Why Estimates of Future Revenues for Obesity Drugs Are Likely Off the Mark

Last Updated Oct 19, 2009 3:32 PM EDT

The race for a new anti-obesity drug between Vivus, Arena and Orexigen was the subject of a New York Times review over the weekend. The piece was good publicity for all three companies, but buried within it was some crucial cold water for anyone who thinks one of these drugs may be a blockbuster:
Even drugs that have made it to market have not done well. IMS Health, which tracks prescriptions, estimates combined sales of obesity drugs last year at only $173 million in the United States.
That's the revenue history. So what are the predictions? Unsurprisingly, they're not so modest. Depending on what you read, they range from $1 billion to $10 billion. Here's a summary:
  • Adam Cutler, analyst at Canaccord Adams, believes there should be room for all three because grabbing just 1% of the overall market will translate to more than $1 billion a year in sales for any one drug.
  • Michael Murphy: Half the market would mean roughly $3 billion in sales for Arena in three years...Orexigen also would have a blockbuster in Contrave if they got 25% of the market, or $1.5 billion in sales in three years.

    The situation with Vivus is no different. Qnexa should be the third blockbuster in the group, also bringing in $1.5 billion in three years.

  • RTTNews: The market for anti-obesity drugs is virtually untapped and continues to hold a glittering allure. Till date there has been no 'silver bullet' remedy for obesity. Analysts estimate that the potential market for obesity drug ranges from $5 billion to $10 billion per year.
If estimates range from $1 billion to $10 billion, doesn't that suggest that most of these estimates must be wrong? Bear in mind that analyst estimates of much more predictable launches, such as Sanofi-Aventis' Multaq, were way off the mark. That drug was estimated to be a €3 billion market maker. It's currently on course for just €200 million.