Shionogi hopes for fat profits from anti-flab pill

Two women sitting on a wall in Munich, Germany. Drugmakers have failed to find a weight-loss formula without side effects. Bloomberg News

Japanese firm bets on 20-fold expansion in anti-obesity drug market

TOKYO: Persistence may pay off for Shionogi & Co as it struggles to turn a promising scientific advance into a best-selling diet pill.

The Japanese company, discoverer of the blockbuster cholesterol medicine Crestor, plans to stick with velneperit, an experimental obesity drug, after one of two key studies failed and Merck & Co, Johnson & Johnson and GlaxoSmithKline Plc abandoned similar treatments.

Shionogi is betting on a world market with the potential to expand 20-fold to $10.5 billion by 2018, according to estimates by London-based Datamonitor Plc. Even if it should eventually gain regulatory approval, velneperit may not be enough to offset the potential drop in annual sales when Crestor loses patent protection in 2016, said Gareth Powell, a fund manager in London.

"I've not been impressed with the drug," said Powell, who invests in healthcare stocks for Polar Capital Partners Ltd, the manager of $2 billion of assets. "If they relied on this as the sole replacement of Crestor, I'd be pretty nervous."

Powell's holdings don't include Shionogi shares. Analysts at Barclays Plc in London and at Mitsubishi UFJ Securities Co and Mizuho Securities Co, both of Tokyo, are omitting the product from revenue estimates for Osaka-based Shionogi.

The drugmaker needs velneperit and AIDS treatments it is developing with Glaxo to make up for the revenue plunge foreseen for Crestor, which now accounts for a quarter of Shionogi's 223 billion yen ($2.5 billion) in annual sales, when the cholesterol drug loses patent protection in less than seven years.

Side effects

Drugmakers have failed to find a weight-loss formula without side effects. Wyeth, now a unit of New York-based Pfizer Inc, pulled its fen-phen diet pill in 1997 and put aside $21 billion to settle a decade of litigation after the drug combination was linked to heart and lung damage.

Paris-based Sanofi-Aventis SA dropped its weight-loss drug Acomplia, which the company had expected to generate $3 billion a year, in October 2008 after European regulators deemed that the risks of the pill outweighed its benefits. The drug had failed to win backing from a US Food and Drug Administration panel in June 2007 over reports of suicide risks.

Merck, of Whitehouse Station, New Jersey, and Pfizer stopped developing drugs similar to Acomplia.

For drugmakers, the allure of the weight-loss market is hard to resist. The world had at least 400 million obese adults in 2005, a figure that may jump 75 percent to 700 million by 2015, according to the Geneva-based World Health Organization. Overweight and obese people face greater risk of heart attacks, strokes and diabetes than those with less body mass, according to the US Centers for Disease Control and Prevention, based in Atlanta.

Product withdrawals and failed treatments in the pipeline have hurt global sales of obesity drugs, which totaled $514 million last year, Datamonitor said.

The number of obese adults in seven markets, including the US and UK, will climb at least 14 percent to 143 million in the decade to 2018, and assuming that a quarter of them will be treated for a year at $1 a day, the market could swell to $10.5 billion, the research company said.

Velneperit is a gamble, as the latest tests showed that patients taking the drug shed 4.6 percent of their weight. While that compared with 1.2 percent for those given a placebo, medicines from Orexigen Therapeutics Inc of La Jolla, California, and Vivus Inc of Mountain View, California, have advanced further in development and yielded more weight loss.

For now, Shionogi is commanding growing sales and profit without help from its obesity drug, said Yasuhiro Nakazawa, an analyst at Mitsubishi UFJ Financial Group Inc in Tokyo.

The drugmaker's operating profit will climb more than 20 percent annually through March 2013, Nakazawa said. He is one of 13 analysts, among 17 tracked by Bloomberg, who recommend buying Shionogi shares, citing sales led by Crestor. Shionogi, which discovered Crestor, sold rights to the drug to AstraZeneca Plc's forerunner Zeneca Group in April 1998.

In October, Shionogi halted its search for a partner to help develop velneperit outside Japan, as the company planned to carry out more studies to achieve a stronger result on the drug's efficacy, President Isao Teshirogi said at an analysts' briefing in November.

Promising test

The company announced in February the outcome of two clinical tests, in the second of three stages required by regulators. One shows some promise: 35 percent of patients on a restricted diet who took velneperit for 54 weeks lost more than 5 percent of their weight, almost three times the proportion for those who were given a dummy pill.

In the other test, there was little weight-loss difference between patients taking the drug and those on placebo.

"The efficacy just wasn't all that exciting," Polar Capital's Powell said.

Shionogi is conducting new trials of velneperit in combination with an older medicine, Xenical from Basel, Switzerland-based Roche Holding AG. The Japanese company expects results around November 2010, pushing back by one year what had been its schedule to enter the final stage of development.

The delay means the drug may not reach the market in time to help make up for Crestor's patent expiration, said Hiroshi Tanaka, an analyst at Mizuho Securities in Tokyo.

Bloomberg News

(China Daily 12/28/2009 page11)