Arena Pharmaceuticals, Inc. (ARNA), VIVUS, Inc. (VVUS): One Weight-Loss Drug That Investors Forgot

Page 1 of 2

Arena Pharmaceuticals, Inc. (NASDAQ:ARNA)You know Belviq and Qsymia and Contrave and Empatic, but do you recall the still most widely used weight-loss drug of all? It seems almost like ancient history now, but back in 1999 the Food and Drug Administration approved Roche Holding Ltd. (ADR) (OTCBB:RHHBY)‘s Xenical.

Fast-forward to 2013. Many investors are excited about the prospects for a new weight-loss drug on the market from Arena Pharmaceuticals, Inc. (NASDAQ:ARNA). Many are disappointed by the sluggish start for VIVUS, Inc. (NASDAQ:VVUS)‘s  Qsymia. And some are hopeful for potential drugs on the way from Orexigen Therapeutics, Inc. (NASDAQ:OREX).

Meanwhile, Xenical still reigns as the most-used obesity drug. Are there lessons to be learned from this weight-loss drug that investors likely forgot? Let’s take a look.

The tortoise and the hare
Xenical quickly became one of Roche Holding Ltd. (ADR) (OTCBB:RHHBY)’s top-selling drugs and “exceeded expectations by a substantial margin” in the U.S. after its launch. In 2001, sales for Xenical reached $600 million — not bad, but not blockbuster status. Unfortunately, that also marked the peak for the drug. By 2004, sales were down to $464 million, and GlaxoSmithKline plc (ADR) (NYSE:GSK) bought the rights to sell the drug over-the-counter in the U.S. under the brand name Alli.

The lesson for today’s investors is that of the old story about the tortoise and the hare. A quick start doesn’t always win the race. That could be comforting for VIVUS, Inc. (NASDAQ:VVUS) investors. Qsymia sales in the first quarter totaled $4.1 million, well below analysts’ expectations. This slow start added fuel to the fire for efforts by activist investor First Manhattan to replace VIVUS, Inc. (NASDAQ:VVUS)’s management team.

Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) investors were excited about initial sales results for Belviq. That quick start is good news, but the real key for Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) will be to sustain solid sales. Remember: Xenical started out as a hare and morphed into a tortoise.

The real tortoise of today could be Orexigen Therapeutics, Inc. (NASDAQ:OREX). While Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) and VIVUS, Inc. (NASDAQ:VVUS) battle with their drugs already on the market, Orexigen’s Contrave has yet to gain FDA approval. The company hopes to secure that go-ahead in 2014. If its large cardiovascular study goes well, Orexigen could be in position to succeed over the long run — especially with its partnership with Takeda for commercialization of Contrave.

Market potential is still just potential
The number of obese individuals was high in the early years for Xenical. GlaxoSmithKline plc (ADR) (NYSE:GSK) and Roche touted the market potential of 129 million Americans at risk for serious health concerns due to being obese or overweight. In 1999, analyst Rene Nordmann said that Xenical “will reach peak sales of up to $1 billion worldwide after five years.” It didn’t happen.

GlaxoSmithKline put Alli (its non-prescription version of Xenical) up for sale in 2011 along with a block of other over-the-counter drugs, although the company delayed the sale due to manufacturing problems. Despite a big marketing push, sales disappointed to the point where Glaxo didn’t even break out Alli sales beginning in 2010.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!