Low-Cost Contrave Fuels Anti-Obesity Drugs Recovery From Thanksgiving

| About: Orexigen Therapeutics, (OREX)

Summary

Belviq, Qsymia and Contrave all posted gains, with Contrave up 62% week over week. Therefore, there's no evidence so far that any one drug is poaching patients from the others.

The sector as a whole grew 29.5%, and 5% from the week before Thanksgiving, and Contrave expanded its market share among the three rivals to an all-time high 19.3%.

With two more reporting periods before Christmas, it remains to be seen if momentum continues, especially for Contrave, whose Week 7 total prescriptions is above that of Belviq's Week 35.

Qsymia's sales inertia will probably continue, while a bigger team promoting Belviq calls for a 26% increase in cumulative scripts from Q4 2014 to Q1 2015.

Contrave is in launch mode and could see anywhere from 87,000 to 114,000 total prescriptions in Q1 2015. It will surpass the lower range because patients pay less for refills.

Doctors' offices are typically closed on holidays such as Thanksgiving and put a damper on the numbers of prescriptions filled that week. Unlike when pharmacies are closed and patients return en masse at their convenience, "lost" prescriptions from patients who could've been seen are not made up, at best, refills may be called in prior to the next appointment. The holiday effect is usually more pronounced for drug launches in the early stages; the strength of the launch may be gauged by how much it recaptures the numbers the following week. The latest figures released by IMS for the 3 oral prescription-only weight loss drugs Belviq from Arena (NASDAQ:ARNA), Qsymia from Vivus (NASDAQ:VVUS) and Contrave from Orexigen (NASDAQ:OREX) showed a full recovery (see Table 1), with the trio gaining 29.5% week to week (27,987 vs. 21,616). More importantly, the total is up 4.7% from the week before Thanksgiving (26,721) and a 75% gain from last year when Belviq and Qsymia tallied 15,992 scripts for the week ending December 6.

Table 1. Total and New Prescriptions

Belviq

Qsymia

Contrave

Week Ended

Total

New

Total

New

Total

New

11/21/14

11919

8637

10837

7611

3965

3922

Weekly Change

-2.4%

-3.7%

-3.3%

-4.1%

72.7%

72.0%

11/28/14

9264

6241

9005

6125

3347

3265

Weekly Change

-22.3%

-27.7%

-16.9%

-19.5%

-15.6%

-16.8%

12/05/14

11652

8066

10923

7288

5412

5283

Weekly Change

25.8%

29.2%

21.3%

19.0%

61.7%

61.8%

Previously, there had been signs that the obesity market was reaching a plateau. In the period starting when the FDA allowed it to be sold in retail pharmacies starting July 1 last year, prescriptions for Qsymia rose for several weeks and passed the 11,000 mark in October before dipping in the 8,000-range during Thanksgiving (see Figure 1). And after the holidays, Qsymia had been range-bound between 9,000 to 12,500.

Figure 1. Total Prescriptions by Week

Data from Symphony (2013) or IMS (2014)

On the other hand, while the chart for Qsymia for this year's July to December period is flat, Belviq entered the period behind Qsymia in total scripts but overtook it on the week ending August 8 and is steadily pulling away (see Figure 2). There are multiple possibilities for this dynamic. One belief is that the Vivus' 150 sales representatives and the 600 of Belviq's marketer, Eisai (OTCPK:ESALY), have targeted much of the same 60,000 willing prescribers. As the doctors become increasingly familiar and comfortable with the results they see in practice, they put more and more of their patients on it. Since both have offered free or discounted products, there is little differentiation price-wise or coverage-wise; the difference comes with the drugs' efficacy or tolerability. There are enough patients going on Qsymia to balance the ones who can't tolerate it or don't lose enough weight who move on to Belviq and vice versa, with a little more being recruited by Eisai's extra reps and direct-to-consumer advertising (DTCA). In this bearish theory, the emergence of Contrave can be explained by the much more generous pricing of distributor Takeda (OTCPK:TKPHF), especially the low $60 maintenance price for cash patients. Doctors of the patients who couldn't previously afford the more established medications are now switching them over, but a saturation point will eventually be reached or Contrave will start encroaching into the Belviq and Qsymia markets.

