New Obesity Drug Available Soon

Europeans will have a new option for treating their obesity shortly. The Committee for Medicinal Products For Human Use, or CHMP, gave Orexigen's Mysimba a positive recommendation.

Orexigen will have to wait for the European Commission to adopt the opinion in a few months before it can start selling Mysimba. Unlike the U.S., where the FDA often ignores its advisory committee's recommendations, the European Commission is just a rubber stamp on CHMPs opinion. There's been only one time that I know of when the European Commission didn't adopt a positive opinion, and that was due to new information coming to light between the CHMP recommendation and the European Commission's adoption of the decision.

Big dealThe drug is already approved in the U.S., where it goes by the brand name Contrave; but Europe could actually be more lucrative for Orexigen. Shares of the biotech were up less than 1% on Friday, but that's because the approval was widely expected after the company hinted that meetings with regulators were going really well. Shares are up 65% since the hint on the conference call.

In the U.S., Orexigen licensed the drug to Takeda Pharmaceutical, which pays Orexigen tiered double-digit royalties on sales. But Orexigen still owns all the rights to Mysimba in Europe, although management has said it plans to partner there, too. With an approval in hand, Orexigen should be able to get better terms than it got with Takeda, which was a pre-approval deal.

Takeda would be the most obvious partner. Considering the relatively strong launch so far, investors should be happy if Orexigen gives Takeda rights there, too. Part of Takeda's success likely has to do with its strong expertise in diabetes, which overlaps substantially with obesity.

In Europe, Mysimba won't have to compete with VIVUS' Qsymia, Arena Pharmaceuticals and Eisai's Belviq, and phentermine, a generic weight-loss drug, which are all approved in the U.S., but not in the EU.

Orexigen's was the last of the drugs to get approved in the U.S. because the FDA made Orexigen run a clinical trial to eliminate the possibility that Contrave caused heart problems. Ironically, that data may have helped it gain approval in the EU where regulators tend to be a little stricter on the safety issues.

The only prescription weight-loss drug that Mysimba will have to compete with in the EU is Xenical, but that shouldn't be much of a threat. The drug works by inhibiting the breakdown of fat that patients eat, which can cause problems at the other end, especially when patients slip up and eat fatty meals that contain more than the recommended 30% or less calories from fat. Side effects include oily rectal discharge. Ewww.

It's been challenging for Takeda, VIVUS, and Eisai to get U.S. insurers to pay for their obesity medications. In Europe, Orexigen or its yet-to-be-named marketing partner might actually have an easier time getting national healthcare systems to pay for Mysimba. There are clear long-term benefits to losing weight, and one-payer systems tend to be longer-term thinkers because they know they'll reap the benefits of a healthier population. U.S. insurers can't think that way because they don't know whether the patient will have the same insurance when the benefits occur.

The article New Obesity Drug Available Soon originally appeared on Fool.com.

Brian Orelli and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.