Vivus (NASDAQ:VVUS), the company with the first FDA approved anti-obesity drug to hit U.S. markets in over a decade, has launched a second discount program for its drug Qsymia. In the Fall of last year, the company launched a Get Started discount program that delivered what seemed to be a turnaround in the number of prescriptions written.
Vivus sales have not been what analysts would consider brisk, and the company is far from the blockbuster status that many were anticipating when the company received FDA approval for Qsymia last summer. Adding fuel to the fire, competitor Arena (NASDAQ:ARNA) is likely only days away from the launch of its anti-obesity drug Belviq.
It is unknown whether the latest Vivus discount program is due to slower than anticipated sales, the pending launch of a competing drug, or a combination of both. As an investor in the sector I believe that it is a combination of both.
While Vivus has been gaining traction with the Get Started program, the figures are still not delivering the number of prescriptions needed to make the financials look more positive. The company has written some 57,000 thirty day scripts in 5 months since launch, and there are currently (As of February 18) just above 17,000 patients on the drug. These numbers need to see dramatic improvement. Clearly the company has hurdles relating to REMS requirements and is working at mitigating the restriction to mail order pharmacies. Are sales slow because patients are hesitant for a prescription solution, or is it that doctors and patients are waiting for Arena's Belviq to enter the market? That is the $1 million dollar question that will be answered when Belviq launches.
Arena Entering The Market With Belviq
Vivus will have had a 6 month head start by the time we anticipate Belviq being launched in the United States. That could have, and should have been a distinct advantage for Vivus and Qsymia. Likely, once a patient gets scripted a drug, they are unlikely to switch. This is especially true if the patient is seeing success. With Belviq getting ready to become available to patients, it is a good strategy for Vivus to garner as many patients as possible when the competitive landscape is empty. Even by giving away some product, the longer term benefits may be enough to make the program worthwhile. Certainly the company is giving up revenue, but if it can grab a bigger chunk of the market, it can at least establish a foundation of patients that will be better to build upon.
Watch the Pricing Closely
If you are invested in this sector, you need to watch the pricing closely. I do not care if you are invested in Vivus, Arena, or Orexigen (NASDAQ:OREX). The price point of treatments can impact all three.
Arena has recently announced that Belviq will be made available at wholesale prices of $200 per month. It is anticipated that the retail price will be between $225 and $250. Compare this to the Vivus product Qsymia being made available at no more than $75 now and you can quickly see a disparity in the pricing of treatment.
Last week I posed the question of whether or not Arena's Belviq was priced right. While passionate Arena and Vivus investors debate safety profiles, REMS, side effects, and efficacy, the part of the debate left off of the table is price. Clearly the Street is already thinking about the pricing. It even came up in the Arena Q4 conference call. CEO Jack Lief stated that the price Eisai pays will be based on the NET of any discounting conducted.
There will certainly be excitement and eager eyes watching Vivus and Arena over the next few weeks. Channel check numbers will be a factor for immediate stock price movements and pricing will be a large factor in determining valuations of both companies going forward. Essentially we will have short-term movements over the next few weeks and months that will be a factor in determining long-term valuations. It takes $1 billion in sales to be a blockbuster. At the moment that expectation is off the table for most rational investors and that is perhaps a good thing. The number of patients has been a central focal point. Now it will be joined by pricing.
Should Vivus Investors Worry
Any time you have money invested in any equity, worry is part of the equation. Vivus got off to a slow start and is now being joined in the marketplace by a competitor. These are important times for Vivus and investors will want to watch closely. We will want to see meaningful growth in the number of scripts for Qsymia when the numbers are reported on or about March 18th. If you are invested in the sector, you need to develop a strategy now in preparation for whatever may transpire good or bad.
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 or Orexigen.