Obesity Care: Fad, Niche, or Sleeper?
It’s a bumpy ride right now for people who are trying to make a business of providing obesity care. This really applies to all segments — consumer weight management, medical obesity care, pharmaceuticals, surgery — but the most visible evidence of bumpiness is playing out in the pharmaceutical segment of obesity care.
On one hand, prescriptions for obesity medicines are growing steadily. Four new, FDA-approved drugs are available, and more are on the way. On the other hand, investors who expected weight loss miracles and blockbuster sales are having a tough time getting excited about a rate of uptake that makes these drugs look more like niche opportunities than overnight sensations. In the words of financial analyst Spencer Osborne, writing about Contrave:
Despite the most impressive launch in the sector, sales are not yet anywhere near what is needed to drive an equity and hold any gains. Sales need to increase by a factor of at least 5 for the street to really appreciate the revenue stream potential of Contrave.
The most recent entry into this market — Saxenda from Novo Nordisk — has had a decidedly low-key introduction. Perhaps Novo Nordisk can afford to play a longer-term strategy because Saxenda is a high-dose form of liraglutide. Under the brand name of Victoza at a lower dose, liraglutide is already a blockbuster, with sales of $2 billion in 2014. Going into 2015, sales growth appears to be accelerating. Last year, sales grew by 16%. For the first quarter of 2015, sales are up 18% over the prior year.
We suspect that the approval of liraglutide for the treatment of obesity many be responsible for at least some of this growth for Victoza. None of the byzantine, absurd barriers that stand in the way of treating obesity are a problem when prescribing Victoza for diabetes. So if the approval of liraglutide for obesity at a high dose serves to make Victoza even more attractive for treating type 2 diabetes at lower doses, Novo Nordisk can afford to be very patient with Saxenda.
Patience will be a good thing for obesity treatment and for people living with obesity. Obesity is a tough, chronic disease. It’s great that we finally have some new options for managing it. But those new options have limitations that everyone needs to respect. Pushing for a blockbuster is more likely to yield a fiasco that will make them look like passing fads. Remember fen-phen?
More realistically, these new options are solid niche opportunities. With patience it may well turn out that some of them are sleepers that can become solid successes — both for patients and for companies with the skill to develop the opportunity.
Time will tell.
Click here for more perspective from xconomy.com and here for more perspective from Seeking Alpha.
Niche, photograph © Paul Englefield / flickr
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