To handicap the obesity race, we have to understand obesity.
I) You can't really lose the weight by exercise, and diets don't work long-term
"In general, for weight loss, exercise is pretty useless," says Eric Ravussin, chair in diabetes and metabolism at Louisiana State University and prominent exercise researcher. The scientific evidence on this has reached consensus. You would have to exercise for an hour and a half to burn the effects of half a muffin, and exercise has a tendency to make you hungrier and make you want to reward yourself with food. Most people cannot exercise to an extent that makes a difference in terms of weight loss.
As for diets, if the goal is lose to keep the weight off long-term, they are a disaster. 80% of people who purposefully lose weight through diet put it back within a year, and within five years, according to Dr. Rudolph Leibel, a recognized expert on obesity at Columbia, that number is between 95 and 98%.
The weight usually comes back plus 5-10 pounds. "Researchers at the University of California at Los Angeles analyzed 31 long-term diet studies and found that about two-thirds of dieters regained more weight within four or five years than they initially lost." Dr. Kelly Brownell at Yale University, premier obesity researcher, called this "yo-yo dieting."
As for why, studies show that when people lose weight through dieting their metabolism slows, exercise is less effective and they need fewer calories to put on weight. Their hormones change, causing increased hunger. People report feeling preoccupied with food. Most dieters quickly regain the weight when the diet stops. More recent studies suggest that these post-diet changes may never go away until the weight is back on.
Of course, 2-5% manage to keep the lost weight off long-term. Those tracked by scientists are, decades after the weight loss, still calculating every calorie and gram. They "never don't think about their weight." For example, Janice (see reference above) must exercise nearly two hours a day because she burns less than half the calories in a standard exercise than others do. She must eat 300-500 fewer calories a day than standard tables suggest. There is no quality of life in that, by most people's account. Humans are not good at prolonged constant vigilance and self-denial.
People who say that obesity drugs are competing with effective and safe methods of diet and exercise already available are badly misinformed. How many drugs would we keep on the market, and keep telling people to use them, with a 97% failure rate?
Prominent obesity researchers, those without a financial interest in the newest diet craze or exercise program, agree that biochemical help from an obesity pill is "the next logical step in hormone and obesity research."
II) So how good are the new obesity medications?
There are three companies competing for the obesity market, if the FDA approves them: Vivus Pharmaceuticals (VVUS), Orexigen Therapeutics (OREX), and Arena Pharmaceuticals (ARNA). Their meds are Qnexa, Contrave, and Lorcaserin, respectively. Vvus and Arna come up for FDA decision and possible sales first. For reasons which will become obvious, I will focus on comparing those.
A) Initial weight loss effectiveness
The weight loss is modest. However, the meds' clinical trials and other studies show that even a 5% reduction significantly lowers blood pressure, lipid levels, risk for diabetes, etc. Most of these benefits result from the weight loss (Lorcaserin seems to have an advantage in diabetes prevention). Therefore, I will just focus on weight loss.
Lorcaserin results in an average loss of 6% of body weight on an overweight person and Qnexa results in 8%. But those numbers include everyone who started the trial, even those who dropped out a day after it began. Of those who completed the year-long trial, Lorcaserin results in a loss of 8% of body weight and Qnexa results in 10.5%.
A person weighing 220 pounds and completing the year of treatment would lose 18 pounds on Lorcaserin and 23 on Qnexa. For those extra 5 pounds, you get a lot more worries.
B) Qnexa side-effects
For Qnexa, the patient starts on the low dose and titrates up over four weeks to the mid-dose, the recommended dose. The top-dose has many side-effects and is only for those who can't respond to any other interventions. The mid-dose will be competing in the marketplace with Lorcaserin.
The side-effects of Qnexa's mid-dose with an incidence 2% or more greater than placebo were: (Listing placebo, then mid-dose Qnexa) tingling in fingers and toes (2%, 14%), constipation (6, 15%), dry mouth (3, 14%), altered sense of taste (1, 7%), dizziness (3, 7%), loss of tactile sensations (1, 4%), anxiety (3, 5%), irritability (1, 3%), and hair loss (1, 3%).
However, the real worries for Qnexa are these. First, Qnexa increases heart rate, makes birth control pills less effective and, taken when pregnant, makes cleft palate more likely in the baby. Put those three symptoms together and you get a greater likelihood of cleft palate births. Even if women do accidentally take Qnexa when pregnant, cleft palate might happen only around .21% of the time (compared to .07% without exposure). Although it is a 3-fold increase, it is still only about 1 in 500 births.
Second, 6% of subjects at one and two years showed some kind of cognitive-related adverse event, such as attention and memory problems. Placebo is 2%. Both of the ingredients in Qnexa list those problems and "cognitive slowing" as possible side-effects. One of them is often called Dopamax for this reason. I think that might be a real negative in the minds of many potential customers, especially for long-term maintenance.
A third possible concern is metabolic acidosis, which affected approximately 30% of patients in the top-dose. Consequences of chronic metabolic acidosis if untreated include fatigue, hyperventilation, anorexia, and increased risk of osteoporosis and softening of bones. But it is treatable.
