Market Spotlight: Obesity Drug Makers

The diet industry is a multibillion-dollar enterprise, with companies such as WeightWatchers, Nutrisystem and Medifast kicking off the year by marketing diet and behavioral changes to consumers who have made losing weight their top New Year's resolution.

But the quest hasn't abated for a long-term weight-loss solution in the form of a pill capable of solving the nation's growing obesity epidemic.

In the U.S., Europe and Japan, the market for weight-loss drugs totaled about $600 million in 2005, and is expected to surge globally to roughly $2 billion in 2010, according to a recent report from drug industry market information provider Espicom Healthcare Intelligence.

Clearly people will pay whatever it takes to lose weight without restrictive diets and exercise, and the company that can make that happen could bring in billions.

"Doctors and patients tell us there is tremendous interest in a medicine that can provide safe, double-digit weight loss," said Daniel M. Bradbury, president and chief executive of San Diego-based Amylin Pharmaceuticals Inc., which is heavily pursuing drugs for obesity.

About half a dozen drugs are currently available by prescription for weight loss and obesity including Roche Laboratories Inc.'s Xenical and Abbott Laboratories' Meridia. But weight loss with current drugs is rarely more than 10 percent, and these products can cause unpleasant side effects.

British drug maker GlaxoSmithKline had some success in 2007 with its over-the-counter weight-loss drug Alli, which like Xenical eliminates a portion of ingested fat before it can be stored in the body. Glaxo reported third-quarter sales of its over-the-counter drugs grew 24 percent to 417 million pounds (US$827.5 million), boosted in part by the launch of Alli in the U.S.

But competition is rising, with at least 30 companies now targeting the market, particularly with combinations of drugs currently for sale. Pfizer Inc. and Bristol-Squibb recently teamed up to develop DGAT-1 inhibitors, or compounds that target the DGAT enzyme critical to the creation of triglycerides and fat storage. Other vying for a piece of the obesity drug market include Orexigen Therapeutics Inc., Novo Nordisk A/S, Merck & Co., Arena Pharmaceuticals Inc., Vivus Inc. and Athersys Inc.

"Overall what we're starting to see is the use of combination products that could approach the levels of efficacy of some surgeries, and that's unprecedented," said Lazard Capital Markets analyst Matthew Osborne in an interview. "If you're seeing greater than 15 to 20 percent weight loss, that is a significant benefit over the existing class of drugs, which show around 5 percent weight loss and short-lived results."