Doctors cheered last year when the U.S. gave its first approvals for drugs to combat obesity in more than a decade. Eight months later, the two treatments have yet to catch on with consumers or investors.
New prescriptions of Vivus Inc.’s (VVUS) Qsymia, on the market since September, have declined 22 percent since peaking on Feb. 8, a drop that analysts say may be caused by high patient costs. That’s led investors to bet that shares of San Diego-based Arena Pharmaceuticals Inc. (ARNA) won’t climb when its drug, called Belviq, goes on sale in the U.S. later this year.
Qsymia and Belviq are the first medicines cleared since 1999 in the U.S. to fight obesity, a global health threat that can lead to chronic illnesses including diabetes and heart disease. While the condition has doubled in the U.S. since 1980, with a third of the population now considered overweight, investors are shying away from Vivus and Arena because they see the drugs’ high costs and lack of marketing to general practitioners hurting sales.
“There are a lot of obese people in this country, but the drugs are not getting the uptake that people originally thought they would,” Andrew Berens, an analyst with Bloomberg Industries, said in a telephone interview. “The overall market has proven to have more hurdles than everyone expected.”
Those obstacles include sales forces that are marketing to specialists instead of the family doctors who tend to write most prescriptions, as well as safety concerns, Berens said. Price may be the biggest hurdle, as the drugs could cost patients as much as $200 per month. It’s unclear how much of that would be covered by insurance.
When Qsymia debuted, insurance companies agreed to cover about one-third of its cost. The initial reimbursement news caused Vivus shares to rise in the first weeks the drug was on the market. Yet since reaching $22.86 on Oct. 12, the Mountain View, California-based company has fallen 53 percent through yesterday on disappointing sales of the medicine. The shares rose less than 1 percent to $10.81 at the close in New York.
“Nobody is willing to pay the full price of this out of pocket,” Marko Kozul, a Leerink Swann & Co. analyst in San Francisco, said in an interview. “That’s why reimbursement is key and that’s why reimbursement news this year should be considered a major driver.”
Short sales against Arena have risen this year, reaching 21 percent of shares outstanding as of March 8, the most since March 2011, according to London-based financial information services firm Markit. In a short sale, traders sell borrowed stock assuming the price will drop, enabling them to profit by buying it back at a lower price.
To be sure, the market for the obesity pills may expand at a faster pace once Arena is advertising and marketing its drug, Berens said. Also, Orexigen Therapeutics Inc. (OREX), based in La Jolla, California, is developing a weight-loss therapy called Contrave, which could help raise public demand if that drug reaches the market, Berens said.
“I think it’s a mistake to judge Arena and the whole obesity space on how six months of Qsymia sales have gone,” Simos Simeonidis, an analyst with Cowen & Co. in New York, said in an interview.
Still, the drugs may have a tough road ahead. While Belviq was approved in the U.S. in June, a month before Qsymia was cleared, the medicine won’t be available until the U.S. Drug Enforcement Administration classifies its ability to be abused, a decision that may come in April.
“We continue to see few signs that the early launch of Belviq will avoid the problems Vivus is currently experiencing,” Cory Kasimov, a JPMorgan Chase & Co. analyst, wrote in a note to clients on March 4. “In fact, Belviq could well experience a more lackluster launch vs. Qsymia given the drug’s higher price and more modest level of efficacy.”
Belviq will cost $199.50 for a month’s supply, or about $6.65 a day, Arena said in a February filing. That’s 48 percent more than Qsymia for a less-effective medicine, Kasimov said.
Arena shares rose 5.3 percent to $7.90. The stock had declined 34 percent from when Belviq was approved June 27 through yesterday as investors grew concerned about the drug’s prospects in light of Qsymia’s slow sales.
More than 78 million U.S. adults are obese, according to the Centers for Disease Control and Prevention in Atlanta. About 500 million people worldwide are obese, as levels doubled in every region from 1980 to 2008, according to a World Health Organization report last year. In addition to raising health risks that also include stroke, obesity costs the U.S. economy an estimated $147 billion a year in medical expenses and lost productivity, according to the CDC.
Belviq will be marketed in North America by Tokyo-based Eisai Co. (4523), which has deployed 200 sales representatives to promote the therapy once it gets clearance from regulators. Another 50 specialists are working to persuade insurers to reimburse patients for the treatment, Arena said during an earnings call on March 4.
Investors shouldn’t compare the two companies, said Craig Audet, Arena’s senior vice president of operations, in an interview.
“People overestimate the way these drugs are going to take off,” Audet said. “They think they’re going to go like gangbusters right out of the gate, I don’t think that that’s what’s going to happen.”
He stressed that Eisai isn’t targeting patients looking for a “quick fix,” rather the companies are seeking people committed to a lifestyle change with the medicine to improve their health.
“This is not something where you see instantaneous results,” said Stephen Brozak, president of WBB Securities in Clark, New Jersey, in a telephone interview. “Patients are not going to be coming in and pushing for it. This has to be done in combination with clinicians. So whenever that’s the case, it’s always better to keep your expectations lower.”
While the drugs are meant to help patients reduce the risk of chronic conditions often spurred by obesity, keeping those expectations in check may prove challenging, said Berens.
“The payers, rather than looking at it as preventative medicine, are looking at it as cosmetic,” he said.
Arena’s pill works in a similar way to fenfluramine, part of the fen-phen appetite-suppression drug combination pulled from the market in 1997 when it was linked to heart valve abnormalities. Belviq also is indicated for overweight people who have at least one coexisting condition such as high blood pressure or Type 2 diabetes, Arena said in an e-mailed statement.
Arena’s drug, previously called lorcaserin, and Vivus’s Qsymia were approved last year after being rejected by the FDA in 2010. Regulators said at the time that lorcaserin raised cancer concerns and Qsymia may have been tied to birth defects and heart risks.
Arena’s treatment affects an area of the brain that helps a person eat less and feel full after consuming small amounts of food, according to the FDA. Qsymia from Vivus is a combination of the appetite suppressant phentermine and the anti-seizure drug topiramate.
Patients who tested Arena’s pill in three studies lost about 3 percent more of their body weight than those who took a placebo, FDA staff said in a May 8 report. People who took part in trials on Vivus’s Qsymia lost 6.7 percent and 8.9 percent more of their body weight on mid and high doses compared with those who used a placebo, FDA staff said last year in a report.
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