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Obesity Drugs: Stocks to Watch

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Obesity is a big healthcare problem. In the U.S. alone, an estimated 35% of adults, or 85 million people, are believed to be obese, putting them at increased risk of certain forms of cancer, cardiovascular disease, and type 2 diabetes, among many other extremely serious medical conditions.

Source: Arena.

Arena Pharmaceuticals offers the appetite-suppressing drug Belviq

Belviq (lorcaserin) is a selective serotonin 5-HT2C agonist that regulates food intake by suppressing hunger, resulting in approximately 3%-4% of body weight loss, on average -- although about a quarter of patients in the clinical studies did see much higher levels of weight loss, on the order of 10%.

The drug was approved by the FDA in June 2012 and commercially launched by Eisai in the U.S. almost an entire year after its regulatory approval.

Because Belviq's efficacy for most patients is on the low side, the pill's commercial uptake has been painfully slow, crushing Arena's share price in the process:

Specifically, Arena and Eisai's first-quarter numbers suggest that Belviq will fall short of even $100 million in sales this year, despite being on the market for two years at this point. The two companies are hoping that new formulations, such as an extended-release version and/or a combo treatment with phentermine, will kick-start Belviq's U.S. launch, but only time will tell how this will play out.

Orexigen counters with Contrave

Contrave is a oral, sustained-release combination of bupropion and naltrexone designed to both suppress appetite and increase energy expenditure. The FDA approved the diet pill in Sept. 2014, and it was launched by Takeda Pharmaceuticals almost immediately afterwards. The drug was also recently approved in Europe under the brand name Mysimba, where Orexigen is actively seeking a marketing partner.

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Key takeaways

Both of these fat-fighting pills are essentially indicated for the severely obese, or for overweight patients with one or more risk factors, such as diabetes or hypertension. The scope of the problem is such, though, that even this niche market should still encompass around 25 million adults in the U.S., and counting.

So, this latest generation of FDA-approved weight loss pills might seem like an amazing investing opportunity -- at least at first glance. A deeper look nonetheless shows that Belviq and Contrave may have a tough time reaching $1 billion in combined sales within the next decade. The truth is that neither pill is overwhelmingly effective, and the jury is still out on their long-term safety profiles.

All told, the size of the obesity market makes these two stocks worth watching going forward. But the fairly anemic launches of their respective diet pills bodes poorly for their long-term growth prospects, meaning something drastic would have to happen in order for them to transform into compelling growth stocks.

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The article Obesity Drugs: Stocks to Watch originally appeared on Fool.com.

George Budwell 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 .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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