The prescription drug anti-obesity space has two new drugs in it that are now on the market. Vivus (VVUS) has had its drug Qsymia on the market for just over nine months, while competitor Arena (ARNA) has had its drug Belviq on shelves for about a month. Over the past year or so, since these drugs first received FDA approval, there has been chatter about blockbuster ($1 billion in sales in 1 year) status for both. While most did not see the blockbuster status happening for at least several years, that potential did get investors excited.
Vivus launched Qsymia in the Fall of 2012. Sales have been quite modest, and revenues even more slim. The very slow launch has led activist shareholder First Manhattan to nominate an entire new Board of Directors and even bring forward a new candidate for CEO. The Vivus annual meeting is on July 15th, and it is on that day when we will find out whether the leadership at Vivus is the same, or if a new direction is being taken.
Up until now shareholders have essentially been left in the dark with regards to what to expect from Vivus. They see that sales are picking up, and that loosened REMS has led to availability of the drug at some 8,000 retail pharmacies, but what about sales? Where does the company see the next 6 months of sales coming in at? Simply stated, Vivus owes it to investors to deliver guidance as soon as possible. If the current board and CEO remain intact, shareholders deserve guidance at the annual meeting. Vivus has had over 9 months to understand the marketplace. It is time that Vivus stepped up to the plate and informed investors as to what realistic expectations are.
Arena will be reporting its quarterly call sometime in the next 8 weeks. This company should offer its investors guidance as well. Analyst estimates on Belviq sales are all over the map, and the unofficial guidance by Eisai for $150 million in sales by December 31st simply adds to the confusion. There are a lot of naysayers in the segment and investors deserve to know whether they are holding stock in a company that is on the quick path to impressive numbers, or a slow build.
Yes, Arena only has had a few weeks of sales to analyze, but by the time the quarterly call comes, it will have had nearly two months worth of data. Further, the agreement between Arena and marketing partner Eisai deals specifically with sales forecasting, thus, the company should be able to develop even a conservative guidance figure to investors.
6.2. Forecasting and Ordering.
(A) Forecasts. With respect to each Product for which an NDA has been filed, commencing on the date no later than (I) 30 days after the Effective Date, for the Initial Product, and (ii) six months prior to the expected date of FDA approval of such NDA for each Additional Product, and, on the first day of each month thereafter, Eisai shall provide Arena a good faith 18-month rolling forecast of anticipated orders of such Product, in Finished Product form, to be placed during each month of such period (broken down by quantities to be sold commercially or distributed as samples or as part of a compassionate use, named patient use or indigent patient program) (each, a "Forecast" for such Product). Each Forecast will specify, on a month-to-month basis during the 18-month period covered by the particular Forecast, the amounts of Finished Product to be ordered in each month and the requested delivery dates for each such order of Finished Product anticipated to be placed; - From agreement between Arena and Eisai
Absent the market conditions, perhaps Arena would be deserving of another quarter to gather more detail regarding sales. However, with the $150 million target already established on launch day, investors deserve to know whether that target is real, or whether it was simply a positive outlook on a product about to launch. If the company believes that the $150 million is real, it should spell that out for investors. In fact, if Vivus were to forego giving any guidance, Arena could place itself in the catbird seat by being the first to step up to the plate to help define the market.
Why do I feel that these companies owe guidance to investors? Because in the case of Vivus it has been far too long in the waiting, and in the case of Arena, the sector needs to get a handle on exactly what this market is and how fast it will develop.
In my opinion the biggest hurdle this space faces is with insurance companies. The faster that these drugs get covered, the more traction we can see. If the build up is slowed because of insurance coverage, many longer term investors will be patient. I received one email where a writer in the sector is extrapolating the three weeks of Belviq sales data into $3.2 billion in sales by March 31st 2014! The only way to stop wild assumptions is to put forth guidance.
What We Want To See
- Revenue Guidance
- Progress on the insurance company front
- The average price per prescription we can anticipate
- The status and goals on applications outside the U.S.
- Sales guidance
This is not an indictment on either company, but is an appeal to bring some sanity to a sector that currently has many investors in a state of confusion. The Street will not take either company seriously until these companies have the courage to put some guidance on the table. By example, analyst estimates for Qsymia sales have been halved twice and still investors are expected to believe based on blind faith.
Simply stated...We need guidance, please. Good, bad, fast growth, or slow growth. It does not matter. What matters is that investors can make informed decisions based on company expectations. The time is here.
Additional disclosure: I have no position in Vivus.