Vivus (VVUS) scored a victory Thursday when Express Scripts (ESRX) added its anti-obesity pill Qsymia as a standard benefit option to its national formulary. What that means is that the out of pocket cost to patients will be a very reasonable $50 to $60, a level that is much more consumer friendly than the $150 a patient must spend without coverage.
Essentially, the patient is seeing a 66% discount. Combined with the Vivus "Get Started" program, this could be a powerful motivator for patients to request Qsymia. The "Get Started" program offers a two week supply covered by the company when a qualified consumer buys a one month prescription. Now the out of pocket cost for the initial 6 weeks of use will be just $50 to $60.
Express Scripts is the nation's largest benefits manager for prescriptions. Aetna (AET), another major insurer had already included Qsymia and Arena's (ARNA) Belviq as a covered drug last month. Clearly a trend is forming that is seeing insurers believe in the benefits of anti-obesity drugs. Having such a trend is a big positive for the sector.
While these deals are benefiting Vivus now, they will also benefit Arena later when that company launches Belviq. Arena just received a proposed Schedule IV designation from the DEA. The scheduling should become final early in Q1 allowing Arena to put Belviq on the market to compete with Vivus and Qsymia.
While there has been long standing "competition" between Vivus and Arena, there is likely plenty of room in the market for both to succeed. These recent developments will actually pave the way for Orexigen (OREX), a third company that is in the FDA approval process for an anti-obesity drug of its own.
Initial sales of Vivus came up short of street expectations, but it appears clear that the company has been gaining traction. With expectations now set at more reasonable levels, and the insurance coverage hurdle seeming to evaporate there is reason to be cautiously optimistic.
Vivus investors are likely eager to see the first full quarter of sales results. Vivus should be announcing Q4 2012 results in February of 2013. This will be an important conference call for Vivus and Arena investors combined as it will set the stage and help determine expectations going forward. If Arena gets a waiver of the DEA waiting period it could launch Belviq in early March. I have oft stated that no matter which company you are invested in that you will want to pay close attention to the sector as a whole. Performance of one company can be used as an effective measuring stick for another.
Vivus made an impressive run in the last few trading sessions. It is possible we are looking at a short term crest. For a savvy investor it may be best to wait just a bit before getting onto the train. My strategy would be to watch the volume, look for a dip, and then look jump in when upward traction starts again.
Disclosure: I am long ARNA.
Additional disclosure: I have no position in VVUS or OREX.