By: Ahmed Ishtiaq
Vivus Inc (NASDAQ:VVUS) had a milestone year and faced a lot of ups and downs during 2012. The company received approval for its anti-obesity drug, Qsymia. As a result, the stock price went to all-time high levels and touched $30 mark. However, as is the case with most development stage biopharmaceutical companies, the gain was short lived and the stock price came down. Most of the BioPharma stocks soar at the news of drug approval and then come down once the emotional trading abates. After the approval of the drug came the process of the drug launch.
The company went through the launch with limited success due to the restrictive label, high cost and limited coverage by the insurance providers. As a result, first quarter sales after the launch were hugely disappointing and caused the stock price to come near $10 mark. In my previous article, I urged the investors to be patient and weather this selling pressure to gain in the long-term. At the moment, the stock is trading above $14, and positive news about Qsymia sales is expected to drive the stock price further up.
However, 2013 may prove to be a different story for the company. Its biggest competitor, Arena Pharmaceuticals (NASDAQ:ARNA) will enter the market with its own anti-obesity drug, Belviq. As a result, competition will increase in the market, and the dynamics of the market will change dramatically. Let's try to assess how the company will fare in 2013.
Improving Sales figures for Qsymia
Recent growth in prescriptions for Qsymia reported by the company has excited the market and the stock jumped 8%. The volume of shares traded was three times the normal average daily trading volume for the stock. According to the company, prescriptions for Qsymia grew at 68%, compared to the previous month. The growth figure in prescriptions considerably surpassed the analyst estimates. Qsymia prescriptions were growing at around 30% according to previous reports. However, the current growth in prescriptions is hugely impressive, and it seems that the drug is getting approval of physicians and patients. Furthermore, the willingness of the insurance companies to provide coverage for the drug has also played an important role in increasing the prescriptions.
The total prescriptions for the period ending on December 21 were thirteen thousand. At the end of the last quarter, the company did not have much time to record sales as the drug was launched one week before the end of the quarter. However, during the fourth quarter, the company has been able to grow prescriptions substantially. As a result, sales figures should be impressive for the quarter. However, I do not believe the company will be able to meet lofty sales figures expected by the Wall Street. I believe analysts put too much pressure on the company by projecting lofty sales figures. As a result, lower sales figures reported by the company have a negative impact on the stock price of the company.
Expectations about 2013
Arena will still take some time to launch its drug, and I expect Vivus to have another quarter of uncontested presence in the market. Although Arena now has a DEA scheduling for the drug, Belviq will still take some time to reach the market. As a result, Vivus will be able to increase its penetration in the market. Vivus is disadvantaged due to a restrictive label. The best way for Vivus to penetrate the market is exceptional performance of Qsymia. The drug will have to bring substantial benefit to patients to earn the label of being the best drug in the market. Qsymia has an incredible efficacy profile, which can give it the desired penetration. However, the entry of Arena in the market will change things for Vivus.
We may see two sections of physicians and patients. One section may prefer safety over efficacy and favor Belviq. On the other hand, the other section may opt for high efficacy, and decide to use Qsymia. Furthermore, Orexigen Therapeutics (NASDAQ:OREX) may also enter the market with its anti-obesity drug, Contrave. As a result, the market will become fiercely competitive, and Vivus may come under further pressure.
The target market for Qsymia is huge and there is a massive opportunity for the company. The market is big enough for both Vivus and Arena, and it can easily accommodate both of these companies. I maintain my long-term opinion about the sector that Vivus and Arena will both be winners. There is a big unmet need in the market and enough room for these companies to enjoy significant market share. I believe companies operating in the anti-obesity market will have another impressive year and investors will be rewarded heavily. I expect Vivus to report impressive sales figures and continue its rise.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: EfsInvestment is a team of analysts. This article was written by Ahmed Ishtiaq, one of our equity researchers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.