Vivus Planning for Failure in Qnexa Birth Defect Study

| About: Vivus, Inc. (VVUS)

This week, Vivus (NASDAQ:VVUS) reported financial results for the first quarter of 2011. In the press release, we were also updated on the company’s meeting with the FDA about a study to rule out birth defects with Qnexa. The FORTRESS (Fetal Outcome Retrospective TopiRamate ExpoSure Study) study will examine the rate of birth defects -- specifically cleft palate and other major congenital malformations -- associated with its diet drug, part of which contains topiramate. The company also stated that if the trial fails, Vivus will be following a contingency plan to get the drug approved in those patients of non-childbearing potential – men and post-menopausal or otherwise infertile women.

Unfortunately for Vivus, however, the question is more likely when the FORTRESS study fails, rather than if. That’s because several similar trials have already taken place linking topiramate to birth defects.

The concerns about topiramate and cleft palate were originally borne out of a very similarly designed study conducted in the UK. Published in 2008 in the journal Neurology, the study found that women exposed to topiramate monotherapy during pregnancy had about a 4.8% chance of major congenital malformations (95% confidence interval 1.7% to 13.3%). This compares unfavorably to a background risk of major congenital malformation of about 1-2%. Furthermore, the rate was as high as 11.2% (95% CI 6.7% to 18.2%) for epileptic women taking topiramate as part of a polytherapy.

Additional data from the North American Antiepileptic Drug Pregnancy Registry – likely the same registry from which much of the FORTRESS data will be generated – also shows a positive link between topiramate and birth defects. This study found that, of women exposed to topiramate in the first trimester of pregnancy, there was a prevalence of 1.4% of oral clefts in their newborns. This compares unfavorably to a rate of 0.38% to 0.55% for women exposed to other antiepileptic drugs and 0.07% to nonepileptic women. The study prompted this release from the FDA and is being used as grounds for several class action lawsuits.

When you look at the amount of damning evidence facing the FORTRESS study, the actions of Vivus’ management become crystal clear. Management is, in fact, planning to fail. The company has no plans of the FORTRESS study succeeding and has therefore carefully crafted a contingency plan of getting the drug approved for patients of nonchild-bearing potential.

Furthermore, what is not said is of utmost importance. In Tuesday’s conference call, very little was said about the company's REMS (risk evaluation and mitigation strategy), except how it would be used to exclude patients of childbearing potential. In all likelihood, the FDA turned down a proposal to require women of childbearing potential to use a birth control strategy with the therapy – a practice currently employed for drugs of known teratogenicity like accutane.

Vivus bulls might point out that of the 15 pregnancies in either of the drug’s phase III trials, none resulted in birth defects. The obvious counterargument here is that 15 pregnancies is far too low a number on which to make any concrete assumptions, especially when the expected rate of said event is as low as 5%. Vivus will certainly find a correlation when it undertakes a study it bills as the largest of its kind to date.

Bulls may also point out that the levels of topiramate in Qnexa are only 92 mg/day, while dose levels for epilepsy can be as high as 400 mg/day. I would point out that even if the drug is safe at the relevant dosage levels – wholly unlikely, given the number of pregnancies necessary to rule out a statistical correlation – that a statistically significant increase at a dose level like 200 mg/day would almost certainly cause the FDA to deny the drug to avoid any possibility of unnecessary birth defects.

Furthermore, anyone following the regulatory saga of Vivus and its competitors Arena Pharmaceuticals (NASDAQ:ARNA) and Orexigen Therapeutics (NASDAQ:OREX) knows very well that the FDA will not tolerate a risk profile common of more serious indications.

So if the FORTRESS study fails, as would likely be the case given the previous data, what would the market for Qnexa look like? The answer: Not good. In the CONQUER and EQUIP trials, the patient populations consisted of 70% and 83% women, respectively. While to my knowledge there exists no information stating which women were pre- and post-menopausal, obesity drugs by their very nature favor usage in those women of childbearing age and potential. Qnexa’s market will very likely be cut by as much as 70% in the limited indication contingency plan.

In spite of the surge in Vivus’ stock price on Tuesday -- a movement almost completely given up in trading on Wednesday -- the regulatory update provided by Vivus is almost certainly bad news going forward. The FORTRESS trial will almost certainly fail; when it does, much of the market for Qnexa will go with it.

The FDA does not appear open to the idea of controlling births via a birth control mandate. Vivus, a company that only six months ago was the clear front-runner in the push for new obesity treatments, will very likely fail to realize its once-lofty potential. With very likely negative results from its FORTRESS study for a drug that the FDA does not believe addresses a serious unmet medical need, Vivus is unlikely to generate an acceptable return for its shareholders in the near- and long-term.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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