Gaining from Weight Loss: Should You Invest in the Obesity Fight?
When news channels report on America's obesity epidemic, it's the same thing we've been hearing for years: A somber voice relays national statistics while we're shown an embarrassing shots of anonymous round stomachs and backsides.
But the business world never stops looking for new ways to address the crisis of our nation's growing overweight population. Their latest developments range from the sublime to the disgusting. (A robot that sucks food out of your stomach -- really?) But investing in the companies behind the next round of slimming strategies could help investors fatten up their portfolio returns.
Coca-Cola Changes its Tune
It's not unusual for a brand in the food industry to try to spin itself into something healthier. It is strange, however, when that brand is beloved beverage staple Coca-Cola (KO).
The soda juggernaut has been linked to obesity for decades, and has only recently started to talk about it. In an ad campaign, Coke acts to boost health awareness by explaining exactly how many calories are in its products, as well as providing fitness steps for preventing obesity, such as burning more calories than you eat every day.
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The campaign makes Coca-Cola the first soda company in the world to talk about this subject matter. And while it may seem unexpected for the largest nonalcoholic beverage distributor in the world to go on a health kick, it may be just the kick its business needs given last quarter's 5 percent drop in revenue.
The only fly in the campaign's ointment, however, is that it does not address Coke's use of aspartame in its diet sodas, a chemical that some scientific studies have found to cause weight gain. If critics decide to focus heavily on that, the whole campaign could conceivably backfire. Thus far, though, the ads have already been positively received by the market -- Coke's stock price rose 0.7 percent on the morning of the announcement, from $36.81 to $37.09, its highest peak in three days.
The Skinny from Big Pharma
The pharmaceuticals industry has seen its fair share of obesity cures come and go, but two companies in particular have made huge recent gains thanks to their obesity treatment pills.
In November 2012, biotech company Vivus (VVUS) released its only commercially available product -- anti-obesity drug Qsymia. By Dec. 21, Vivus reported that prescriptions for the FDA-approved drug were up by 68 percent, and Vivus' stock was up 9 percent.
Health care analysts expect Qsymia to sell $1 billion in annual prescriptions by 2019. That's a ton of money to be made off over-large waistlines.
Qsymia isn't the only fat-slayer in town, though. Arena Pharmaceuticals (ARNA) is close to releasing its own anti-obesity offering, Belviq. The drug, unlike Qsymia, does not include the active component phentermine, which played a huge role in the FDA's infamous removal of weight-loss drug fen-phen from the market. Arena's most recent quarters have featured incredibly weak revenue streams, and a safe, powerful weight-loss drug could provide a much-needed sales boom for the company -- and a win for shareholders.
The Future of Fighting the Flab
On the more creative end of the weight-loss spectrum stands Dean Kamen, the man behind the Segway. Kamen recently filled out a patent application with the zippy title, "Apparatus for Treating Obesity by Extracting Food." His invention supposedly works by sticking a tube into a person's stomach and removing chewed-up food before it is digested.
If it sounds ridiculous, that's because it is. But only time will tell whether such a device can creep into the mainstream -- and you can bet that investors hungry for profit and weight watchers hungry for simpler solutions in the battle against obesity will be ready to give it a try.
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Caroline Bennett is a Motley Fool contributing writer. The Motley Fool recommends Coca-Cola.
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