After FDA approval for its flagship product Qsymia (phentermine and topiramate ER), we saw very strange market activity in shares of Vivus Pharmaceuticals (VVUS), which was the first company to step foot into the coveted prescription obesity drug market in many years. Since the FDA decision on July 17, VVUS managed to drop almost 32% in value.
About half of the drop can be attributed to the ~12% move downwards on September 21 (plus subsequent declines), reacting to Vivus' press release stating that the European Medicines Agency was probably going to reject Qsymia for approval in the European Union.
VVUS declined until it hit its new price floor of $18/share, then stayed quiet in anticipation of Qsymia sales data. Today (October 8th) the stock opened marginally higher, until we saw another press release which brought a huge wave of buyers.
The largest domestic pharmacy benefit manager, Express Scripts, has joined VVUS in its mail-only delivery network for Qsymia. While we aren't expecting sales figures that could immediately justify the ~$2 billion valuation of Vivus as a company, this is a somewhat bullish hint for the prescription obesity drug market as a whole. VVUS is moving up especially fast today, because its shareholders also want to see signs of Qsymia getting a head start on the upcoming competition from Arena Pharmaceutical's (ARNA) Belviq (lorcaserin).
Looking back, note that we actually saw the FDA approval for Arena's Belviq come first (it was announced on June 27th). Sadly, Belviq can't be put into the market until it is cleared by the DEA. This means that Qsymia's progress in the unexplored world of prescription obesity drugs will naturally have direct influence on shares of VVUS, and mixed effect on Arena's stock.
Qsymia's implied success would demonstrate that the obesity drug market is indeed full of sales revenue that is waiting to be made. On the other, there's an idea that these drugs will compete viciously for the new territory too.
Although there's no question that the two drugs will compete as they mature, I see any positive developments in VVUS as beneficial for ARNA for the time being. This brand-new drug market is so far from being saturated that competition can be called a non-factor. The takeaway? Here's your excuse to buy ARNA if you've been waiting - it's only up about 1.5%. The rally in VVUS, which is approaching 9.3% as I type this, is a bit daunting.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.