purchases. On October 17, Vivus submitted an amendment to the agency to allow Qysmia to be sold at retail pharmacies, although Belviq has already been guaranteed this right.
Catalysts are critical to discovering winning stocks. Check out our newest CHEAT SHEET stock picks now.
Further problems have halted Qysmia’s expansion into Europe. The European Medicines Agency rejected Qsymia’s Marketing Authorization Application on October 18, after months of delays. While Vivus intends to resubmit its application, the agency’s decision suggests that the drug’s risk profile was too high. But this pronouncement was not unexpected. The Food and Drug Administration approved the drug in the United States only on the condition that a REMS was put in place to guard against the dangers associated with the drug’s components.
The other contenders, Arena’s Belviq and Orexigen’s Contrave, still have regulatory hurdles to overcome before reaching the market. While Belviq awaits Drug Enforcement Agency scheduling, Orexigen must resubmit Contrave to the FDA. The treatment was initially dismissed by the regulator because further data was needed to prove that the drug was safe enough for patients with heightened risk to cardiovascular events. On October 22, Orexigen announced that the FDA’s Center for Drug Evaluation and Research had issued a formal dispute resolution request that would give the company a faster path to resubmit Contrave. The company subsequently announced plans to enroll 9,000 patients in a new study by the end of 2012.
For much of their history, these three stocks have traded in sync. But as their respective obesity treatments came closer to hitting the market, the stocks began to diverged at the end of last year. Seeking Alpha contributor Brian L. Wilson noted in a recent article that the correlation between the three stocks has begun to wear thin. While all three pharmaceutical companies are targeting the “supposedly giant and undiscovered drug market” of obesity treatments,” Wilson questions whether all three can be successful in the same market.
His thesis is supported by recent declines in the companies’ stock prices. Vivus, although Qysmia reached the market ahead of other treatments, has seen its shares drop 22 percent over the last year. In comparison, Arena dropped only 6 percent and Orexigen just under 4 percent in the same period. It may seem counterintuitive that Vivus shares have fallen by a greater percentage, but its treatment has yet to post significant sales numbers. According to Seeking Alpha, Arena’s drug is in a better position to be a success because “there is a notion that Belviq is superior to Qsymia due to the big discrepancy in safety between the two drugs, although their efficacy in weight loss was never directly compared.”
Don’t Miss: Is This a Big Thumbs Up For the U.S. Economy?