Pfizer Inc. (PFE), Arena Pharmaceuticals, Inc. (ARNA), VIVUS, Inc. (VVUS): Two Lucrative Drug Markets You Should Avoid

To make a successful drug, it helps to have:

A large number of people with the disease.

A limited number of successful treatments.

You really don’t need both. There are enough people with rheumatoid arthritis or high cholesterol, for example, to have multiple blockbuster drugs that treat the diseases. On the other hand, orphan indications that have just a handful of patients can still produce blockbusters through high prices and lack of competition.

If you can find a market that has both, I recommend running away.

Not what you were expecting? Let me explain.

In theory, having both is obviously the ideal situation. In reality, the situation is inherently risky because there’s almost certainly a reason that a large number of people are going untreated.

Forget this super-high-reward, super-high-risk disease
Alzheimer’s disease is a perfect example. Given the large number people with Alzheimer’s, which will only increase as baby boomers get older, the potential market is huge.

Yet no one has been able to create an effective medication. It’s not as if they haven’t tried. The trash heap of Alzherimer’s disease drugs is pretty high.

Those that have gotten through aren’t all that effective at slowing down the disease progression, let alone stopping it.

The main problem seems to be a lack of understanding as to what causes the dementia seen in Alzheimer’s patients. The brains of patients contain amyloid plaques, but it isn’t clear if they’re the cause of the disease or if they’re just a byproduct.

Pfizer Inc. (NYSE:PFE), Johnson & Johnson (NYSE:JNJ) and Elan‘s bapineuzumab was designed to bind directly to the amyloid plaque, but it didn’t work, failing multiple phase 3 trials last year.

That hasn’t stopped others from trying to attack amyloid from different directions. Eli Lilly & Co. (NYSE:LLY)‘s solanezumab binds to the individual amyloid before they form plaques, while bapineuzumab was designed to bind to the plaques directly. And Merck is developing MK-8931, which inhibits an enzyme that creates the amyloid protein fragment that forms the plaques.

While I certainly hope they work — Alzheimer’s runs in my family — I can’t recommend investing in the companies for their Alzheimer’s programs. History isn’t on their side.