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3 Things to Watch With VIVUS

Is obesity over? VIVUS (Nasdaq: VVUS  ) investors hope the company's FDA approval signals an era of slimmer waistlines. But the market seems to think this small drugmaker is trying to peddle a prescription-only Olestra. That compound also looked like a slam dunk until the, ahem, side effects became apparent. Since Qsymia's approval on July 17, the high-flying stock has been brought down to earth somewhat, dragging Arena Pharmaceuticals (Nasdaq: ARNA  ) , maker of competing weight-loss drug Belviq, along with it:

VVUS Total Return Price Chart

VVUS Total Return Price data by YCharts

Will Qsymia be the blockbuster investors hope? That will depend on a few critical factors, which we may not fully understand for some time. Let's examine three important issues VIVUS has to handle in order for it to justify the market's high hopes.

1: Are Qsymia's benefits worth the risks?
This is a question that dogs every potential fat-killing substance, both consumer-based and pharmaceutical. Thus far, nothing's managed to justify its hype. Olestra was a commercial flop. GlaxoSmithKline's (Nasdaq: GSK  ) alli was supposed to be a home-run over-the-counter weight-loss drug, but it has similar gastrointestinal issues as Olestra, which is kind of a deal-breaker for anyone who prefers to maintain control of their bodily functions.

Qsymia, Belviq, and Orexigen Theraputics' (Nasdaq: OREX  ) Contrave have different problems. Contrave is still in trials due to cardiovascular concerns, and the FDA has placed tight restrictions on both Arena and VIVUS' drugs. Millions of people want to lose weight, but the list of failed drugs is long and frightening. It's easy to imagine a small sample of adverse reactions causing medical professionals to reject it entirely, as happened with fen-phen in the '90s. Additionally, Qsymia's female users must avoid pregnancy at all costs because of birth defect risks.

2: Can VIVUS make this work on its own?
The FDA's restrictions on Qsymia limit the drug to mail-order pharmacies. That's hardly a surefire path to irrelevance, but it does make things more difficult. VIVUS also lacks any marketing muscle, which puts it at a disadvantage against Belviq and the Arena-Eisai partnership that will promote it. Additionally, VIVUS doesn't have the known manufacturing capabilities to produce significant quantities of Qsymia.

A small one-drug biotech company with no manufacturing partners, no distribution and marketing partners, and significant competition from biotechs that have lined up one or both of these important deals makes VIVUS' an uphill climb. But the final issue may be the most devastating.

3: Is Qsymia worth prescribing instead of the alternative(s)?
Qsymia is the combination of two existing drugs. That's it, really. A doctor might prescribe Qsymia, or he might choose instead to issue two prescriptions for the off-patent drugs topamirate (formerly Topamax) and phentermine, which you might recognize as half of the phen-fen tag team that went down in flames years ago. Both drugs can be prescribed now in generic form, so there may be little impetus for physicians to offer a higher-priced combination.

Notorious short-seller Citron Research has brought up the point that Qsymia's patent may be challenged, but the more obvious risk is that doctors and patients will simply use the two component drugs instead, or otherwise try Belviq due to its lack of known potential for birth defects.

All weight-loss drugs carry risks, which is why it's so important to stay on top of any news and analysis regarding your chosen biotechs. For investors looking at Arena Pharmaceuticals, we've created a premium research service to track its progress. Subscribers gain access to a comprehensive report as well as a full year's worth of detailed updates, so what are you waiting for? Get your research started now.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (7) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 30, 2012, at 3:35 PM, uropa1 wrote:

    No,, VVUS did not drag ARNA with it. Arena is doing a great job on its own by diluting its shares and having a minimally effective drug with MORE side-effects, not to mention more dangerous side effects than qsymia. If you are going to write a propaganda article, at least do some minimal DD first, then blabber on afterwords.

    Your and your so called collegues are a bunch of biased fools. Fitting.

