I've already seen the message boards chiming in with debate over some recent news released about Vivus (NASDAQ:VVUS). According to Bloomberg, recently launched Vivus is seeing that about one-third of the prescriptions written for its product, Qsymia, are being covered by insurance companies. That is great news for Vivus as well as competitor Arena Pharmaceuticals (NASDAQ:ARNA). One major issue with anti-obesity drugs was whether or not insurance companies would cover the pills. According to Vivus, the one-third rate is higher than the company was anticipating.
I can tell from my email inbox that some investors are focusing on other aspects of the Bloomberg article, however. If you are serious about your investment in this sector, please try to remove the noise of message board debate. This article has news that bodes well for both Vivus and Arena.
Insurance Vs. Cash
It almost goes without saying that when a consumer perceives that he or she is getting a product cheaply, or for free, he or she is much more likely to participate. Thus, having insurance companies see the cost benefit to getting people down to a healthy weight and deciding to cover the treatment is good news.
There will certainly be some passionate investors in these companies saying things like, "Only one-third of patients getting insurance to cover Qsymia is a huge negative." This is noise. This type of debate accomplishes nothing. What we want to focus on here is that having one-third of the insurance companies pay for a new drug like this out of the gate is a victory for the sector. The number of insurers that cover it will only grow from here.
If you have ever had to take medication, you are likely aware that you sometimes have to jump through hoops to get a particular drug covered. This is particularly true when a drug or treatment is new. In my opinion, I could easily see the coverage rate jumping to 50% in short order and then moving up from there. Simply stated, remove the noise of those few passionate investors who are one-sided and look at what is happening for the sector.
The next piece of news in the Bloomberg article was that in the first week there were 106 prescriptions written for Vivus' Qsymia. This was another favorite of the passionate one-sided investors who filled my email inbox. One message said, "LOL... Only 106 prescriptions written... Vivus is DOOMED!!!" More noise.
Vivus is doomed? Really? Come on. Vivis has conducted what equates to a soft launch of its drug Qsymia. The company created a website and launched the product. It is testing the proverbial waters like any company that is essentially creating a new category does. Vivus has not yet even begun to "pound the pavement" on this. Rather than look at 106 prescriptions as a negative, we should be looking at this information for what it is.
In the first week of launch, the company obviously had doctors prescribe Qsymia 106 times. That is impressive. I am not sure about you, but I cannot typically get an appointment with my doctor with just five days notice. Typically, I have to set appointments weeks in advance. As the word about Vivus spreads, appointments will increase, as will consultations, and the numbers will increase at an impressive rate. Patience is required here, not fly-by-the-seat-of-your-pants rants.
Simos Simeonidis, an analyst with Cowen & Co., did some research that indicates great potential. In his analysis, about 70% to 75% of doctors surveyed stated that they would not be hesitant to prescribe Vivus' Qsymia or Arena's Belviq. Again, a huge positive in the piece. That market will grow as well.
Simply stated, the early indications seem to be that Vivus is off to a good start. There are positives in the early data, and there is a huge need for treatment. Set aside the Vivus vs. Arena noise and look at the positive developments for both of these companies. As I have said in the past, the potential market is massive and there is room for two or three companies to perform well.
Disclosure: I am long ARNA. I have no position in VVUS. 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.