Weight
Loss Industry is Lucrative
April 05, 2005
America is a nation of both obese and overweight adults
and now the minorities and children are catching up
soon. According to the Centers for Disease Control nearly
9% of all medical expenditure is on excess body weight.
This figure amounts to $93 billion a year and is growing
steadily. The health hazards related to obesity
are many like heart disease, diabetes, sleep apnea,
lower quality of life, etc.
While obesity is a serious medical issue, there are
many who have sought to seek profit in the anti-obesity
market. There are many who have made a fortune out of
weight loss solutions like Diet Plans, Weight Loss Support
Groups and Weight Loss Drugs which are popular among
the weight-loss enthusiasts.
Consider for example the dieting market. The first
option of Weight loss enthusiasts is to modify their
diet in an effort to lose
weight. There is no dearth of fad diet plans, self-help
books and therapies which drain more weight from your
wallet than they drain from your waist. There are two
very popular dieting or behavior-modification approaches
namely, Weight Watchers (NYSE: WTW) and NutriSystem
(AMEX: NSI).
Weight Watchers derives its credibility from long-term
clinical studies. Weight Watchers has proof that it
works. Unfortunately, clinical proof isn't helping profitability
too much these days. What's worse, the company has a
high debt load, and valuation on the shares is pretty
steep. On the other hand NutriSystem is growing strong
of late. With prepackaged meals that take a lot of the
hassle and confusion out of dieting, there is certainly
a convenience angle to the company's approach.
The Weight Loss industry is a profitable one with sales
up nearly 90% in the fourth quarter, and management
expects 100% growth for the first quarter. Although
NutriSystem's revenue and market cap ($39 million and
$182 million, respectively) are tiny compared with Weight
Watchers ($1 billion and $4.3 billion), NutriSystem's
numbers are growing much faster. This is irrespective
of the question whether NutriSystem dieters are able
to maintain their weight loss once they switch back
to preparing meals for themselves after eating the company's
prepared meals.
Now lets us consider the Weight -Loss Drugs market.
When people fail to lose weight through diet plans ,
they switch over to weight-loss drugs. Drugs are a treatment
option with obvious appeal. There's no pain, no sweat,
and no hard work involved. Given that many people with
obesity are obese precisely because they're not willing
(or in some cases, able) to exercise, a weight loss
pill is an obvious winner. However , even weight loss
drugs are a tricky proposition. Many drugs have failed
to produce any meaningful sustained weight loss, and
some of those that have led to weight loss have also
proved to be too dangerous to use. For example, manufacturers
like Wyeth (NYSE: WYE) has been under a cloud of lawsuits
as former users of Pondimin and Redux have lined up
to get compensated for the side effects of the drugs.
The good result of this has been that many pharmaceutical
companies have taken the "Wyeth lesson" to
heart and won't advance early stage obesity compounds
if they show even a hint of potentially serious side
effects.
Drugmakers also face competition from the frauds, charlatans,
and scam artists who offer their own unapproved "pharmaceutical"
treatments for obesity, some can actually be dangerous.
Even the Food and Drug Administration has not been able
to check them completely. At present the most popular
weight-loss drugs are Phentermine, Meridia and Xenical.
While the two drugs have different mechanisms of action
-- Meridia reduces hunger while Xenical inhibits fat
absorption -- both work best in conjunction with a low-calorie
diet. Though it might not be fair to categorize either
drug as disappointing (they do, in fact, work), they
certainly haven't reached blockbuster status.
There are some drugs in clinical trials which are worth
watching. Sanofi-Aventis (NYSE: SNY) appears to have
a real winner with Acomplia. In clinical trials, this
cannabinoid receptor antagonist has been shown to lead
to an average weight loss of about 19 pounds, or 8.5
kilograms, while also lowering cholesterol. Better still,
roughly one-third of patients who received Acomplia
lost more than 10% of their body weight. Acomplia has
a tolerable side-effect profile (nausea and diarrhea)
and also appears to be effective in treating nicotine
and alcohol abuse.
Biotech company Amylin Pharmaceuticals (Nasdaq: AMLN)
is getting into the game with its SYMLIN compound (pramlintide
acetate). Recently approved for use in helping insulin-using
diabetics gain better post-meal glucose control, the
drug does show a positive trend of moderate weight loss
with few severe side effects.The downside with this
drug, though, is that it has to be injected, and that
could make patients' compliance tricky. Last but certainly
not least, Amgen has moved past its leptin disappointments
and has three separate obesity projects running (one
of which is in phase 2). Regeneron Pharmaceuticals hasn't
yet completely abandoned its drug Axokine. While antibody
formation seems to mute the efficacy of the drug, it
did show trends toward weight loss. That said, given
that the company has no new trials planned now, investors
shouldn't expect much (if anything) from this program.
Source: http://www.fool.com
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