Why Arena's Launch Will Be Strong, Despite Vivus' Weak Launch
Reza is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It has always been clear to me that despite Wall Street's (souring) love affair with Vivus (NASDAQ: VVUS), Qsymia will not be a great success for the company for the following reasons:
1) Qsymia has safety risks that discourage some doctors and patients from using it. This is a key to my prediction of low demand for it based on discussions with several doctors. It will be used, but the demand for Belviq will far surpass demand for Qsymia. One of my friends, Andy Baron, who understands the obesity space better than a lot of Wall Street analysts, summed up Belviq's appeal as first line therapy this way:
"Play it safe by trying Belviq for 3 months. If it works for you, you will lose at least 5% and your blood glucose will go down significantly. Stay with it for a year and you will lose about 11%. If it doesn't work for you, then you might consider trying Qsymia – if the potential side effects are an acceptable risk."
2) Doctors know Qsymia's ingredients very well. The burden of history may negatively impact the effectiveness of Vivus' sales force in motivating doctors to write scripts for Qsymia.
3) The REMS program may discourage some practitioners.
4) Doctors and patients have another alternative. Belviq is has an excellent safety profile, is highly efficacious for responders, and offers other benefits than just weight loss (e.g. favorable changes in glycemic control). Many doctors have been waiting for Belviq for a long time; what's another few months? Belviq will be launched shortly after completion of DEA scheduling.
5) Vivus has been shut out from all the countries in the European Union because of safety concerns – this closes a key market to Vivus.
6) Vivus' sales-force is relatively small. That's one reason shorting a launch, especially a self-launch, is a common practice – many self-launches by small companies either fail or are not too successful.
7) Qsymia has generic competition. Vivus has downplayed the use of generics, which are much cheaper than Qsymia, but I think this is a reality that will play out against Vivus.
Initial sales numbers for Qsymia are not as rosy as several analysts had expected. In fact they're so weak that one analyst wrote maybe IMS is not tracking all the sales! Of course it's not, but it's probably the best indicator of sales levels and trend. I am not surprised by Qsymia's weak sales. It's also not a surprise that the weak sales come as a shock to the analysts because as explained in this MF article, analysts have had a poor track record in the obesity space and have made assumption for Vivus and against Arena Pharmaceuticals (NASDAQ: ARNA), which are not accurate.
"Anyone who listens to Steve Byrne deserves to lose money. He has been constantly wrong with his coverage of this space. How can you say with confidence that a drug that has only sold > $1M in 5 weeks can miraculously sell another $9M in the next 8 weeks when weekly script growth dropped from 30% week 4 to 7% in week 5?"
Arena is a different story altogether.
For the following reasons Arena's launch will be successful in spite of Arena being punished by weakness in the sector due to Vivus' expected poor launch.
1) Arena's marketing partner Eisai has a strong sales & marketing engine that has experience marketing two blockbusters! Comparing Eisai's sales force with a self-launch is like comparing a 1988 Hyundai with a 2012 Camry--I've driven both and know the difference! Or as someone else put it today (Camrys must be popular): "Just because a Yugo will not sell does not mean a Camry will not."
2) Arena's target market is huge and under-served.
3) No REMS is required for Belviq. This means a low administrative overhead requirement.
4) Belviq has no history of abuse.
5) Belviq has a low potential for abuse, and in fact may help control other dependencies.
6) Belviq has a strong safety profile, and for conscientious doctors safety is the number one priority.
7) Belviq is inexpensive.
8) Belviq has no generic competition.
9) Belviq can be advertised much more freely than Qsymia.
10) Belviq is not just an obesity medicine. It has clear clinical benefits for patients with Type 2 Diabetes (T2DM), and some doctors believe Belviq will be a blockbuster T2DM medicine as well as a blockbuster obesity medicine.
11) Eisai may expand its already existing marketing arm and partner – as it did with two other blockbusters – with other big marketing powers like Pfizer (NYSE: PFE), Johnson & Johnson's (NYSE: JNJ) pharmaceutical arm Janssen, or another Big Pharma as it has before. Eisai marketed Aricept with Pfizer, and Aciphex with Janssen (more details in this MF article).
Coupling Arena's destiny with Vivus' is a mistake made by analysts and investors who do not understand the facts about these companies. I don't claim to be an expert – I am not – but it is clear to me that expecting Arena's launch to perform like Vivus' is an oversimplification, and simply erroneous.
The last key milestone for Arena is the DEA's scheduling decision, which should happen soon. Most people believe Belviq will be designated as Schedule 4 as FDA recommended, 5 which is more lenient; or as Dr. Denise Brunner, who spoke at the FDA AdComm, and Dr. Steven Vig, who has pleaded with the FDA and DEA, both said, it may be designated as a non-controlled-substance. Afterwards, the sky is the limit for Arena. We should witness a clean, powerful, world-class, and highly successful launch by Arena's marketing partner Eisai.
beatlesforever has a position in ARNA. The Motley Fool owns shares of Bank of America and Johnson & Johnson. Motley Fool newsletter services recommend Johnson & Johnson. 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.If you have questions about this post or the Fool’s blog network, click here for information.