By Kanoko Matsuyama Dec. 22 (Bloomberg) — 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 health-care 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 U.S. 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 U.S. Centers for Disease Control and Prevention, based in Atlanta. Damped Sales 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 U.S. and U.K., 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. Without Velneperit Shionogi rose 1.1 percent to close at 1,949 yen in Tokyo trading. The stock has dropped 18 percent in the past 12 months, compared with a 6.4 percent gain for Japan’s benchmark Topix Index . 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. Advanced Drug Testing Besides the obesity pill, only one drug originating from Shionogi is in advanced stages of patient studies in the U.S., the world’s largest pharmaceutical market. The company is working with Glaxo on an HIV treatment that blocks an enzyme the virus uses to hijack healthy cells. Alpharetta, Georgia-based Sciele Pharma Inc., owned by Shionogi, has at least two drugs in advanced development: a spray to prevent premature ejaculation, and Adrenamate, a treatment for anaphylaxis, a potentially deadly allergic reaction. Shionogi said it is sticking with velneperit because the treatment shows more promise than Merck’s MK-0557. In one study involving dieting patients, Merck’s drug showed the test subjects regained some weight after finishing treatment. When combined with weight-loss medicines sold by Abbott Laboratories of Abbott Park, Illinois, and Roche, the drug didn’t show as much benefit as those products alone. Velneperit works by blocking a receptor called neuropeptide Y5, which plays a role in food cravings. ‘Can do Better’ “Merck tried everything it could and gave up,” Takuko Y. Sawada, Shionogi’s head of drug development, said in an interview from its laboratory in Osaka. The Japanese company “can do better” because of differences in the way velneperit shows its effect on weight management, Sawada said. Merck ended development of MK-0557 for obesity in 2005. The weight loss after one year of treatment wasn’t clinically meaningful, Ian McConnell , a Merck spokesman, said in an e-mail. Glaxo, Johnson & Johnson and Novartis also stopped testing drugs in the same class as MK-0557. “The human response to food is extremely complex,” McConnell said. “It appears that interfering with one pathway may not have a dramatic effect because there could be other pathways serving as backup systems that compensate for the change caused by the drug.” Terminated Project Melinda Stubbee, a spokeswoman for London-based Glaxo, said its project was no longer active. Ernie Knewitz , a spokesman for New Brunswick, New Jersey-based J&J, said development of its drug stopped several years ago. Eric Althoff , a spokesman at Basel, Switzerland-based Novartis, said its project was terminated. All three didn’t elaborate. Targeting Y5 alone probably can’t reduce body weight by much more than 5 percent because humans eat as a form of protection, said Herbert Herzog , head of the neuroscience research program at the Garvan Institute of Medical Research in Sydney. “As soon as you are starving and your body feels like your energy level is low, it’s driving you toward feeding,” Herzog said. “You are not programmed not to eat.” The U.S. FDA published guidance for the industry in February 2007 on developing medicines for weight loss. Products must meet at least one of two benchmarks. The first requires a minimum difference of 5 percentage points between weight loss from the drug and that from a placebo; otherwise, at least 35 percent of the group taking the drug must lose no less than 5 percent of body weight and the effect must be seen in twice as many patients as those on placebo. Rival Drugs Arena Pharmaceuticals Inc. , of San Diego, and Vivus plan to submit their respective obesity treatments, lorcaserin and Qnexa, to the FDA this year. Orexigen has said it will present its medicine, Contrave, in the first half of 2010. Most of those drugs combine at least two proven treatments to get around the need to eat. Contrave mixes an antidepressant with a narcotic. “Appetite is a fundamental function that humans can’t survive without,” said Kazuhiko Tatemoto, who co-discovered neuropeptide Y. “There are many pathways that control appetite so if you deactivate one, others get activated.” To contact the reporter on this story: Kanoko Matsuyama in Tokyo at kmatsuyama2@bloomberg.net .