What Should You Expect From Arena and Vivus?

Ishtiaq is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The anti-obesity market is becoming interesting as Arena Pharmaceuticals (NASDAQ: ARNA) has launched its anti-obesity drug, Belviq.

For a long time, Vivus (NASDAQ: VVUS) was operating as the only player in the anti-obesity market. However, the entry by Arena has changed the dynamics of the market, and we will now see two rivals going head-to-head for this large market in the U.S.

How big is the market?

Obesity has become an epidemic, and the authorities are looking to declare obesity a disease. The market for anti-obesity drug manufacturers is fairly large. The willingness of the FDA to approve anti-obesity drugs indicates that the authorities are serious about tackling the issue. The total net spend on obesity related diseases was about $140 billion during the last year.

Anti-obesity drugs can help bring down the health bill by helping patients control other related diseases. At the moment, obesity in youth is becoming a serious issue, which needs to be tackled promptly. There are only two players in the market at the moment, so there should be enough for both of these players to fight for.

What is the expected response?

Anti-obesity drugs have had a positive response in the early phases of their launch. Vivus’ Qsymia did not get good reception due to the restricted marketing, availability of ingredients (Phentermine and Topiramate) at lower prices and possible side effects. However, earlier anti-obesity releases were received well by the market and produced impressive sales figures.

However, sales figures tend to fall for the anti-obesity drug manufacturers as the early excitement abates. Almost all of the previous drugs have come with some sort of side effects, which caused the manufacturers to pull the drugs from the market. Also, some drugs failed to live up to the high expectations built before the launch and patients decide to discontinue. As a result, a sharp decline has been seen in anti-obesity drug sales in the past.

What should we expect from Arena and Vivus?

Sales figures for Vivus have been very poor due to the above mentioned reasons. The company reported sales of only $4.1 million for the first quarter of the year. However, there might be some good news for the company. One of the biggest reasons for slow Qsymia sales has been the lack of coverage from insurers. However, recently, the company announced amended insurance agreements with Medco Health Solutions and its parent company Express Scripts.

According to the amendments, Qsymia will be available in either a tier-2 or tier-3 position for those clients of Medco that offer obesity drugs in their benefit design. Furthermore, patients with benefits where Qsymia is offered on tier-2 should expect to pay an estimated $25.00 to $30.00 co-payment for a monthly prescription of Qsymia. The out of pocket cost was a big deterrent for patients and the company also started a free trial period to stimulate sales. However, the amended insurance agreement should prove beneficial for Vivus.

On the other hand, prescription figures for Arena’s Belviq are increasing at a good pace. According to IMS, the fourth week prescriptions for Belviq stood at just over 2,200. However, the prescription figures are still very low and the sales for the quarter may not meet expectations. Belviq has an advantage over its closest competitor. The drug has a safer profile and there are no restrictions on the marketing. Furthermore, Arena has an experienced partner in Eisai to market the drug. Overall, the response to the drug has been good.

However, the biggest test for the drug will come once it has gone through the first batches of patients. One or two quarters are not enough to judge these drugs, in my opinion. These drugs should be judged on the performance of at least a year of sales. I expect Belviq to do well as the drug has a safer profile, which gives physicians more confidence.

Summary

Anti-obesity drugs manufacturing is an attractive segment of the market. There is real need present in the market and these two companies have an excellent opportunity to capture a large chunk of the market before other players decide to enter the market. However, the long-term success of these companies will depend heavily on the long-term performance of the drugs. If the drugs are able to maintain early sales, then these companies are set to have excellent future. Otherwise, their fate might not be different from the previous anti-obesity drug manufacturers.

Nonetheless, these stocks remain attractive short-term trading candidates due to the high levels of volatility.


Ishtiaq Ahmed has no position in any stocks mentioned. The Motley Fool recommends Express Scripts. The Motley Fool owns shares of Express Scripts. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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