Investing in Weight Loss Ahead of This Summer’s FDA Decisions

Submitted by Daniel Tarockoff as part of our contributors program.

With the approaching FDA decisions for Vivus (NASDAQ: VVUS) and Arena Pharmaceuticals (NASDAQ: ARNA) this summer, many investors have begun looking for sympathy stocks in the weight loss sector. In a 2008 study, more than 1.4 billion adults were overweight worldwide, and more than half a billion struggled with obesity. In addition, childhood obesity breached all-time highs, with over 40 million preschool children placing in overweight percentiles. Due to rising numbers and increased demand for obesity medication, investors have taken an interest in companies developing weight loss treatments. While investors certainly await the FDA decisions on the weight loss treatments of Vivus and Arena, this article provides color on other investment possibilities in the natural treatment space.

Focusing on Natural Alternatives

Chromadex Corporation (OTCBB: CDXC) was founded in 1999 in response to growing demand for natural product reference standards, materials, and services. It has worked to establish itself as an industry leader in nutraceutical and botanical certification, and even publishes its own manual outlining specifications for phytochemicals. Chromadex works to provide science-based, natural solutions for the food, beverage, supplement, cosmetic, and pharmaceutical industries.

While Chromadex is best known for its phytochemical testing laboratories, the company is working to gain traction as an original provider of consumer-grade products. Although Chromadex has plans for launching additional products in the future, it is currently focused on its existing dietary supplement line, BluScience. BluScience is Chromadex’s flagship product that utilizes its patented ingredient, pTeroPure, a nature-identical formulation of a natural compound within blueberries, pterostilbene.

There’s More to Blueberries than Meets the Eye

Pterostilbene is a phytoalexin, a type of phytochemical that is produced by small berries to ward off damage from pathogens such as bacteria or fungi. It is a close cousin to the phytochemical resveratrol, and both serve the same function in berry plant defense systems. Still, there are some key differences between the two, which led Chromadex to choose pterostilbene over resveratrol for its initial launch of BluScience. For one, resveratrol is less oil-soluble than pterostilbene, meaning it has lower potential for cellular uptake. Resveratrol is also less bio-available with slightly inferior oral adsorption and metabolic stability than pterostilbene. In addition, resveratrol has a drawback in that it has an extremely short half-life once consumed. Pterostilbene will remain active in the bloodstream for about 105 minutes, allowing more time for its antioxidant properties to take effect, while resveratrol lasts for only about 14 minutes. While many small berries contain pterostilbene, blueberries are one of the primary and most abundant sources of phytoalexins, making it logical for Chromadex to choose blueberries for its supplement line.

This BluScience supplement line consists of five variations, all of which contain pTeroPure and are associated with patented health claims from the U.S. Department of Agriculture (USDA): heart health, improved cognition, energy, longevity, and weight management. The weight management version, titled TrimBlu, speaks to Chromadex’s desire to combat obesity, which takes 300,000 lives annually. Competitors like Vivus and Arena are aggressively pursuing solutions as well. TrimBlu assists in weight management, although it has far different chemical properties and uses than its synthetic counterparts. As a completely natural supplement with a USDA patent for the use of pterostilbene in dealing with weight loss, Chromadex offers an interesting alternative for investors in the dietary supplement space.

Chromadex is currently waiting to hear back from the first human study using its patented pTeroPure to determine the actual physical effects of the blueberry-derived ingredient. Students and faculty at the University of Mississippi are currently conducting the study and should release findings within the next few weeks. While there have yet to be any scientific studies directly relating blueberries and their benefits to weight loss, there is still a vicious race to find alternative solutions, especially given the pending FDA decisions for two major companies this summer.

Struggle for Approval

While Chromadex continues perfecting its current BluScience line and begins developing newer products, many other companies are seeking approval from the U.S. Food and Drug Administration (FDA) for their own weight loss supplements. Three companies in particular are in a high-stakes race for FDA approval: Vivus, Arena Pharmaceuticals, and Orexigen Therapeutics (NASDAQ: OREX). After Vivus’s Qnexa and Arena’s Lorcaserin were denied approval in 2010, Orexigen took a temporary lead. In early 2011, Orexigen’s weight loss pill Contrave continued to gain ground after an advisory panel recommended the drug be approved by the FDA. While the FDA is not required to follow its panels’ recommendations, it does the majority of the time. In February 2011, however, the FDA denied approval for Contrave, citing strong concerns about the product’s safety. After the denial, investors quickly fled while Orexigen’s stock dropped nearly 75%.

Today, Orexigen continues to conduct studies for Contrave and hopes to gain FDA approval by 2014. Meanwhile, it must watch its two rivals Arena and Vivus as they apply yet again for the FDA’s approval. Both competitors have already gained support from FDA advisory panels, putting them in a similar position to Orexigen back in 2011. Arena is expected to hear back from the FDA by June 27th, while Vivus is expected to hear by July 17th. If Arena is granted approval, it will be the first company in nearly 13 years to bring a weight-loss pill to the market. Due to the high demand and scarce options on the market, a new weight-loss pill could coincide with high-volume trading in all three stocks.

Conclusion

From dietary supplements to prescription medication, many companies are hoping to capitalize on the market for weight-loss. Obesity has reached staggering levels, and currently, there is only one prescription drug approved on the market for long-term weight loss: Xenical (orlistat). Orlistat can also be bought over-the-counter under the brand name Alli, yet Alli’s uncomfortable side effects have stunted sales. The millions of people struggling with obesity hope that within the next few months there will be more options available. Even if the treatments proposed by Arena and Vivus are both approved, the FDA may still limit the availability or demographic profile of the drugs, affecting the market potential of each company. Until then, the general public will have to rely on diet, exercise, and the supplements that are currently available. They can also look to treatments that are not synthetically-derived nor intended to outright cure any disease, such as the natural weight-loss products offered by smaller companies.