Finally, there are low but increased risks of cardiac arrythmias (4% for Qnexa mid-dose vs. 2% for placebo). Arrythmias are heart palpitations, increased heart rate (.6 beats per minute average increase at one year, .9 beats at two years), or tachycardia. This causes concern about whether long-term use of Qnexa might cause a small increased risk of heart attacks. There were five heart attacks in the Qnexa groups vs. none for placebo. But that is considered a very small number, and it could easily be just chance.
C) Lorcaserin side-effects
Side-effects with an incidence 2% or more greater than placebo were: (Placebo, then Lorcaserin) headache (11, 18%), dizziness (4, 9%), fatigue (4, 7%), nausea (5, 8%), and dry mouth (2, 5%). The headache is mild enough for an Advil to take care of it, and only happens in the first few weeks. There are no other long-term concerns that showed up in trials with 8,000 subjects.
D) The importance of weight loss maintenance and the two-year follow-ups
Dieting and exercise can work for most people for getting some weight off, initially. The average overweight baby boomer has lost weight many times. The problem is that it comes back, usually with friends. Phentermine is FDA-approved for up to 12 weeks for taking weight off, but doctors are not using it because they know the weight will return. The problem that most of our nation has is not losing weight, it is keeping it off, and neither diet nor exercise nor phentermine as currently prescribed works for that.
Even using Qnexa, Contrave or Lorcaserin for one year to get the weight off initially, the weight comes back when you stop the pills. The maintenance phase would then be for the rest of your life, requiring many more pills. The real profit is in long-term maintenance of weight loss.
Those who took Qnexa for two years lost an average of 9% of body weight. This is a decrease of 1.5% from year one to year two.
For Lorcaserin, there was about the same decrease of weight loss from one year to two, but that is a larger proportion of the initial loss. Lorcaserin at two years looks like it might be starting to approach the placebo weight loss. If this finding holds, then Qnexa could take the prize. However, the data is very preliminary and there is no way to know what will be found in year 3, 4, and 5.
For Qnexa, the side-effect profile was essentially the same at two years as it was at one, but the longer trial showed that Qnexa doesn't seem to lead to things that predict heart attacks, such as decreased oxygen, and blood pressure improved. Lorcaserin's side-effects were also essentially the same at two years as at one.
At two years, we know that only about 10% of people using diet and exercise without any extra help keep lost weight off (see part I), compared to 68% or more with obesity meds. That is a very effective and radical difference.
III) Investment considerations
A) What would FDA do?
Qnexa had a very positive 20-2 advisory committee vote. Because it is two ingredients that have been on the market forever, the FDA feels safe that a ghastly unforeseen reaction won't pop up from long-term use. The FDA will very likely approve it.
For Lorcaserin, an advisory committee meeting in 2010 was essentially poisoned by an allegation of cancer in rats that was scientifically inappropriate. Five independent pathologists all later unanimously agreed it was inappropriate. Give the benefit of the doubt to hard-working folks at the FDA, well-meaning mistakes were made. The denial letter from that 2010 meeting listed the requirements for approval, and the company has done a good job of addressing all of those.
Qnexa is a combination of two ingredients already on the market as generics for other purposes. Topiramate is an appetite-suppressant, and phentermine speeds up metabolism. Lorcaserin was invented by Arena specifically for the purpose of suppressing appetite. Why did Arena test Lorcaserin without a metabolism-aid? Because the FDA asked them to.
If Arena added a metabolism-aid, weight loss would have been greater. To quote Michael Murphy, well-known investment guru, "I don't think there is any doubt that Lorcaserin is the safest and most effective appetite-suppressant. That is, I don't think Topiramate or (Contrave's) Naltrexone by themselves come anywhere near Lorcaserin's numbers."
The FDA greatly fears a new obesity med that might be widely used, but it's clear this drug is no fen-phen. Arena has reasonably demonstrated that it is a safe and clean new med. If, after 8000 subjects and hundreds of millions of dollars spent in a decade of testing, the FDA rejects this drug because it isn't as effective as its competitors, it would make the FDA appear hostile and capricious, and it would discourage future investment in new drugs.
But let's throw out appearances, as the FDA might, and just examine realities. With at least 2/3 of our country overweight or obese (the latest data suggest even more), we are about to face a tsunami of weight-related health problems, diabetes, heart disease, cancer, etc., that will cost many billions in health care, early deaths, and untold suffering. The next generation is the only one in recorded history to face predictions of a shorter life-span than their parents. The FDA has been under a lot of serious political pressure to give the country some obesity meds to work with.
We may not know what methods of use will work best over the long haul, but the country needs to start finding out. If the FDA denies the most effective and safe appetite-suppressant yet, it would be a truly staggering lack of sensitivity to the problems facing our nation, to our healthcare needs, to political realities, and ultimately to the effects of such a decision on their individual careers. These people are not stupid. I believe they will pass Lorcaserin.
Having passed Qnexa and Lorcaserin, they will probably also eventually pass Contrave.
