1 Biotech You Might Want to Explore: Right Now!
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
After more than a year, Arena Pharmaceuticals’ (NASDAQ: ARNA) weight-loss drug Belviq has finally launched. Let's look at recent history to determine how successful the drug might be, in both the short and long terms.
A Tough Start for the First to Market
VIVUS’ (NASDAQ: VVUS) Qsymia was first to market, having already been sold for half of the last year. However, sales have been less than encouraging, as total company revenue totaled just over $6 million during the last two quarters. As a result, Vivus’ stock has declined 43% over the last 12 months.
Vivus has had a rough start with Qsymia. The drug combines two currently approved drugs: Phentermine and topiramate. Much of Vivus' early struggles has been due to battles with insurance companies, seeing as how its "ingredients" can be prescribed and obtained individually for a fraction of the price.
Moreover, Vivus cannot aggressively market Qsymia nor can it be sold in retail pharmacies. Qsymia comes with a risk for women, causing significant birth defects if taken while pregnant. As a result, women taking Qsymia must also take birth control, and the prescriptions must be obtained from "certified mail-order pharmacies". While this makes sense in regards to protecting women, this can be an inconvenience to potential patients, and doctors, and has negatively impacted initial sales.
Arena’s Belviq is likely to see a better start, since Belviq will be marketed heavily and can be obtained at any retail pharmacy.
What Happens With Belviq?
In the U.S., with obesity being an epidemic, and with us having a tendency to try new weight loss remedies, I think we could see strong demand in the initial months following launch. To better explain why, let’s take a look back at the 2007 debut of big-name weight-loss product Alli.
Alli, developed by GlaxoSmithKline (NYSE: GSK), was expected to be a blockbuster as the first FDA-approved OTC weight-loss drug. GlaxoSmithKline spent a fortune on this drug in lobbying, development, and then marketing to the general public, trying to ensure its success.
During its first three days on the market, sales hit $12 million, putting it on pace to earn more than a billion in the first year. Alli's first year on the market actually saw sales of $247.2 million, which still wasn’t bad. Following its first decent year, consumers began to realize that Alli didn’t produce a great deal of weight loss – but did come with rather unpleasant side effects.
In Alli’s second full year in the market, sales declined to just $131 million, almost half of the year prior. While this trend is opposite of what we often see in biotechnology, it is consistent with the fads of weight loss.
The problem with Alli is that it really didn't work too well to create weight loss, but rather was effective at making people choose between food and its unpleasant side effects. The drug itself was believed to accelerate fast loss, but only helped users shed 3-5 pounds annually. This limited effect is most likely why it was unsuccessful. The big question is whether or not a minimally effective Belviq will stand the test of time; after its presumed initial pop.
How To Invest In The New Weight-Loss Craze
Personally, if I were looking to invest in Arena Pharmaceuticals, I would definitely be buying now. Currently, I see no reason to believe that Belviq won’t create the same weight-loss madness that we saw with Alli, and that we see with new weight-loss books every month.
I expect significantly better than expected initial sales – but then the real question will be year two, three, and further down the road. In my opinion, with Belviq producing weight loss of just 4%, I don’t think it will stick long-term. Moreover, I think Vivus’ Qsymia then becomes interesting, as it produced weight loss of 10%.
Due to Qsymia’s marketing restrictions, many people don’t even know that it exists. Thus, Belviq could actually benefit Qsymia, as consumers become educated about current drugs available in the market. Overall, this looks to be a fragile space, one in which I would invest with caution, but one that I expect to produce short-term returns for Arena – but then long-term questions.
Brian Nichols has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!