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Two of the three major players in the treatment of obesity, VIVUS Inc. (NASDAQ:VVUS) and Arena Pharmaceuticals Inc. (NASDAQ:ARNA) released their financial results and provided an update on recent developments. The third player, Orexigen Therapeutics Inc. (NASDAQ:OREX), will release its quarterly results and provide an update on recent developments today.

While the U.S. Food and Drug Administration (FDA) has approved VVUS and ARNA's obesity treatments earlier this year, OREX is still waiting for a regulatory approval for its obesity drug. In this article, I want to focus on VVUS and ARNA, the two companies that have already received a nod from the FDA for their obesity drugs. Let's start with VVUS.

VIVUS

Shares Plunge as Q3 Results Disappoint

Shares of Mountain View, California-based VIVUS fell nearly 21% on Tuesday as investors digested the company's third-quarter results.


(Click to enlarge)

VVUS Stock Price Performance; Source; stockcharts.com

The sell-off was sparked by disappointing sales of VVUS' obesity drug Qsymia. While VVUS' obesity drug was approved a month after ARNA's, it has been the first to hit the market. VVUS announced the U.S. market availability of Qsymia on September 17, 2012.

For the third quarter of 2012, VVUS recognized net product revenue of $41,000 from prescriptions shipped from certified pharmacies to patients. This was below the consensus forecast of $310,000. The company only had a couple of weeks left in the third quarter when Qsymia was launched. However, the performance has been disappointing in October as well.

VVUS said in a conference call that between the launch date and October 26, 5,560 Qsymia prescriptions were shipped. Given the retail price for a 30-day prescription of the drug at the recommended dose is $160; this translates to sales of around $900,000 in the fourth quarter. It is likely that more prescriptions will be filled during the fourth quarter. However, the company will still struggle to meet Street estimates of $24.3 million in sales in the fourth quarter.

The weaker-than-expected sales in the third quarter also resulted in higher-than-anticipated loss for VVUS. The company reported a loss of $40.4 million, or $0.40 per share, compared to consensus forecast of $0.32 per share.

Reasons Behind the Lackluster Sales

VVUS said in its conference call that 30% of patients who are prescribed its obesity drug are choosing not to pick up their prescriptions. This is because currently only 20% of patients are receiving reimbursement coverage for Qsymia, with an average co-pay of $62 per month. As a result, some patients are abandoning prescriptions at the pharmacy.

Mike Miller, Chief Commercial Officer at VVUS, said in a conference call with analysts, "Given the obesity market has not seen a branded introduction in 13 years, payer coverage is minimal and there is prescription abandonment due to the cash outlay."

Miller said in the call that the company is looking into these issues and is continuing to prioritize obtaining payer coverage. He also said that the company will deploy other tactical innovative programs to reduce out-of-patient costs for the patient.

Although VVUS is addressing the reimbursement issue, it may take a while before coverage is increased. Therefore sales could remain lackluster in the future.

VVUS also perhaps needs to partner with a major drugmaker with a large sales force.

Currently, Qsymia is distributed through the home delivery networks of CVS Pharmacy (NYSE:CVS), Walgreens (NYSE:WAG), Express Scripts (NASDAQ:ESRX) and a large closed model health maintenance organization. Last month, VVUS submitted an amendment to the Risk Evaluation and Mitigation Strategy or REMS for the drug proposing a REMS modification that would enable the company to distribute the Qsymia through select retail pharmacies in order to increase access.

Setback in Europe

Recently, VVUS suffered another setback as the company's Marketing Authorization Application with the European Medicines Agency to market Qsymia in the European Union for treatment of obesity was rejected.

Arena Pharmaceuticals

Update on Recent developments

VVUS's rival, ARNA also released its financial results for the third quarter on Tuesday and provided an update on recent developments. ARNA's obesity drug, Belviq, was approved in June this year. However, the company is yet to launch the drug, therefore I am not focusing on the financials.

ARNA said on Tuesday that it is preparing for the launch of Belviq. The company expects its marketing partner Eisai Inc. to begin marketing Belviq in the U.S. in early 2013, subject to the U.S. Drug Enforcement Administration's final scheduling designation.

ARNA also expects regulatory authorities in the EU and Switzerland to provide their decisions on the MAA for Belviq in the first half of 2013.

CEO Jack Lief said on Tuesday, "We look forward to providing a novel treatment option to patients who need help with chronic weight management. As we prepare for the U.S. launch of BELVIQ, we continue to pursue additional regulatory approvals and collaborations in strategic markets worldwide."

VVUS vs ARNA

While VVUS met with a slow launch for its obesity drug, the big question now is will ARNA meet with the same fate when it launches its own obesity drug?

One thing in favor of ARNA is that the company has a major company as its marketing partner. In addition, Belviq will have no REMS and it will be available at retail channel.

While ARNA's Belviq has a better safety profile, VVUS's Qsymia has better efficacy.

Taking all these factors into account, ARNA may have a slight edge over VVUS.

Source: Vivus Or Arena: Who Has The Edge?