  • Report this Comment On August 30, 2012, at 4:30 PM, Marketjocky wrote:

    First off, the arena and vivid bashing is well overplayed! Bashing does not help the obisity pill market look good for anyone.

    Second, if you insist on bashing try to do it with class and the facts!

    Arena with more and more dangerous side affects where in the world did you get that info?

    Do your own dd

  • Report this Comment On August 30, 2012, at 5:47 PM, uropa1 wrote:

    Well let's see Marketjocky itch,

    Brain and mammary tumors in rats to start. You can talk all you want about the high dose and it was in rats and not humans, but only a small fraction of subjects were exposed to the ARNA placebo like drug. For all the other side effects, see the belviq side-effect profile on the arena website. Most of the qsymia side-effects of parasthesia, memory disturbance, altered taste and the like is also listed on the belviq (the name even sounds like someone vomited) side-effect profile of the drug.

    Thanks for your suggestion.

    Have a great day and go read.

  • Report this Comment On August 30, 2012, at 6:52 PM, seelis wrote:

    VVUS has 2 drugs. VVUS has secured manufacturing for qsymia and is readying for October launch. VVUS has hired sales force team. The FDA did not restrict VVUS to mail-order pharmacies. The FDA explicitly requested VVUS expand to brick & mortar retail pharmacies. VVUS qsymia is single long acting dual agent capsule. There is no comparable generic equivalent available for prescription. Combining the two drugs in off-label format is too high risk an activity for the large majority of prescribers. VVUS's ceo has brought 2 other companies to big pharma sale. VVUS has 3 yr NCE and is patent protected thru 2020. Motley Fool no longer seems to fact check.

  • Report this Comment On August 30, 2012, at 9:18 PM, meldog6 wrote:

    Alex, welcome to the imaginary world of the vvus investeor. As you can see by their comments their elevators do not go to the top floor. With vvus you are either 100% with them or 100% against, no in between.

    Some of the posts on their message board somehow gets mistranslated such as how Qsymia with its REMS, label restrictions, ONLY available from certain online pharmacies (which by the way it's on vvus's website that no contracts have been finalized yet) and not to mention the monthly pregnancy test. Now add TEN post studies and in their opinion they have a drug that is safer than Belviq with no delays in approval, NO REMS and SIX post studies in which FIVE are pediatric studies.

    Lets not forget no buyout not even a partner, an EMA approval on a second delay awaiting oral questions and burning through alot of cash.

    I don't agree 100% with your article but I think you brought up some good points. The only problem is vvus investors don't like that. ha ha! GLTY!

  • Report this Comment On August 31, 2012, at 4:36 PM, Foreeverlong wrote:

    I've been in health care industry for a long time, and I really have a hard time understanding how Qsymia is going to sell to any great degree. Physicians order drugs, are very risk averse and avoid liability at any cost. I am of the mind that Vivus would not have been a good "long term" investment, even if Lorc/Belviq had not gotten FDA approval. Qsymia's components, as you have said, are already readily available.

    Because Topiramate/Topamax has recognized side effects, particularly for women of childbearing age (a huge segment of the worldwide obesity challenge), to say nothing of creating memory loss etc.; I just don't think that physicians are going to be willing to take on the rigors of the REMS associated with Qsymia. Patients of chldbearing age taking Qsymia willl have to see their physician every single month, and the physician will have to see to it or risk liability. Limited pharmacy distribution is a major problem. Finally, if physicians are not ordering the compoenents of Qsymia in generic form, why would they order a more expensive combination of the two?

    But in the end, Qsymia's restictive REMS and the liability of Topiramate will be its downfall. Neither will sit well with physicians.

  • Report this Comment On September 11, 2012, at 11:48 AM, mysticjoanna wrote:

    Hi, I'd like to offer a comment from a patient who will be taking this new medication, granted I am not of child bearing age. I have passed that. I encourage people who are thinking of investing in vvus stocks to research the money that the company made selling Phentermine, that drug was sold over the internet very profitably, the internet offers a world-wide market for Qsymia. Thanks for letting me comment.

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