Positive Clinical Study Could Provide a Tailwind for Obesity Drugs (VVUS, ARNA, OREX)

76764023According to the Centers for Disease Control (CDC), more than one-third (35.7%) of all adults in the United States are obese or very overweight. Obesity-related medical conditions include heart attack, stroke, type-2 diabetes and even certain types of cancer. Since 2008, medical costs associated with obesity have climbed to an estimated $147 billion dollars per year. The U.S. Food and Drug Administration (FDA) has approved drugs from two companies, and their stocks have been crushed.

Currently only one drug company VIVUS Inc. (NASDAQ: VVUS) has an FDA-approved product that is being marketed and sold. The basic disappointment for the company has been extremely tepid initial physician prescriptions. While the scripts have grown sequentially since the drug's introduction, they are still very low. In fact, they only reported 13,000 for the month of December. The Wall St. consensus price target is $25, but to get there, analysts and investors must see positive prescription growth in the coming months.

The reluctance of some physicians may be due in part to the fact that VIVUS drug Qsymia is a controlled substance. Not only is it expensive, as obviously there is no generic, but patients have to return to the physician every time they need a refill. These factors combined with the slow start for prescriptions prompted VIVUS to offer a free 14-day trial for the drug.

But a just-published study may be the data to help really propel sales. The study concluded that weight loss resulting from treatment with Qsymia (phentermine and topiramate extended-release) capsules CIV led to significant improvements in cholesterol, blood pressure and triglycerides in obese and overweight patients experiencing one or more of these associated conditions. The improvements were significantly greater among patients who lost 10% or more of their starting weight. The study was published online in The American Journal of Cardiology.

This provides clear evidence that patients with hypertension or high cholesterol treated with Qsymia for one year experienced significant weight loss and clinically meaningful improvements in their underlying cardiovascular risk factors. … The ability to improve underlying risk factors is another reason physicians should proactively discuss the medical treatment of obesity with their patients who have failed lifestyle modification alone.

A positive study like this may be timely, as well as the competitors are close behind. Arena Pharmaceuticals Inc. (NASDAQ: ARNA) received a proposed DEA schedule IV designation (modest potential for dependency) in December and is awaiting final designation in coming months. The company believes a second-quarter 2013 launch for their obesity drug Belviq is likely. With a Wall St. consensus target of $9.50 and a large following in the short seller community (24.7% of the float was short as of 1/15), Arena seems very dependent on that second-quarter launch.

On January 7, Orexigen Theratputics Inc. (NASDAQ: OREX) announced positive progress with the FDA on a faster path for resubmission of their obesity drug Contrave. If the Contrave data can prove that cardiovascular risk is within a tolerable range, a 2014 launch with partner Takeda Pharmaceutical is within reason. Bank of America Merrill Lynch covers the stock and has a $10 price target, while the consensus view is $11. One possible advantage to the Orexigen drug is it will not be classified as a controlled substance. That means patients will not have to return to their physician every time they need a refill.

The obesity problem in the United States has become close to epidemic. While some of the initial jubilation in the industry over obesity drug profits may have been tempered, the long-term sustained profitability of a safe and successful drug remains intact.

Filed under: 24/7 Wall St. Wire, Biotech, Drug companies, Healthcare Tagged: ARNA, featured, OREX, VVUS
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