Investing Profits From The War On Obesity

by: Greg Group

The fight against obesity will be a major investment trend for the next 25-50 years, according to a report by Bank of America/Merrill Lynch. Globally, 500 million people are obese and 1.4 billion are overweight. Obesity is the fifth greatest cause of death, leading to 2.8 million fatalities each year. Worldwide prevalence of obesity doubled between 1980 and 2008, according to the World Health Organization. By 2030, 65 million more Americans will be obese if current trends continue. While its impact is well-known in the West, obesity is rising quickly around the world. Obesity in Europe has tripled in 30 years. It is growing rapidly in emerging markets as diets westernize. Brazil, where 16 percent of the population is obese, is on track to match U.S. obesity levels by the 2020s. Obesity has reached levels of up to 20 percent in Chinese cities. A quarter of Russian women are obese.

U.S. health regulators approved the first new weight-loss drug in 13 years, allowing Arena Pharmaceuticals Inc. (NASDAQ:ARNA) to bring its Belviq pill to market, as public health advocates push for new solutions to the nation's growing obesity epidemic. Arena shares have surged from $2 to trade at $9.50 in recent months. Recently, Vivus (NASDAQ:VVUS) received FDA approval for its obesity drug Qsymia, which was previously known as Qnexa. Vivus shares have soared from $12 to trade at $22. While its own treatment is still a ways off from going before the FDA, Orexigen Therapeutics Inc. (NASDAQ:OREX) is also seeking to bring a weight-loss drug to market at some point in the coming years. Orexigen shares have moved from $3 to around $5.5 per share. In classic fashion, small biotechnology shares move fast based on drug news.

The global obesity epidemic has caused a similar explosion of diabetes cases. About 95 percent are Type 2 diabetes, usually related to being overweight and sedentary. Type 2, once called adult-onset diabetes, now is also being diagnosed in adolescents, just like insulin-dependent Type 1 diabetes, which used to be called juvenile diabetes.

Novo Nordisk (NYSE:NVO) recently reported results of Degludec, its ultra-long-acting insulin for patients with Type 2 diabetes. Its yearlong, 1,030-patient study compared Degludec with sanofi-aventis's (NYSE:SNY) Lantus - the world's top-selling insulin. Degludec reduced low blood sugar during the night, when it's most dangerous, by 36 percent and also reduced severe hypoglycemia significantly, compared to Lantus. Those problems occurred less than once in a year in both groups of patients, though.

Novo also reported on other studies finding that because Degludec is active in the body for more than the standard 24 hours for long-acting insulins, patients can maintain good blood sugar control even if they don't take it at the same time every day. The Food and Drug Administration was to decide whether to approve U.S. sales by June 29, but just pushed that back until Oct. 29 to allow more time to review data. Novo shares trade at $153 with a dividend yield of 1.63%.

Johnson & Johnson's (NYSE:JNJ) Janssen Research unit reported five late-stage studies on its daily Type 2 diabetes pill, Canagliflozin, part of a newer class of diabetes drugs called SGLT2 inhibitors. They work primarily by increasing how much glucose is excreted in urine. One yearlong study found it reduced long-term blood sugar levels, called A1C levels, and also helped patients lose much more weight than Merck & Co.'s (NYSE:MRK) blockbuster pill Januvia. Another study similarly showed Canagliflozin decreased A1C levels and body weight significantly more than Sanofi's diabetes pill Amaryl. JNJ shares are trading at $69 with a 3.51% dividend yield.

Eli Lilly (NYSE:LLY) and partner Boehringer Ingelheim of Germany released results from two mid-stage studies of their new short-acting insulin, known as LY2605541. In separate studies comparing it to Lantus, it was slightly better at reducing blood sugar levels in Type 1 diabetics and about the same in Type 2 diabetics. In the eight-week Type 1 study, patients getting LY2605541 lost about 2.5 pounds on average while those on Lantus gained 1.5 pounds. Weight changes were similar, but smaller, in the Type 2 study. Eli Lilly shares are trading at $44 with a 4.42% dividend yield.

The U.S. Food and Drug Administration have approved Vascepa fish-oil heart pill for patients with high triglycerides brought to market by Amarin (NASDAQ:AMRN). Elevated triglycerides can be caused by obesity and a number of other disease processes. Amarin's newly approved drug Vascepa is made from ultra-purified ethyl EPA, an omega-3 fatty acid commonly found in fish. Amarin is planning on a Vascepa commercial launch in the first quarter of 2013. Vascepa will compete against a similar prescription-grade fish oil pill marketed by GlaxoSmithKline (NYSE:GSK) known as Lovaza, which generates about $1 billion in annual sales. Amaring shares have moved from $8 to $13 in recent months.

Sanofi and Regeneron Pharmaceuticals Inc. (NASDAQ:REGN) recently announced that they are enrolling patients in more than 10 late-stage clinical trials, named Odyssey, for a potentially first-in-class cholesterol-lowering drug. Odyssey will involve more than 22,000 patients, including 18,000 in a trial measuring cardiovascular outcomes such as heart attacks and strokes. Sanofi trades at $40.37 with a 4.17% dividend yield. Regeneron trades at $135 and has an equity summary score of 7.2 out of 10 for a Bullish outlook.


Both JNJ and LLY are listed as bullish with high dividend yields. NVO and SNY are listed as having neutral outlooks. The smaller biotechs (ARNA, VVUS, OREC, and AMRN) are buys on a pullback as long-term trades.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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