Magazine Article | November 7, 2010

Looking Slim: Obesity Drug Market Is Shrinking

Source: Life Science Leader

By John Centofanti

The public has become more aware of the availability of obesity drugs, such as Alli, yet the obesity drug market is facing a potential decline. Large pharmaceutical companies have pulled out of the obesity drug market. According to Datamonitor, sales from obesity drugs are expected to rise 1.2% from 2008 to 2014, compared to the historical rate of 10.5%.

Life Science Analytics is a biomedical database company owned by Datamonitor. An interview with Sarah Terry, global managing director of Life Science Analytics Inc., reveals surprising trends in the obesity drug market. Some of the trends include the decline of large companies in the market, as well as opportunities for smaller companies to enter the market.

The topics of diet, exercise, and weight loss have saturated the news, the workplace, schools, and family discussions — nearly every facet of society. Yet Americans continue to gain weight, ever searching for easy weight loss. Bariatric surgery, or weight-reduction surgery, has become so prevalent it’s likely you know one or more people who have had the surgery.

Obesity drugs appear to be an easier, less invasive, and less risky alternative to bariatric surgery, also called gastric bypass surgery. These drugs help morbidly obese patients lose weight by controlling appetite or preventing fat from being absorbed into the system. Being morbidly obese simply means a person is overweight to the point that the excess weight causes health issues that could affect life expectancy.

In spite of this market potential, opposition to a successful obesity drug comes from many sides. FDA regulations, the medical community’s resistance, and lack of patient resolve increase the potential for failure when a pharmaceutical company introduces an obesity drug.

Increased Regulations
Medically, there is a very high failure rate in the market for obesity drugs. Weight loss is much slower than anticipated by patients. Many of the drugs have terrible side effects such as memory loss, increased heart rate, and birth defects. The FDA now requires longer clinical trials. A few years ago, a new drug could be brought to market after a one-year clinical trial. Now, there is a two-year minimum, effectively doubling the clinical trial costs and increasing the likelihood of discovering more side effects. These longer clinical trials and other regulatory hurdles make it more expensive and risky to bring a drug to market.

Medical Aversion
In order for a pharmaceutical company to see a return on investment, it needs the support of the medical community. While there are many perspectives on treating obesity in the medical community, the driving philosophy is that patients ought to take responsibility for themselves and choose a lifestyle that includes a healthy diet and exercise. Certainly, many patients are not able to easily control weight gain, such as diabetics, the physically challenged, and some elderly. Many doctors will push for lifestyle changes for years before prescribing a weight loss pill. Some doctors will not prescribe the obesity drugs simply due to the serious health risks from side effects. None of the obesity drugs have been approved for children, and the thinking is that children need education, not medication.

When doctors do prescribe an obesity drug, Xenical is commonly accepted. Doctors understand the risks and feel comfortable prescribing it. Selecting a new drug comes with too many uncertainties over risks and results. To add greater risk, many of the patents on obesity drugs, like Xenical, are expiring. This opens the door for cheaper generic drugs to compete with newer, costlier drugs.

Patient Failure
Whether obesity is caused from genetics or lifestyle choices, lifestyle cannot be ignored. Terry explained, “Consider Japan, where 4% of the population is obese, compared to 37% of the U.S. population. Lifestyle is considered to be the greatest determining factor for whether a person becomes obese. Patients already taking obesity drugs have not shown commitment to the regimen beyond one month.”

Years ago, diet pills were marketed heavily on television, magazines, and billboards. Consumers were promised easy weight loss in just a week or two. While marketing of diet pills continues, public perception of weight loss pills is that they are a short-term effort to reduce weight. In truth, today’s obesity drugs are not a quick fix for the morbidly obese.

To be effective, they must be taken chronically and for long periods of time. Further, the weight loss is discouragingly slow. Patients can expect not more than 5% loss of total body weight over three months. This is considered a major reason patients give up early on these drugs.

Pharmaceutical companies invest staggering amounts of research and money to develop obesity drugs. Yet, the success largely depends on the patients who take the drugs. Many of these patients have not committed to healthy lifestyle choices, which is partly why they are obese. It seems their commitment to obesity drugs is not much greater, and pharmaceutical companies have taken note.

Dropping Numbers
Consider these facts offered by Terry: The pharmaceutical market is an $820 billion industry. There are three major obesity drugs currently in development. Compare that to the roughly 60 drugs being developed for oncology.

It is not surprising given the high failure rates and huge expense in both size and duration of trials that many of the big pharma players are discontinuing development programs in obesity:

  •  Pfizer has five obesity products in early stage development, having dropped seven in the last three years.
  •  GlaxoSmithKline has four obesity products, all in early stage, having dropped three products.
  •  AstraZeneca has four obesity products, all in early stage, having dropped two products.
  •  Merck has five products, all in early stage, having dropped seven products.
  •  Sanofi-aventis has one product in Phase 2, having dropped four products.

Datamonitor reports all of the products in late stage are being developed by smaller players, including Norgine, Vivus, Arena/Eisai, Orexigen, and Novo Nordisk. The smaller pharmaceutical companies have found success by targeting specific segments of the obese population.

Smaller Segments, Bigger Opportunities
Smaller pharmaceutical companies find it more cost-effective to target a narrower market, especially one where the obesity is often caused by a disease or other health issues rather than lifestyle choices. Some of these target markets include obesity drugs for diabetics (while many diabetics are able to keep weight under control, many are faced with weight gain associated with taking insulin) or obesity drugs designed for the elderly.

In the latter group, obesity is caused by many factors and can’t easily be attributed to one factor. However, it’s easy to see that the elderly population faces greater challenges to a healthy lifestyle, as they are often more physically challenged due to other health issues.

“The obesity epidemic faced by both public and private healthcare payers is likely to force a greater emphasis on preventative and lifestyle interventions, detracting from budgets available for drug therapy,” said Terry. “As patient numbers rise, so too will the size of distinct subpopulations for which individual treatments may be more or less appropriate, offering the potential for higher value targeted therapies.”

Datamonitor asserts, “The market potential for the obesity sector is substantial. Conservative estimates value the market to be worth $560 million by 2018, while other estimates reach as high as $8 billion to $12 billion.” That potential should be weighed against other information from Datamonitor, which states, “Regulatory approval of an obesity drug is not an indicator of clinical acceptance or use, or success. There is a big difference between market potential and market capitalization.”

To be sure, there is great potential for the obesity drug market to grow. Smaller pharmaceutical companies need to develop drugs for niche markets and comply with regulatory restrictions, as well as overcome safety concerns. The other part of the equation cannot be directly controlled by the pharmaceutical companies: acceptance from the medical community and patient commitment to the regimen.