Vivus And Arena Score Insurance Win

| About: Arena Pharmaceuticals, (ARNA)

Vivus (NASDAQ:VVUS) and competitor Arena Pharmaceuticals (NASDAQ:ARNA) scored a big win on the insurance coverage front for their respective anti-obesity drugs, Qsymia and Belviq. Aetna, a major healthcare insurer in the United States, has revised its weight loss coverage poliocy to include Vivus's recently launched Qsymia, as well as preemptively including the not yet launched Belviq from Arena. The news is a big win for both companies, as it paves the way for more insurance coverage on treatment of obesity. Should the trend continue it will be easier for consumers to opt for treatment.

When Vivus had its most recent quarterly call it had indicated that in early results since launch some 30% of patients prescribed Qsymia did not fill their scripts, presumably due to the costs associated with the drug. With a major insurer seeing the benefit in getting obese patients treated, a wave of new policy has potential to make its way through insurance companies.

Vivus has not been without its challenges. The equivalent drug to Qsymia was rejected in Europe and the company is taking steps to appeal that decision. Meanwhile, expectations for the anti-obesity market were sky high and the first 5 weeks of Qsymia sales fell short of those lofty goals.

At this time Vivus is essentially the sole anti-obesity drug on the market. Arena is awaiting DEA scheduling for Belviq and likely will not be on the market until Q1 of 2013.

As with most prescription drugs, the expense for consumers can be substantial. Getting insurance companies to cover these drugs is perhaps the most important mission both Vivus and Arena could have right now. If the product is affordable for consumers they will be more apt to try treatment, and by extension, sales of the drugs could skyrocket. The potential here is now that the over exuberant and lofty expectations have been tempered, these companies have a potential to perform better than expected in Q1 of next year. This is especially true if more insurance companies follow the lead of Aetna and decide to offer coverage.

Vivus is trading up on the news, as is Arena. While this certainly bodes well for the future, the battle to garner more coverage is in its infancy. The good news for investors is that a major hurdle has been cleared. It will take time for the benefits to hit the bottom line, but the ingredients are there for continued progress.

Disclosure: I am long ARNA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I have no position in Vivus