SAN DIEGO — Obesity may be on the rise, but the market for fat-loss pills? Flat.
Exhibit A: the recent maneuverings of Orexigen Therapeutics, which sells a moderately effective anti-obesity drug called Contrave.
The pill, approved in 2014, was once projected as a shoo-in blockbuster: With more than one-third of Americans obese, the market seemed ripe for a pharmaceutical that promotes weight loss. Yet today, Orexigen, which is based here in Southern California, is on the brink of a Nasdaq delisting, with shares trading below 50 cents.
And company executives acknowledged in a recent earnings call that Contrave sales have basically flatlined, and will show only marginal growth in the coming year. (Sales for Contrave in the first quarter of this year were $13 million, up from $11.5 million for the same period in 2015.) CEO Mike Narachi said on the call that his team has developed “a focused, creative” plan to promote the drug — in part by targeting patients who are highly motivated to lose weight — and predicted the company would turn a profit in the “near term.”
But in a note to clients, RBC Capital Markets analyst Simos Simeonidis projected “zero-to-limited growth” for Orexigen and expects “the next 12 months to be very difficult ones.”
Orexigen isn’t alone in its struggles.
As recently as five years ago, analysts were predicting that anti-obesity drugs could ring up as much as $3 billion in sales by 2020. Companies were racing to develop next-generation medication that would boost metabolism, dampen appetite, and melt away fat.
In 2012, San Diego’s Arena Pharmaceuticals launched a new weight loss drug called Belviq, and San Francisco’s Vivus introduced one called Qsymia.
But physicians proved reticent to prescribe the new drugs as they hit the market, in part because of a cultural reluctance to see obesity as a disease requiring medication. Others feared a redux of the diet pill horror stories of the 1990s, imagining the new wave of obesity medications would harm more than help.
“Most doctors are kind of scared to prescribe these drugs,” said Dr. Eduardo Grunvald, director of the University of California, San Diego, Weight Management Program. “That said, I don’t think we’ve done a good job on educating doctors on how to manage obesity today.”
Grunvald said he’s “had great success” prescribing all of the approved weight loss meds.
But the market continues to struggle. Patients who do try one of the new medications often see only modest benefits, in part because some individuals are simply wired to respond better to certain drugs than others. And cost is an issue, as many insurers still aren’t paying for weight loss pills.
Newer weight loss drugs only command a small portion of the broader US obesity market, Narachi said. About 75 percent of the prescriptions doled out for weight loss are actually generic amphetamines. Orexigen’s angle, now, is to point out to doctors that these amphetamines can be addictive and only work in the short term — whereas weight loss drugs like Contrave could prove safer.
“In order for us to win, to succeed, our bet is pretty simple: About 18,000 prescribers write the mass majority of obesity prescriptions, and we think they’ll respond to our message of differentiation against generics,” Narachi said.
Companies are still pushing obesity treatments through their pipelines: Last year, Danish drug maker Novo Nordisk (NVO) rejiggered its diabetes drug Victoza and launched an obesity drug called Saxenda. And Cambridge, Mass.-based startup Zafgen is developing an experimental medication for an obesity-related disease called Prader-Willi syndrome, persevering despite the deaths of two patients in clinical trials.
But investors have largely lost interest.
When Arena launched its obesity drug four years ago, the share price hovered around $10; today, it’s a buck and change. When Vivus got regulatory approval for its drug, shares peaked above $28. It’s been more than a year since it traded above $2.
Novo Nordisk’s Saxenda had a strong start last year, but sales appear to be slowing for this weight loss drug as well.
As for Orexigen, it’s scaling back its dreams and forging ahead.
The company once had grand plans to market Contrave through the large Takeda sales team — 900 members strong. With that partnership over, Orexigen has instead beefed up its upper management, hired 15 regional sales managers, and partnered with Valeant Pharmaceuticals to sell the drug in Europe. Executives talk of bringing on 160 new sales representatives in the next few months.
The company projects it’ll command about 10 percent of the US obesity market by 2018.
But that market is a whole lot slimmer than investors once predicted.
Correction: An earlier version of this story misstated sales for Contrave in 2015 and 2016. The story has been updated.