Obesity Sector Gets New Shoes

Includes: ARNA, OREX, VVUS
by: John Reisman

Things To Think About

Some have already noted yesterday (June 18, 2013) that the American Medical Association is now classifying obesity as a disease.

Today, the AMA adopted policy that recognizes obesity as a disease requiring a range of medical interventions to advance obesity treatment and prevention. "Recognizing obesity as a disease will help change the way the medical community tackles this complex issue that affects approximately one in three Americans," said AMA board member Patrice Harris, M.D. "The AMA is committed to improving health outcomes and is working to reduce the incidence of cardiovascular disease and type 2 diabetes, which are often linked to obesity."

The Old And The New

This will likely have ramifications for the obesity sectors in old and new pharma as time unfolds...

The news has been out for a while that old pharma is looking for new pharma. The Basel behemoths (Bayer, Ciba, Novartis, Roche, etc.) started seeing some of their patents run out these last few years and that may indicate they are going to be sniffing around the forest looking for tasty treats to devour; as they begin to notice the empty feeling of reduced growth revenue in the pits of their accounts.

Bulls, Bears, & Buyouts, Oh My!

But as much as investors speculate about buyouts, which are always possible, they should also consider circumstance and what is probable. A buyout might look interesting to one company and uninteresting to another depending on the market potential and match. I don't speculate much here since I really don't know what's going to happen. Apparently crystal balls that 'actually' work stopped selling around the time the industrial revolution really kicked into gear.

In new pharma, such as (NASDAQ:ARNA) the first new obesity medication approved by the FDA with Belviq, (NASDAQ:OREX), which is not yet approved with Orexigen, and (NASDAQ:VVUS) which was first to market with Qsymia; all are now supported by the fact that obesity is being taken ever more seriously as evidence mounts and becomes better understood as to the costs of unchecked obesity rates growing along with BMI.

Who will or won't get bought out when? I don't know, so I don't waste too much time on such thoughts.

Obesity Costs Us All

Obesity is linked to a multitude of serious diseases and disorders that can often be life threatening. The health consequences include:

  • Coronary heart disease
  • Type 2 diabetes
  • Cancers (endometrial, breast, and colon)
  • Hypertension (high blood pressure)
  • Dyslipidemia (for example, high total cholesterol or high levels of triglycerides)
  • Stroke
  • Liver and Gallbladder disease
  • Sleep apnea and respiratory problems
  • Osteoarthritis (a degeneration of cartilage and its underlying bone within a joint)
  • Gynecological problems (abnormal menses, infertility)

The risk of having metabolic syndrome is closely linked to overweight and obesity and a lack of physical activity. Insulin resistance also may increase your risk for metabolic syndrome.

From an investment perspective this makes new pharma quite interesting. The new pharma drugs apparently have different scopes, targets and mechanisms. Doctors are the ones that have to make the ultimate decision about which medicine is right for their patients.

From a health/economic perspective, this is important as well, since greater health can translate to a stronger economy. The less people and governments need to spend on healthcare, the more discretionary monies are available for consumers to spend in other areas; thus enabling the market cycle of life to open and grow new market opportunities.

Disclosure: I am long ARNA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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