Will Qsymia's Stellar Sales Growth Continue?

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

Shares of Vivus (NASDAQ: VVUS) climbed on Monday after the company announced that prescriptions for its anti-obesity pill Qsymia had risen significantly in late November and December 2012.

Vivus revealed that it shipped around 13,000 orders for Qsymia over the four week period ended Dec. 21, marking a 68% jump from the preceding four-week period. Prescriptions had grown 44% over the previous four week period. Vivus said a total of 14,500 patients had been treated with Qsymia at the end of the four week period. Vivus commenced selling Qsymia in September. Qsymia is only the second long-term weight loss drug approved by the FDA in the U.S. since 1999.

The market expectation is that sales of Qsymia will eventually grow into the billions of dollars, but early sales were comparatively disappointing. In November 2012, Vivus disclosed that sales were being hurt by high co-pays and limited insurance coverage, and, as a result of these costs, a lot of prescriptions were not being filled. On Dec. 20, 2012, the company announced that pharmacy benefits manager Express Scripts (NASDAQ: ESRX) had added Qsymia as a standard benefit option to its national formulary.

Michael Tong, an analyst at Wells Fargo, said that the totals were better than expected and that prescriptions increased when Vivus began offering a two-week supply of the pill to patients free of charge though the offer could hurt the company's revenue. Owen & Company analyst Simos Simeonidis said the figure was an improvement but that total prescriptions for Qsymia remain "very low." He is of the opinion that Vivus should partner with a larger drug company for Qsymia to become a top-seller.

Reasons Behind Increased Prescriptions

There are several reasons behind the increase in Qsymia sales. Health insurer Aetna previously did not cover Qsymia, but revised the guidelines it uses to determine whether weight reduction medications are “medically necessary” for the treatment of obesity in late November 2012. Now, it is covered by the United States’ third largest health insurance company. In addition, Express Scripts, the nation's largest benefits manager for prescriptions, added Qsymia as a standard benefit option to its national formulary. One reason for sluggish Qsymia sales in the past was the drug’s cost and the reluctance of many insurers to cover prescriptions. Without insurance coverage, the drug costs $160 for a 30-day supply. This is now expected to drop to a far more affordable $50 to $60.

Challenges Going Forward

The FDA compelled Vivus to file a risk evaluation and mitigation strategy, or REMS, for Qysmia. This means that doctors had to warn women patients about possible birth defects when taking the drug. Women were advised to take a pregnancy test before starting medication, and then monthly while on the regimen.

Other major side-effects include an increase in heart rate and metabolic acidosis. The REMS also restricted Qsymia's sales to mail-order pharmacies. This restriction, added to Vivus' lack of a big pharma partner for marketing, was an early warning sign of low initial prescription rates. The flow of patients toward Qsymia was restricted, and 30% of the prescriptions remained unfilled. A key challenge for Vivus remains the retail distribution of Qsymia. The company is not allowed to distribute through retail pharmacies. Distribution is restricted to mail order because of stricter safety guidance on Qsymia.  Moreover, the problems associated with side effects persist.

The Competition

Qsymia may have been first to get approval and first in the market, but its most formidable competitor, Belviq, which is manufactured by Arena (NASDAQ: ARNA), will be launched in the market in 2013 and will receive the same insurance coverage benefits. Qsymia proved more effective in trials, but the lack of REMS restrictions on Belviq may prove to be more attractive to female patients, despite the fact the drug is also contraindicated for pregnant women. Arena's drug will be the first in the European market if approval is received. Arena also has the benefit of having a large company as a partner in Eisai.

Orexigen (NASDAQ: OREX) is even further behind, but still needs to be considered as a future competitor. The FDA has forced its drug Contrave to go back to the lab for cardiovascular safety trials. The company is moving as quickly as it can, and Contrave could be in the market within the next few years. Given the size of the anti-obesity market and the different prescribing conditions, being first in the market does not necessarily provide a first mover advantage.


Though Vivus had a slow start in terms of sales, the increase in sales is encouraging and, combined with the other efforts that the company is making, shows signs of being sustainable. Vivus is currently trading around $14, and the mean analyst target price of $23.89 suggests that considerable upside is expected. However, only fourth quarter 2012 results will show whether Qsymia's sales growth has been sustained and provide a basis to estimate future growth. For now, I am placing a "Hold" rating on the stock.

jordobivona 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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