Vivus (NASDAQ:VVUS) disclosed today that it has received a notice from Actavis Laboratories (ACT) that the company has filed an Abbreviated New Drug Application with the FDA to produce generic forms of the anti-obesity drug Qsymia. The news has Vivus shares trading down nearly 5% just a week after the company rose up over 10% on its quarterly call.
On May 7, 2014, VIVUS, Inc., or the Company, received notice from Actavis Laboratories FL, Inc., or Actavis, that it has filed with the U.S. Food and Drug Administration, or the FDA, an Abbreviated New Drug Application , or ANDA, for generic versions of all strengths of Qsymia® (phentermine and topiramate extended release) capsules CIV. The notice from Actavis included a paragraph IV certification with respect to all of the Company's patents listed in the FDA's Orange Book on the date of the Company's receipt of the notice. A paragraph IV certification is a certification by a generic applicant that patents covering the branded product are invalid, unenforceable, and/or will not be infringed by the manufacture, use or sale of the generic product.
The Company is currently reviewing the details of Actavis's notice. Under the Hatch-Waxman Act, the Company has 45 days from receipt of the notice to determine if it will file a patent infringement suit. If the Company brings such a suit, a stay of approval of up to 30 months will be imposed by the FDA on Actavis's ANDA. The Company intends to vigorously enforce its intellectual property rights, but cannot predict the outcome of this matter.
While the news is indeed a bit concerning, it should be noted that there is a lengthy process before any generic form of Qsymia could be brought to market. With its filing, Actavis is essentially alleging that the patents held by Vivus are not valid. Vivus can delay the Actavis application by simply filing a patent infringement lawsuit. That action would cause the FDA to place a proverbial hold on the generic application for up to 30 months. Actavis can afford to be patient. It is a $33 Billion dollar giant that is quite active in the pharma space.
This presents a substantial challenge for Vivus investors to consider. One does not need to use too many brain cells to conclude that a giant like Actavis does not file applications if it thinks that it will lose in the process. This could mean that the exclusivity Vivus has had with Qsymia may be much shorter than many anticipated. This news could also impact the sector as a whole. If generic Qsymia becomes available what does that mean to cost conscious consumers that may be considering competitor Belviq from Arena (NASDAQ:ARNA) or Contrave from Orexigen (NASDAQ:OREX) if it gains approval next month? Overall, a cheap version of any of the new anti-obesity pills could impact pricing structure of the sector as a whole. This action should be monitored closely by anyone invested in the sector.
Vivus is not a one trick pony though, and that could be a saving grace. The company has a novel erectile dysfunction drug, Stendra, on the market as well. Stendra launched in January and is already helping Vivus improve the bottom line. While Qsymia has indeed been a very slow and disappointing launch, the news of possible generics may actually hasten the company into focusing on Stendra. Q1 sales of Qsymia were down from an already weak Q4. With Arena's Belviq now getting television advertising, and Orexigen's Contrave looking to hit the market with big pharma partner Takeda, questions about the possibilities for Qsymia were already floating. A generic Qsymia may give investors serious pause.
I expect Vivus to say the right things, and fight the fight, but in the end we have a $500 million company in Vivus being challenged by a $33 billion giant in Actavis. Investors should be cautious, and monitor Stendra closely. Stay Tuned!
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, Orexigen, or Actavis