At the other end of the spectrum lies the concept of a vast untapped market: the over 110 million people in the U.S. who are obese, defined as having a body mass index greater than or equal to 30.0 kg/m2 and a refusal of the idea that the market has already come down to recycling patients and doctors. A survey of 900+ healthcare professionals overwhelmingly initially recommend lifestyle modifications, which to bears is proof that obesity meds won't succeed. However, that part of the bear case makes no sense; if diet and exercise (D&E) regimens were effective in any way, there would be no obesity epidemic. Second, prescription meds were never meant for first line; they are indicated in addition to D&E for patients whose lifestyle changes could not bring about the clinically significant 5-10% weight loss. Third, bears underestimate the willingness of doctors to prescribe medication. In the above survey, around half the respondents had no prescribing power (academicians, regular nurses), which brings the rate of those who prescribed Belviq and Qsymia to 20% (as well as phentermine, a generic component of Qsymia, to 32%). Interestingly, 40% still prescribed orlistat, which is notorious for oily spotting, flatus with discharge, fecal urgency, and fatty/oily stool all side effects occurring in over 20% of patients. Orlistat is currently only available as prescription-only Xenical; the over-the-counter (OTC) product Alli was recalled due to possible tampering in March, or two months before the survey was published. Those who prescribed Alli for the OTC convenience may have to consider alternatives. Around a million doctors practice in the U.S., and over half of whom work from offices. There are also almost 300,000 clinicians in the primary care workforce (209,000 primary care doctors and another 56,000 nurse practitioners and 30,000 physician assistants). Bulls believe that only a fraction of them have been informed about the advantages of the newer drugs (better side effect profile over Xenical) or combinations (the increased weight loss of adding phentermine to Belviq), and hope the Takeda team doubling the combined sales force to 1,650 will reach a lot more prescribers and their respective patients.

Then there are middle of the road views that acknowledge there have been stumbling blocks in the respective launches. Some in the survey brought up cost as a barrier, and generics will always be a thorn in the side of Qsymia and Contrave, but less so for Contrave. Cash patients will find that even with discounts, generic bupropion and naltrexone still costs more than Contrave. It will be interesting to see if Orexigen reveals the ratios of cash to insurance patients. On the insurance side, Takeda failed to secure at least the same coverage for Contrave compared to Belviq at similar stages in their launches, while formularies of most the top U.S. health insurers don t list Belviq, and by association, Qsymia. Vivus reported a -2% decrease in cumulative prescriptions between Q1 2014 and Q4 2013. It is financially unable to hire more reps or launch a DTCA effort, and perhaps faces a similar outlook next quarter. Eisai has a 50% larger sales force this year than last, so more growth can be expected. Contrave is building a strong launch, with a weekly increase of 61.7% and 36.5% from 2 weeks ago. Another encouraging sign is that the entire market is expanding and Contrave's advancement has not yet appeared to be in expense of the other two. Currently, Contrave's numbers put in around half a year ahead of Belviq (see Table 2).

Table 2. Total Prescriptions, Belviq vs. Contrave, Weeks Into Launch

Belviq

Contrave

Week

Ending

Total Rx

Change

Week

Ending

Total Rx

24

11/22/13

5258

6.8%

5

11/21/14

3965

72.7%

25

11/29/13

3854

-26.7%

6

11/28/14

3347

-15.6%

26

12/06/13

4787

24.2%

7

12/05/14

5412

61.7%

27

12/13/13

4539

-5.2%

28

12/20/13

4640

2.2%

29

12/27/13

3180

-31.5%

30

01/03/14

3851

21.1%

31

01/10/14

4775

24.0%

32

01/17/14

5079

6.4%

33

01/24/14

5186

2.1%

34

01/31/14

5190

0.1%

35

02/07/14

5709

10.0%

36

02/14/14

5766

1.0%

37

02/21/14

6356

10.2%

38

02/28/14

6690

5.3%

39

03/07/14

6667

-0.3%

40

03/14/14

7045

5.7%

41

03/21/14

7096

0.7%

42

03/28/14

7132

0.5%

Of course it is too early to foretell how long Contrave's high-flying act will continue, but 60-70% weekly improvements cannot be sustained. At minimum, following in Belviq's path should be attainable. Assuming Qsymia follows last year's trajectory (very likely), and Belviq does the same (50-50), projections ending in March may look like Figure 2. This gives the following estimated number of prescriptions filled for Q1 2015, for week ending March 27, and year-over-year and quarter-to-quarter comparisons:

Qsymia: 132,000, 11,230, +7%, -2%

Belviq: 186,000, 17,364, -, +26%

Contrave: 87,000, 8,065, -, +173%

Combined: 405,000, 36,659, +29%, +124%

Figure 2. Projected Total Prescriptions by Week

The above model for Contrave appears conservative and assumes 4,000 prescriptions during Christmas (compared to 3,180 for Belviq in its 29th week); it is 75% likely these numbers will be surpassed. To account for Takeda's bigger sales team and price advantage, an adjustment of +25% and reducing the downside capture also by 25% leads to possibly an optimistic projection:

Contrave: 114,000, 11,055, -, +252%

Investors may mull over the reasonableness of the projections. If Contrave reaching 5 digits seems implausible, consider that Belviq and Qsymia had to contend with patients facing *higher* costs after their initial free or discounted fill. Under Takeda's Direct Save program, Contrave patients pay the same for the second month, then $10 lower from the third month on. Refill numbers for Belviq and Qsymia are consistently 25-35% of total scripts. Therefore, even if Contrave's new scripts remain at 5,500, that kind of refill rate will push totals over 7,000 in a month.

Disclosure: The author is long OREX, 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.

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