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4 Smaller Alternatives to Big Pharma Obesity Treatments

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Given America's expanding waistline, anti-obsesity treatments are, no pun intended, big business. The Center for Disease Control has estimated obesity costs the U.S. economy $150 billion every year. Said differently, lost economic output at the hands of obesity in this country works out to a number that is larger than Hungary's GDP.

To that end, it's no wonder that traditional pharmaceuticals companies want in on this market. Share of biotechnology firm Vivus (Nasdaq: VVUS) have surged more than 150% year-to-date as its Qnexa weight-loss treatment has shown promise in international trials. Qnexa is awaiting approval from the U.S. Food and Drug Administration. Earlier this year, an FDA advisory recommended the drug be approved and a decision is expected on July 17.

Shares of Arena Pharmaceuticals (Nasdaq: ARNA) nearly doubled last Friday, touching their highest level in almost two years, after an FDA advisory panel recommended Arena's lorcaserin be approved for obesity treatment.

Fortunately for investors, there are still opportunities to add some heft to portfolios on the back of weight-loss drugs and those opportunities come courtesy of some smaller, lesser-known companies.

Orexigen Therapeutics (Nasdaq: OREX) With a market cap of less than $230 million, Orexigen Therapeutics isn't a small-cap. By definition, it's a micro-cap. Despite its diminutive stature, the shares have more than doubled this year thanks to the fervor surrounding weight-loss treatment producers.

Orexigen's contrave combines the use of two drugs already approved by the FDA. Late in the second quarter, Orexigen will initiate the contrave cardiovascular outcomes trial (CVOT), which will involve 10,000 patients the company said in a statement released earlier this month. An interim analysis and New Drug Application resubmission is planned once at least 87 major adverse cardiovascular events have occurred, which is anticipated to be less than two years from the start of the trial, Orexigen said.

ChromaDex (OTC: CDXC) California-based ChromaDex isn't a traditional biotech or pharma firm. The $68.5 million company is best described as a nutraceuticals firm. Nutraceuticals is the business of selling the health-giving and medicinally-beneficial substances that occur naturally in nature.

Before thinking of blueberries for use in pie and atop breakfast cereal, think of the fruit as havin profit potential. That's what ChromaDex does although it actually has an entire business division that maintains the definitive standards for almost every other nutraceutical in the world.

Last week, ChromaDex said customer demand and unit sales of its recently launched BluScience line of dietary supplements have exceeded the Company's initial forecast and expectations and that probably explains why the shares are up 44% this week alone.

Arrowhead Research (Nasdaq: ARWR) Arrowhead Research, a tiny clinical stage nanomedicine company with a market cap of less than $47 million, is among the more unheralded players in the weight-loss treatment arena. The company's marquee product, adipotide, is designed to kill the blood vessels that support the growth of unhealthy fat within the human body.

This is a speculative play to be sure. Down over 24% in the past year, Arrowhead wasn't profitable in the first quarter, but had $6.3 million in cash at that time. More importantly, Arrowhead only recently received permission to proceed with a Phase I trial on adipotide, meaning the coming is still a long way from bringing the drug to market.

Nutrisystem (Nasdaq: NTRI) Nutrisystem shares have plunged almost 14% this year and now sport a dividend yield of 6.7%, but that might be more an example of yield trap than legitimate value proposition. Nutrisystem is known for weight-loss programs and its Glycemic Index diet. Far removed from the sexy biotech universe, Nutrisystem sells monthly food packages of shelf-stable and frozen foods, putting the company in direct competition with the likes of Jenny Craig and its diet plans equal a rivalry with Weight Watchers (NYSE: WTW).

Weight Watchers is the larger company, but in a sign that diet companies are under significant pressure, that stock is down almost 26% in the past month.

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