Thursday, March 14, 2013

If It Is Needed, It Will Work

The number of Americans who are considered obese, a Body Mass Index (BMI) of 30 or higher, has tripled since 1960, while those considered morbidly obese (BMI above 40) has increased six fold. A study completed by researchers from the Mayo Clinic last year showed that obese people on average pay $1,850 more in health costs a year, while the morbidly obese saw costs soar an additional $5,500 a year. "Smoking added about 20 percent a year to medical costs," said Mayo's James Naessens. "Obesity was similar, but morbid obesity increased those costs by 50 percent a year."

Several proposed solutions to obesity have moved to the investment forefront, a pill by Vivvus and an implantable device, the VBLOC by EnteroMedics Inc, which purports to block the vagus nerves to suppress appetite. The surgically implanted device uses electrical pulses to block that nerve regulating digestion. Unlike pacemakers, patients power the EnteroMedics' VBLOC device on and off with a control belt worn around the waist. When VBLOC is on, patients are supposed to feel less hungry, eat less and lose weight.

Success or failure of such therapies is measured by "EWL", calculated as a percentage equal to total weight loss in the trial (the numerator) divided by the difference in baseline weight and "ideal weight" using a BMI of 25 (the denominator.)
Gastric bypass surgery patients lose an average of 28% of their body weight. For the sample female patient standing 5' 4" and weighing 240 pounds, that equates to 67 pounds or an EWL of 70%.

The EWL for VBLOC-treated patients was 17% compared to 16% for control patients. Clearly, there was no statistically significant difference at all in excess weight loss between the two groups. The result missed statistical significance by a wide margin, with a p value of 0.70. From an investigative perspective, this was a disaster showing little distinction between the device and placebo. The share value of the company plummeted appropriately.
But the stock is coming back. Investors are buying the company now and have been advised to do so by someone as cautious as Andrew Tobias. Why? Because the obesity problem is a big national expense and something, anything, must be done. These investors are betting the FDA will approve the device in spite of the fact there is no evidence of its effectiveness because "we must do something."

It will be interesting to see if the investors profit by investing against the FDA's integrity (and on bureaucratic desperation.) And it will be an interesting and revealing insight into the thinking of government.

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