Seeking Alpha
Growth, value, special situations, momentum
Profile| Send Message| ()  

Vivus (VVUS) announced today that the company is collaborating with major insurance carrier Aetna (AET) to begin a pilot program incorporating the prescription weight loss drug Qsymia with lifestyle changes to manage weight.

The pilot program is currently being offered to self-insured plan sponsors and includes outreach to members as well as health care providers. Patients will also receive membership in Aetna's "Lose It!", an app designed to help people tackle weight loss in a responsible manner. Essentially, Vivus just landed a deal for some more marketing reps, though not in the classic sense of the word. In contrast, Vivus' competitor Arena Pharmaceuticals (ARNA) enjoys the marketing muscle of partner Eisai (OTCPK:ESALY), which has deployed over 400 sales reps to educate physicians. Vivus has no partner and has expressed a desire to find one. Striking a deal like this could help the company identify potential suitors willing to pay what it takes to get a deal done. Qsymia sales have been relatively flat for a couple of months now, but with a new year, we have potential to see recent traction in prescription sales increase. This may also help Vivus in its partnership quest.

I have long stated that the prescription weight loss sector needs to see insurance traction to help boost volume and sales. This deal is a prime example of what it will take to get prescription weight loss medications to the forefront. Currently about 40% of covered lives have some sort of weight loss benefit. Increasing the number of lives covered is a first big step. Getting improved tier coverage and deals like this is the next step. A better tier of coverage typically translates to less out-of-pocket expense for consumers. Less out-of-pocket expense translates to people becoming more willing to try a prescription solution.

Vivus stock has run up over 6% on the news to about $9.60. These types of announcements serve as short term catalysts for the equity, but it is the longer term implications that will determine the real value. In the past year Vivus has traded as low as $8.00 and as high as $15.62. At current prices, and with traction, investors that have been on the sidelines may now have their interest peaked. The bottom line for investors here is that there appears to be a willingness from major insurers to offer better coverage for anti-obesity pills. Lastly, gaining as much traction as possible prior to Orexigen (OREX) possibly entering the market with Contrave is prudent for both Vivus and Arena. Contrave faces an FDA decision on June 10th. Stay Tuned!

Source: Vivus Gains Insurance Traction With Qsymia