Life in the fast lane of an average working American brings more obligations, more hours spent on work, more stress and of course, more fast food. There are so many useful recipes and advices on how to prepare food in order to lead a healthier and longer life, but the keyword I need to highlight is "prepare". With so much time spent sitting behind the office desk, who has the time for it? And even if one finds the time to cook healthier, there's the "loss of will" factor. The next thing you know when you look at the statistics - one out of three Americans is considered obese.
According to the Centers for Disease Control and Prevention, the number of people suffering from obesity has increased dramatically in the United States during the past 20 years. In 2010, their statistics showed that more than one third of adults (35.7%) in the U.S. were suffering from obesity. But what I found even more dramatic is that around 12.5 million of children and teens (17%) living in the U.S. today also belong to this category. On a global level, this number is even worse. According to the World Health Organization, at least 2.8 million people worldwide die each year as a result of being obese or overweight.
While the headlines during the past year were filled with many alarming facts and numbers, especially regarding obesity in children and obesity being one of the primary causes of type II diabetes, there were also many topics discussing the ways in which this epidemic can be stopped.
The hot topic for April is definitely Qnexa, a blockbuster drug by VIVUS, which is about to receive its final verdict from the FDA by mid April. In late February, VIVUS (VVUS) - a small and innovative pharmaceutical company - announced it is offering to sell (subject to market and other conditions) 8.5 million shares of its stock. In addition, the company also announced that it intends to grant a 30-day long option to the underwriters to purchase up to 1,275,000 additional shares to cover for any over-allotments.
If you're thinking the same way I'm thinking - obesity as a major cause of many fatal conditions, needs to become a thing of the past, or at least lower in numbers if we're looking into a more healthier and brighter society - then we're on the same page when it comes to investing options. Think from your own perspective; would you like your kid to be teased at school for weighing over 200 pounds at the age of 12? Me neither. I also think that today's mainstream media is influencing people more than ever before and with all those skinny fashion icons and attractive celebs flooding the news, most people would just love to get in better shape and become more attractive and desirable. I do think that by now most of the over-weight people have figured out that the known weight-loss treatments, teas, and rigorous diets, which just get one more hungry and annoyed, simply don't work. Add to this the fact that overweight people are less movable; therefore, attending some workout classes or visiting gym just won't cut it. What's left?
Magical cures and diets, or an approved and tested drug that works?
After Qnexa won a positive vote from the U.S. Food and Drug Administration Endocrinologic and Metabolic Drugs Advisory Committee on February 22nd, the share price skyrocketed for 125% over the following days. This surprisingly favorable 20-2 vote of approval handed the decision on Qnexa® directly to the FDA. Due to the fact that obesity is considered to pose serious health concerns, I am quite certain that Qnexa will be approved in mid-April even though there's always a chance for delay. However, when considering the fact that there hasn't been an approval of a new weight-loss drug issued by the FDA for more than a decade, and that VIVUS has already announced the possibility of expanding its senior management team in high hopes of the commercialization of its obesity drug, the answer is apparent - Qnexa has to go through.
However, April will definitely get the adrenalin pumping for many biotech traders. After witnessing this stock skyrocketing in February, there is definitely room to be highly optimistic of seeing more gains after the final FDA approval of Qnexa. The stock is currently trading around $22, with a 52-week range of $6.13 to $25.14, current market value of $2.19 billion and volume of 6,198,600.
According to Rodman & Renshaw analysts, the annual sales of the Qnexa drug, if approved, are anticipated to reach $5 billion by 2020. Valuing VIVUS at $3.6 billion Cowen & Co also said that if approved, Qnexa will make the company stock worth as much as $40, which would make VIVUS a tempting target for a takeover by the industry's giants such as Bristol-Myers Squibb (BMY), Johnson & Johnson (JNJ), and Merck (MRK).
Currently, Orlistat (also marketed as Xenical and Alli) is the only drug for obesity management approved by the FDA. There are however, a couple of other weight-loss drugs standing in line for a FDA approval such as Contrave by Orexigen Therapeutics (OREX), and Lorcaserin by Arena Pharmaceuticals (ARNA), which is waiting for an approval in June 2012. As there is obviously little competition in the weight-loss drug market, if given the final approval by the FDA later this month, Qnexa will step onto the big stage in style. And with so many people suffering from obesity and being over-weight, the market for this drug is significant, making it a good investment opportunity.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.