Speculative Bubble Growing Around Diet Drugs
An irrational financial bubble appears to be developing around speculative diet drugs, despite the fact that there is virtually no good news to be found regarding weight loss pills right now. Two Japanese companies recently signed deals for weight loss pills in development even though the FDA has been giving off signals for weeks that it does not believe these products are safe.
Orexigen (OREX) licensed its experimental drug to Takeda for $50 million and up to $1 billion in potential milestone payments; a few weeks ago, Eisai paid $50 million to license Arena (ARNA)'s Lorqess (lorcaserin) and up to $1.16 billion in milestone payments.
The backdrop to these deals is an FDA committee considering whether Abbott Labs (ABT)'s diet drug Meridia should be pulled from the market for causing too many cardiovascular adverse events. An editorial in the New England Journal of Medicine called the drug "flawed." Before that, the FDA rejected Vivus (VVUS)'s Qnexa, another proposed diet drug.
The FDA will consider whether Arena-Eisai's Lorqessa should be allowed onto the market on Thursday.* Assume the best-case scenario: that the Japanese have correctly predicted that the FDA will perform a startling U-turn and allow a new diet pill onto the U.S. market. How big is the opportunity here? One answer is buried on page 62 of the FDA's briefing document. It gives this graph for the number of Meridia prescriptions in use:
Yup, less than 300,000, down from a high of 1.6 million prescriptions. Even when a diet drug makes it through the FDA, no one wants it. GlaxoSmithKline (GSK)'s Alli made only $98 million in Q1 2010, the last quarter in which GSK bothered to report numbers for the drug. (In Q2, sales of Alli declined, GSK said, as the impact of its launch in 2009 wore off. The Alli sales were so small that GSK did not put a specific sales number on them.)
*Correction: The original version of this item incorrectly said the NEJM article was about Lorqessa. It was about Meridia. Apologies for the error.
Related:
- Fat Chance: Pharma Loves Diet Drugs, But the FDA Doesn't
- Why the FDA Will Likely Reject 3 New Weight Loss Drugs