- Contrave has eclipsed the 5,000 script mark.
- Launch trajectory is most impressive yet.
- It is still to early to assess refill data.
Contrave, the anti-obesity drug from Orexigen (NASDAQ:OREX) saw weekly sales come in at just above 5,400 this past week. The drug has been on the market for 8 weeks now, and after a slow start due to technical issues, the last few weeks have been nothing short of impressive. In fact, the early launch of Contrave is presenting a trajectory that Arena (ARNA) and Vivus (VVUS) investors had hoped to see but fell short of. Prior to the Contrave launch, Arena's Belviq had set the bar.
What is it about Contrave that has the early numbers looking so impressive? In my opinion the price point is playing a major role. At this stage the trajectories of the competitors have not really degraded, but if you are invested in any drug in this sector, monitoring the overall sector is critical. It appears that the 900 sales reps dedicated to Contrave have actually helped to broaden the market. Certainly it is early, but there is no denying how impressive the last few weeks have been.
For perspective, I will compare the Belviq launch to the Contrave launch. In order to be realistic, we must realize that the trial blazed by competitors prior to Contrave entering the space made Contrave's parth a bit easier. This is why I had projected that a three month tally of Contrave sales needed to be near 50,000 as opposed to the 33,000 that Belviq had delivered. At this point, eight weeks into the launch, Contrave sales are at about 18,000. That would imply that sales over the next 4 weeks need to be 32,000 to meet my goals (8,000 per week for the next 4 weeks). Certainly the Thanksgiving Holiday and Christmas holiday will impact the ability to reach what I considered good, but it seems apparent that Contrave will easily pass the Belviq launch. Realistically, the sales figures at the three month mark may be between 43,000 and 46,000.
For Contrave to reach 5,000 in 8 weeks is a good achievement. It took Belviq 24 weeks to reach that level, and it was 32 weeks before Belviq was able to stay above 5,000 for good. Belviq sales, at 78 weeks into its launch are at a bit above 11,600. Vivus sales for Qsymia stand at about 11,000 a full 117 weeks after launch. Essentially, Orexigen, just 8 weeks into launch, is already half way to the sales levels that its competitors are at with well over 1 and 2 years on the market.
Chart Source - Spencer Osborne
While all of this is exciting, I must offer a bit of caution. Clearly Contrave is good at getting new customers into the door. What we are not yet able to assess is whether they can keep these customers. I think that a price point of between $55 and $75 is very palatable for consumers. The question is now whether these people stay on the drug. Simply stated, it is too early to really assess the refill traction. Some customers may drop because the drug does not work for them, and some may drop because they have an adverse reaction to the drug. The "churn" impact will begin to show through after the third month of sales.
The main difference between the Contrave launch and the launch of Qsymia and Belviq is the price point, the number of sales reps, and the legwork that Belviq and Qsymia made in insurance and doctor acceptance of anti-obesity drugs. Belviq launched with 200 sales reps, Qsymia's sales reps numbers were similar. Contrave launched with 900 reps. The biggest factor in my opinion is the price point. It is easier to convince a person to part with less than $75 dollars than it is to get someone to part with over $100 and sometimes $200.
With the launch still being new, we should anticipate some decent growth for a few weeks, a dip for Christmas, and then it will get interesting. Weight loss season kicks off with the new year. That should greatly help sales figures. I do not really anticipate the Contrave weekly sales figures to catch Qsymia or Belviq in the next 8 weeks, but the weekly playing field could look very interesting by March.
Investors should bear in mind that Contrave is up for an approval or rejection decision in Europe this month. Do not let that potential catalyst fall off of your radar screen. If approved in Europe, Contrave would be all alone. Neither Belviq nor Qsymia are approved there. If Contrave is the sole player in Europe, it could allow them latitude to be even more aggressive than they already are.
Lastly, Contrave is priced much lower than its competition. That means that it takes more sales to get to the same type of revenue. Investors need to start thinking about the revenue picture, and whether Contrave can deliver the sales numbers needed to deliver good revenues and generate stock price appreciation. Stay Tuned!
This article was written by
Analyst’s Disclosure: The author is long ARNA. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
I have no position in Orexigen or Vivus
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