I am sometimes amazed that in a developing sector some investors will express very negative hopes for a competitor when that competitor is actually helpful in getting the sector awareness to a point where success for any of those in the sector can happen.
Vivus and Arena debates are like Coke vs. Pepsi or Chevy vs. Ford. The difference is that Coke, Pepsi, Chevy, and Ford are all in well established sectors and not trying to build a sector.
I have always felt that in the anti-obesity space there would be room for several players. Further, I have always believed that it would take a few players to bring the concept of a prescription anti-obesity product to the forefront of consumers and doctors.
With the most recent quarterly reports Vivus announced 138,000 scripts for Qsymia in Q2 while Arena announced 110,000 for Belviq. Almost immediately I began seeing communications about these numbers. One of the most naive concepts I have seen is from Arena investors that feel Qsymia script numbers should be cut in half because a titration script is written along with a regular script. That thought process is quite naive.
- Both companies have free trials. Arena has a 15 day free trial, and the Qsymia titration dose has a free trial. Both of these freebies require a script.
- If you look at the revenue side of the equation you would see something glaring if you want to adjust the script numbers downward.
- Growth of awareness is very important to both companies. With a third player in Orexigen potentially entering the market, perhaps awareness can finally grow in a meaningful fashion.
In Q2 of 2014 Qsymia reported $11 million in net revenue on 138,000 scripts. A little math tells us that the average revenue per script was about $80. This makes sense given that Qsymia is priced below Belviq.
In Q2 of 2014 Belviq had $9.9 million in net revenue on 110,000 scripts. Again, math tells us that the average was $90 per script. This would make sense given that Belviq carries a higher price point.
Readers can already figure out my next question to those naive enough to say that Qsymia scripts should be cut in half. Are you willing to say that the average revenue per script for Qsymia is $159? That is exactly what happens if you cut the scripts of Qsymia in half.
The main problem is spin. You see, people LOVE to spin things to appear in their favor. The problem with spin is that anyone digging just a little deeper can call out that spin in a heartbeat. What we have here is Arena investors wanting to spin the Qsymia story with something that appears like solid information. Indeed, there are free scripts and two scripts written when a patient goes on Qsymia. The other half of the story is that essentially the same is true with Belviq.
It seems that there is a band of Vivus and Arena investors that want to fight each other when what they should be doing is hoping that these companies can get awareness of doctors and patients to a level where the sector can benefit. What we have are two football teams fighting it out before the game even starts.
Do a little math. That is all it takes. Neither is setting the world ablaze yet.
Disclosure: The author is long ARNA.
Additional disclosure: I have no position in Vivus