B) Customer preferences
Naturally, more people dropped out of the Qnexa trials because the side-effects were more unpleasant. In the marketplace, it is safe to assume that more people would not finish the treatment if given Qnexa than Lorcaserin.
In return for an average of five extra pounds lost (on a 220-pound body), would people accept common side-effects of tingling in fingers and toes, constipation, dry mouth, and altered sense of taste? Will women of childbearing age tolerate worries about cleft palate in unplanned offspring? Will customers not worry about attention and memory problems and cognitive slowing; metabolic acidosis; and cardiac arrhythmias? Or will they be more likely to forgo the extra loss in return for greater safety with Lorcaserin?
To be fair, none of Qnexa's side-effects occur in more than 14% of subjects. And with any med, there is always a list. Customers have learned to ignore the unlikely ones.
Word-of-mouth may have the biggest influence on customer preferences. If a friend tells me that he took Qnexa, lost 20 pounds and didn't have many side-effects, I might try it. But, although some will only care about the weight loss, I think a lot would be concerned about the many side-effects and long-term worries. Let's call this even, neck and neck.
C) Prescriber methods of use
Most of the investment returns of these companies will depend on eventual methods of use. Only experience will tell for sure, but here are the options.
For initial weight loss: Approximately 35% of patients respond with good weight loss to Lorcaserin alone, and this is shown quickly within a few weeks. That would be the option clearly with the fewest side-effects and risks for those it works for. Also, most doctors would like to prescribe the safest alternative that does not require a titration schedule before other choices. Thus, although some doctors would bow to patient pressure or have their own preferences, Lorcaserin should be the most common first choice.
For the 65% that don't respond well to Lorcaserin, phentermine might be given for 12-week intervals, either added to Lorcaserin or replacing it temporarily. Or, Qnexa or Contrave might be added to Lorcaserin (they have different mechanisms of action and can be given together) or replace it permanently. Coming out of the gate on initial weight loss, Lorcaserin will be leading the field with the majority of prescriptions.
For lifetime maintenance: When considering taking or prescribing a pill for a lifetime, tolerance for side-effects and safety concerns decreases. Best guess at this time, if Lorcaserin alone isn't enough, doctors may add a low dose of generic phentermine, Qnexa's metabolism-aid (Arena holds the patent for any Lorcaserin/phentermine combinations). Some doctors might prefer to give Qnexa instead, but Lorcaserin seems a more effective appetite-suppressant with fewer side-effects than topiramate, Qnexa's other ingredient.
Although Qnexa or Contrave might turn out to be more effective at maintenance than Lorcaserin with low-dose phentermine or bupropion, there are no clear indications that will be the case.
Finally, the best long-term maintenance might be from alternating Lorcaserin, Qnexa, and Contrave in year-long intervals.
D) Miscellaneous factors
The factors and my best guess are:
Funding: Will insurance companies pay for these drugs? So far no, but probably yes once they come out. Even if not, most people will probably pay a couple of bucks a day to stay thinner.
Overweight use: To what extent will 1/3 of the country that is overweight but not obese be able to get these meds off-label from doctors? Probably a lot. Doctors won't want to keep patients overweight. They well know the risks of that condition, even before it reaches obesity.
Dosing: Lorcaserin was two pills daily in clinical trials. Qnexa is only one. However, Lorcaserin recently patented a once-a-day formulation. Likely to be equal factor.
Generic competition: Qnexa and Contrave are combinations of two generics. To what extent will doctors prescribe the generics in low doses, saving the patient money, rather than making them pay more for the Qnexa or Contrave brand name? Advantage Lorcaserin.
REMS (Risk Assessment and Mitigation Strategy): The proposal is for Qnexa to be available only by ordering from 10 selected pharmacies, because of the concern about pregnant women taking the pills. This will be less convenient and take longer than picking it up at your corner store, which may be Lorcaserin's fate. Advantage Lorcaserin.
Unforeseeable adverse events: Any new med always has a risk that once it is on the market for a while it turns out to cause something previously unforeseeable. Because Qnexa is two meds that have been on the market forever, this is less likely. Advantage Qnexa.
With all these factors, adding Contrave equally into the mix would make this report unintelligible. Assume Contrave is between both on all factors. It might come out the winner in a choice like Goldilocks choice of porridge, the one with not too many side-effects and not too little weight loss. However, it also suffers from being two generics and being, as far as I can tell, combinable with Lorcaserin.
E) Investment recommendations
There are no other obesity meds on the immediate horizon, and the FDA's most recent policy direction in March 2012 made the requirements more expensive and lengthier for any new obesity meds. It should be many years before we see any.
There is a huge, 10 billion dollar market out there for a drug that works well. These pills are not yet the ideal fix, but they will most likely all do well and provide a nice return on investment. Thus, it would be a perfectly appropriate strategy to put money in all three.
If you want to try to hit the home run and maximize alpha by figuring out which one will do best, I believe Lorcaserin will capture the largest share of the market, and Arna is selling at one quarter the market cap of Vvus right now.
May 10 the advisory committee for Lorcaserin meets, the FDA's final decision on Lorcaserin is June 27, and July 17 is the FDA's final decision on Qnexa.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.