FDA’s Easing on Obesity Drugs Could Fatten Investor Wallets

by Barry Cohen | October 3, 2011 11:00 am

Until recently, it appears the FDA thought fat people ought to just stop eating so much or jump on the treadmill more often. What other reason could there be for the agency throwing so many roadblocks in the way of prospective obesity treatments? Of course, the FDA claims public health concerns, but let’s face it: Every drug has side effects. However, many in the industry suggest the focus should be on risk versus benefit.

Maybe with the economy in the doldrums, the FDA is becoming more realistic. That might be good news for the companies vying to get new obesity treatments on the market and for their investors.

One of the beneficiaries of the FDA’s attitude adjustment could be Mountain View, Calif.-based Vivus (NASDAQ:VVUS[1]) and Qnexa, the company’s drug candidate being developed to address weight loss, type 2 diabetes and obstructive sleep apnea.

Last fall, Qnexa looked like it had about as good a chance of hitting the market as the Tampa Bay Rays did of winning the wild card in the American League East this season. But after being rejected by the FDA over fear that the drug would increase the risk of cardiovascular problems, Qnexa looks to be on the comeback trail.

Recently, Vivus said it had reached agreement with the agency on a plan that allows for an early resubmission of the Qnexa New Drug Application for the treatment of obesity. The resubmission plan allows Vivus to seek approval for an initial indication that includes obese men and women of non-child-bearing potential.

Based on this agreement, Vivus intends to resubmit its Qnexa application by the end of October. And in the first quarter of 2012, the FDA will conduct an Advisory Committee meeting for the drug. VVUS shares jumped more than 9% in the days following the announcement but have since settled back to where they traded before the news, $8.18.

Maybe investors fear the FDA will revert to its old ways or are concerned that approval of the drug still is a long way off. In the interim, Vivus might have to raise more cash to keep its doors open. And even if Qnexa eventually gets approved, it’s likely to have some competition given the FDA’s “easing.”

Last week, Orexigen (NASDAQ:OREX[2]) resurrected its diet pill Contrave just three months after it looked dead in the water following the FDA’s request for an extensive clinical trial to address the issue of potential cardiovascular problems. Now the company has the go-ahead from the agency to conduct a smaller and far less expensive drug trial that would be completed and reviewed by 2014.

Perhaps the FDA’s actions on Qnexa and Contrave have renewed hope at Arena Pharmaceuticals (NASDAQ:ARNA[3]), whose diet pill locaserin was nixed by the FDA about a year ago. The company continues to study the drug.

It’s possible the FDA is taking a look at the big picture relative to obesity treatments. Maybe they got the message being espoused at last week’s sixth annual Obesity and Wellness Congress in Washington, D.C. There, Kenneth Thorpe, a Vivus consultant and professor at Emory Rollins School of Public Health, said that a 10% weight loss in patients ages 60 to 64 might be able to provide Medicare savings of $8 billion over 10 years and $35 billion over their lifetime.

As of this writing, Barry Cohen did not own a position in any of the aforementioned stocks.

Endnotes:
  1. VVUS: http://studio-5.financialcontent.com/investplace/quote?Symbol=VVUS
  2. OREX: http://studio-5.financialcontent.com/investplace/quote?Symbol=OREX
  3. ARNA: http://studio-5.financialcontent.com/investplace/quote?Symbol=ARNA

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