Maybe this weight loss pill can make you rich

In the past 2 years, FDA has approved quite a few weight loss drugs, e.g. Belviq from Arena and Qsymia from Vivus. But none of them have done well post-approval. Honestly I have a lot of doubt about anti-obesity drugs based on the history. Not sure if anyone has heard a drug called Fen-Phen? It was once a huge successful diet pill marketed by Wyeth but later pulled out of the market due to its cardiovascular (CV) side effects that could cause death. The thing about diet pills is that they are targeting to a patient population, obese patients,  who are also associated with a high underlying cardiovascular problems. The most challenge issue for the marketing companies is not whether the drugs are working or not, but rather to demonstrate whether the drugs are safe, especially their cardiovascular safety. The problem is that there is no easy way to differentiate between whether the CV problems patients experience are due to their own physical problems or are caused by the ant-obesity drugs. This concern has significantly limited the company’s ability to convince physicians and patients to believe the drugs and therefore their sales and profits are far from satisfactory.

But now I see some light at the end of the tunnel for one company. Orexigen (OREX) got its weight loss drug, Contrave, approved last Sep. This is actually not a drug that was developed by themselves. Rather they were clever enough to reformulate 2 approved antipsychiatric drugs, bupropion (Wellbutrin), an antidepressant, and naltrexone, a drug used to treat addiction. While it was approved, the FDA was concerned about its CV safety as well as it seemed to cause high blood pressure and increase heart rate. So as part of approval, OREX was required to conduct a post-approval study to see whether there is any increased risk for heart disease in patients taking Contrave. Well a recent Interim results from the study actually showed some surprising results: the drug may reduce heart attacks by 30%, strokes by 37%, and heart-related deaths by 74%. Not only that, but the health improvements occurred independently of weight loss. This is really a huge positive surprise and such kind of clinical benefit have hardly been heard of even from any drugs for heart diseases. Think about it, if all these effects are proved to be actual when the study is completed, what will it mean for physicians and patients? I think they will go all for it and the demand will be phenomenal!  If the final data confirms the interim results, I think we will be looking at one of the biggest medical blockbusters of all time.

Of course there is no way to predict what will be the final results for OREX and the stock will remain very volatile until everything is clear. But I think this could be one of the exciting high risk high return trades that you can consider.