Obesity market is one of the juiciest markets at the moment. According to the center for disease control, almost 36% of Americans are obese. Additionally, the total cost of obesity related diseases goes well above $140 billion. These staggering numbers prompted the pharmaceutical companies to endeavor in this market. As a result, Arena Pharmaceuticals (NASDAQ:ARNA) became the first company in over a decade to get an obesity drug approved by FDA. However, not long after Arena got approval for Belviq, FDA gave the green light to another anti obesity drug. Vivus Inc. (NASDAQ:VVUS) became the second company to get its anti obesity drug (Qsymia) approved by FDA.
Arena will launch its drug next year, but by that time Vivus Inc. may have made its drug a household name. Recently, Vivus announced that the weight loss drug is commercially available. As a result, the firm gained a first mover advantage in the market. However, the good news came with bad news as Vivus announced the company expects the drug to fail in receiving approval from European Medicines Agency.
Global Obesity Market and Costs:
Almost 500 million adults worldwide are obese, and 1.5 billion are overweight or obese. If, the trend continues almost 60 percent of the world's population could be overweight (2.2 billion) or obese (1.1 billion) by 2030. Obesity is the fifth biggest reason of death, causing 2.8 million fatalities every year. According to the World Health Organization, international prevalence of obesity almost doubled between 1980 and 2008. By 2030, 65 million more Americans will be obese if existing trends persist.
While its force is well-known in the West, obesity is growing rapidly around the world. Over the past three decades, Obesity in Europe has tripled. It is rising quickly in emerging markets. In addition, Brazil with 16 percent of the population facing obesity is on track to match U.S. obesity levels by 2020. Additionally, Obesity has gone up to 20 percent in Chinese cities. Russia is also showing a rise in obesity that raises concerns for the health of its population. China alone will have 665 to 670 million obese individuals by 2015.
The costs of controlling obesity are a lot higher than formerly believed. The U.S. Institute of Medicine estimated obesity related costs in the U.S. to be above $190 billion. For U.S. alone, the costs will be equal to 21 percent of annual medical spending. Earlier studies estimated 10 percent. At the moment, medical costs for treating obese patients are 40 percent higher than for non-obese patients.
Arena will gain from Vivus Loss:
After the failure of Vivus, the door is wide open for Arena to enter the European market and act as the sole player. Pharmaceutical companies rely more on agency approval than customer interest, and there is more likelihood for licensing in countries where the government wants to take measures against obesity. Vivus is losing out on humble growth in Europe. However, obesity is not as big a market in Europe as it is in the United States. Obesity is becoming a major issue in Asia and Latin America, and the authorities will be more inclined to hand approval to anti obesity drugs in these areas.
That being said loss of the European market will certainly hit Vivus to some extent and provide Arena an opportunity to recover revenues lost in the American market. In the domestic market, Vivus is expected to get an upper hand due to the effective profile of the drug. Vivus has already devised a marketing strategy for Qsymia, focusing on physicians that specialize in obesity related health problems at the start. However, Arena will also generate impressive revenues in the domestic market. There is a lot of demand for a safe weight-loss drug, and insurance coverage for it will likely reach near 100 percent.
International obesity market provides attractive opportunity to the companies developing drugs to fight this epidemic. Recently, FDA has also increased support for the companies developing anti obesity drugs. As a result of Vivus' failure in Europe, Arena can make up ground on its closest rival. However, Vivus will not be dealt a fatal blow due to the limited potential of the European market. Nonetheless, Arena business is likely to be boosted by its European operations where the firm will have full marketing rights for the drug. I believe the global market is large enough for these both companies to generate impressive revenues.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.