Vivus’ Problems are Arena's Opportunities
REZA is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Vivus (NASDAQ: VVUS)’s management told investors recently that weak sales of Qsymia are partly due to a weakness in the category which I understood to mean because doctors are not used to writing prescriptions for obesity it takes time for the scripts to pick up steam. However, listening to them and knowing what I know about Arena and the obesity market, I think Vivus' issues are not categorical, and in fact are opportunities for Arena Pharmaceuticals (NASDAQ: ARNA).
Bottom line is, Qsymia is not selling well because doctors are not writing prescriptions for it at the level many believed. We can smooth-talk, rationalize, justify, and blame weak sales on the category but, in my opinion, the key reason for Qsymia’s weak sales is that it’s not a favored drug by many doctors because of safety concerns.
Doctors know Qsymia’s story very well, they know the history of the ingredients well, and know those ingredients are available in generic form much cheaper. More importantly, most doctors who treat obesity put safety first and Qsymia’s risks in my opinion outweigh its benefits. I was disappointed the FDA did not have the same opinion, but the European Union did in rejecting Qsymia.
We can sugar coat the weak demand for Qsymia for some time to come and we can project the same results on Belviq, but I believe Belviq’s sales will be strong and shatter all these fictions and correlation with Qsymia’s sales which are causing ARNA to make sympathy moves with VVUS.
There is nothing similar between Arena and Vivus. Arena has a safe effective drug which many doctors are waiting for – Vivus has drug that has safety concerns and many doctors don’t seem to be too excited about it. This does not make Vivus’ problems one of the category however much Vivus management wish to use that excuse to justify Qsymia’s poor performance.
There is no question that the demand for a safe effective obesity drug is huge given the global obesity pandemic. In a much referred to, and shocking statistic, one-third of US adults are obese. Also, most doctors are well aware of this problem – you see it in the malls, in the streets, and obesity is talked about in the news – it’s an epidemic in the US.
So Qsymia’s lackluster sales are not necessarily a problem for other obesity drug makers, and in fact may be an opportunity. Arena has the kind of marketing power that Vivus doesn’t have – both in terms of advertising possibility, and effectiveness of salesforce (e.g. size, experience). Even Orexigen Therapeutics (NASDAQ: OREX) has a better marketing plan than Vivus, if Contrave ever gets FDA approval.
With regards to affordability and coverage, my research indicates insurance companies will be more than willing to cover Belviq because it saves them costs associated with a slew of healthcare issues that go along with obesity.
A friend wrote: “A doctor in my brother’s VA Hospital told him that Belviq is already being price-negotiated. They love the diabetic applications. All the staff knows about it and some own the stock.”
In the words of a friend and mentor, Jim Stevens:
"Most of these obese people do see a doctor for other conditions such as HBP, edema, poor kidney function, T2DM, cancer, joint conditions, etc. It will be their doctors that will tell them (probably have been telling them) they need to lose weight. But with Belviq, doctors can now tell people there is a medication that will help them lose weight but also help them with their cravings for food... out of the one-third of Americans that are obese, I do believe that at least 25% of them do want to do something to change their condition.
If you research Jenny Craig, Weight Watchers, Nutrasystem, etc., their whole concept is based on eating less food and the programs work by telling people their programs to eat smaller portions several times a day. BTW, the typical cost for Jenny Craig meals for a month is about $600 or what will probably be four months’ supply of Belviq not covered by insurance. If insurance covers, that $600 is 24 months of Belviq assuming a $25 co-pay; if a $40 co-pay, 15 months of Belviq. Therefore, for a majority of the obese, Belviq is affordable. Obese people probably pay at least $800+ a month for food both eat-at-home and eat-out costs.”
Vivus has another big problem too. It has not found a partner yet for neither Qsymia nor Stendra despite talking about interested companies for a very long time. Last company I knew, Beacon Power, who talked about all these parties interested in partnership without anything ever materializing, eventually filed for bankruptcy. Good companies and good products don’t have trouble finding strong partnerships.
Unlike Arena whose partner Eisai will fund much of the post-approval studies for Belviq, Vivus has to foot the bill for many studies that could cost hundreds of millions of dollars. Will Vivus have the same faith as Beacon? File for bankruptcy and get taken over for cheap? Time will tell. But one thing for sure is that continued weak sales of Qsymia will jeopardize Vivus’ future and its very existence.
But I believe Belviq will sell really well for a number of reasons I’ve discussed in my previous MF articles, and will not suffer the kind of problems Vivus is facing because these are Vivus’ problems not the sector’s.
A medical doctor & shareholder in Arena wrote:
"As a Family Physician for 25 years, no one is as familiar with the obesity problem in the US than me. Patients come all the time BEGGING for diet pills to make weight reduction easier. Like many if not most docs, I essentially have never prescribed them due to risks and side effects. Based on what I have read about our drug and talking about it with colleagues, I am convinced that this is the first anti-obesity drug in a long time that will be widely prescribed.”
Know What You Own
The ravages of America’s obesity epidemic are a challenge of epic proportions. However, a group of drug companies is looking to change everything. Newly approved drugs, including one developed by Vivus, could help to reverse this deadly course while reaping massive profits for investors in the process. The profit opportunity is immense but plenty of risks still exist, so make sure you understand the full story behind Vivus in the Fool’s brand new premium research service. It’s a story so important we have the top healthcare writer on the job, so make sure to secure a copy today by clicking here now.
The views expressed above are NOT investment advice and are NOT medical advice. Please always do your own research. I am long ARNA and have no positions in the other stocks mentioned above. To find out more about my interests please visit www.rezamusic.com . If you like to join my private Arena-related mailing list send an email to (info -- at -- rezamusic -- dot -- com).
The Motley Fool has no positions in the stocks mentioned above. 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.