Penn Bioinvestor's  Instablog

Obesity is reaching epidemic proportions. In some parts of the U.S., more than 30% of the population is obese.

Obesity contributes to rising health care costs because of other conditions that go along with it. For instance, obesity is a risk factor for metabolic syndrome, which can lead to cardiovascular disease and diabetes.

Treatments for obesity have developed along several lines, encompassing the diet, exercise, and surgical options such as gastric bypass procedures, as well as pharmaceuticals. Although there are several FDA-approved agents for treating obesity, many obese patients don't use them because they have side effects, including high blood pressure and flatulence.

The three most advanced treatments in late stage human clinical development are Qnexa from Vivus (NASDAQ: VVUS), Contrave from Orexigen (NASDAQ: OREX) and Lorcaserin from Arena (NASDAQ: ARNA). Qnexa is a combination of two existing drugs, phentermine and topiramate (marketed for epilepsy and migraine as Topamax). Contrave is a combination of bupropion (marketed as Wellbutrin) and naltrexone (indicated for alcohol and certain drug addictions). Lorcaserin is a new chemical entity. Both VVUS and OREX are expected to release their top-line new phase III data in summer, 2009.

Based on  research reports by multiple sources like Zacks.com and J.P. Morgan, Qnexa was viewed as the drug with the best profile among all three obesity candidate under development today. Phase III data released by the company from the 6-month supportive Phase 3 EQUATE trial comparing Qnexa to its individual generic components (phentermine and topiramate) and placebo in 756 patients enrolled at 35 centers demonstrated the drug to be both highly efficacious and well tolerated. Patients treated with Qnexa had weight loss of 9.2% and 8.5% on the full-dose and mid-dose of Qnexa as compared to weight loss of 1.7% in the placebo group (p<0.001). Patients on the full commercial dose of Qnexa lost a placebo-adjusted 16.5 lbs, or 7.5% of their body weight, after only 28 weeks of treatment.  In my opinion, the study confirmed the robust weight loss effects of Qnexa, was reassuring from a tolerability standpoint, established the legitimacy of the company’s proprietary once-daily pill, and perhaps more importantly, unveiled mid-dose Qnexa as a potentially attractive therapeutic alternative.

Qnexa has not only demonstrated arguably the most potent weight loss properties among late-stage obesity agents, but it’s also the first to generate promising data in diabetics. Qnexa is generating a substantial amount of compelling evidence supporting the drug’s beneficial downstream effects, including important measures such as lower blood glucose (in diabetics and non-diabetics) and decreased liver enzymes. Mid-stage diabetes data has been outstanding. Glycemic data from phase 3 EQUATE (OB-301) study was presented at 2009 ADA annual meeting. After 28 weeks of treatment, blood sugar levels, as measured by hemoglobin A1c (HbA1c), were lower in the patients treated with Qnexa, while the patients in the placebo group had a significant increase in their HbA1c levels (p<0.0001). The placebo-adjusted reductions in HbA1c for patients taking Qnexa were 0.11 percent and 0.10 percent for the full-dose and mid-dose groups (p<0.0001). Currently the company is running a phase 2 study on diabetes.

Importantly, there were no serious adverse events in the study. Moreover, on a validated depression scale (PHQ-9), Qnexa showed improvement over placebo, which is consistent with data from earlier but smaller trials. The most common adverse effects were in line with expectations, which include paresthesia (20% in the full-dose arm, 15% mid-dose, and 3% pbo), dry mouth (18%, 12%, 0%), altered taste (15%, 8%, 0%), and constipation (11%, 6%, 6%).

What’s still to come: EQUIP and CONQUER data on track for mid- 2009. EQUIP is a Phase 3 trial evaluating Qnexa (low- and full-dose) in 1,250 morbidly obese subjects while CONQUER is testing Qnexa (mid- and full-dose) in overweight subjects with co-morbidities. We expect the CONQUER study, a large ongoing phase 3 study that includes diabetic and pre-diabetic subjects, will further demonstrate the efficacy of Qnexa for weight loss and effective management of glycemic control in diabetic and non-diabetic patients. Positive trial data are expected to lead to a year end 2009 NDA filing. Full approval in both obesity and type 2 diabetes, along with a strong worldwide commercialization partner to market it, makes Qnexa a potential billion dollar drug. 

Vivus current trades with a market capitalization of only $410 million. Management exited the first quarter 2009 with $165 million in cash on hand, positive initial phase III data on a potential blockbuster multi-billion dollar drug, and two additional niche multi-hundred million dollar phase III drugs in sexual dysfunction. The key wildcard events over the next few quarters include the 56-week phase III data on Qnexa from the EQUIP and CONQUER clinical trials -- expected in the third quarter 2009, and the initial phase III data on Avanafil -- expected in the fourth quarter of 2009. Vivus expects to exit 2009 with over $100 million cash in hand.

By almost all calculations, the stock looks still significantly undervalued. However, the risks of clinical development are high and getting drugs past the U.S. FDA, specifically in the area of behaviorally modification such as obesity, has been difficult. Finding a partner maybe is a better way to move the drug forward.

Management is likely to start entertaining partnership discussions on Qnexa, and potentially even Avanafil and Luramist, later in 2009. Zacks.com stated: "Vivus would be an extremely attractive acquisition target for a larger pharmaceutical company. The acquisition of Vivus brings in three phase III candidates -- something most big pharma companies are in desperate need of. As visibility on Qnexa and Avanafil improve, we would not be surprised to see interest from potential suitors soar."

Dsclaim: Long VVUS.