Who Will Be the Winner in the Fight Against Obesity?

The obesity segment of the health care industry is turning into a battleground. VIVUS  (NASDAQ: VVUS  ) entered the market first with its drug, Qsymia, and at the start of June, Arena Pharmaceuticals (NASDAQ: ARNA  ) also launched its obesity drug, Belviq, with the help of its partner, Eisai. On one hand, we have Qsymia, a drug that comes with a restrictive label and marketing limitations. On the other hand, we have Belviq, which does not face any marketing limitations or restrictive label. The third player in the sector is Orexigen Therapeutics (NASDAQ: OREX  ) , which is planning to enter the market soon with its drug, Contrave. The question here is: Which of these companies will come out as the winner in this sector?

Who will be the winner?
The answer to the above question is not simple. VIVUS hoped to capture the market share before any of its competitors entered the market. However, the company failed in attracting patients or convincing physicians. As a result, the sales were very extremely slow and below the expectations. To be fair to VIVUS, I believe Wall Street's expectations of Qsymia were too ambitious. Nonetheless, the failure to meet expectations resulted in massive loss in the stock price.

Many factors contributed to the slow sales, namely high costs, lack of insurance coverage, associated side effects, lack of marketability, and restrictive label. Some of these hurdles may be removed soon as the company was able to win less restrictive label, and VIVUS is also working on increasing the insurance coverage and decreasing the out-of-pocket cost for patients. Furthermore, new management is already having a positive impact on the operations, and the prescriptions are boosting. We might see some growth in revenues over the next two quarters, which could cause the stock price to move up. However, I still expect the sales to fall short of the market expectations.

Arena's launch of Belviq has been extremely poor, in my opinion. VIVUS had many visible hurdles, and the slow sales of Qsymia are understandable. However, Arena had a lot of time to plan with its marketing partner Eisai, and with a drug boasting safer profile -- it should have attracted more patients. The prescriptions rate is disappointing. Without any restrictions and with ample time to strategize and plan, Arena may have botched the Belviq launch, in my opinion. However, I will wait before passing the final judgment on the stock.

As I stated in my previous article about Arena that it is difficult to completely assess the performance of an obesity drug at the early stages of its launch. It should also be kept in mind that the current prescription data for Belviq includes 15-day free trial. The biggest issue with the anti-obesity drugs is the dropout rate. A large number of patients tend to drop out in early stages if they do not see a visible effect of the drug. One positive for Arena is that institutional ownership in the stock has reached almost 50%, which indicates that the market believes in the stock. Arena has mainly been a stock for retail investors in the past. However, increased ownership by institutions might indicate there is potential in this stock.

The third, and probably the most important, player in the sector is Orexigen, which hopes to launch its obesity drug Contrave sometime next year. Orexigen will likely face an easier route to approval due to the experiences of Arena and VIVUS. The company will have the benefit of knowing what exactly the FDA wants. Also, Contrave is a combination of already available drugs, which should allow the company to launch the drug immediately if it's approved. Contrave is believed to fall between Qsymia and Belviq in terms of efficacy -- Qsymia has the highest efficacy among these three drugs. Entering the market, Orexigen will have the benefit of learning from VIVUS and Arena. As a result, I believe the company will be able to launch its drug better.

Orexigen has almost 75% institutional ownership at the moment, and the stock has gained about 72% in the past 12 months. At the same time, Arena and VIVUS have lost 13.3% and 40.6%, respectively. Institutional ownership and the trend in the stock price indicate that the market has more confidence in Orexigen than its competitors.

Summary
It is extremely difficult to pick a clear winner in this sector. However, I believe Orexigen will edge its competitors by a small margin. Contrave is supposed to have better efficacy than Belviq and a safer profile than Qsymia, which might give it an edge in the market. However, the final position will be determined by the cost, insurance, physician choice and the preference of the patient.

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Read/Post Comments (11) | Recommend This Article (3)

Comments from our Foolish Readers

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  • Report this Comment On August 22, 2013, at 4:52 PM, marp11 wrote:

    Arena's launch of Belviq has been extremely poor, in my opinion. VIVUS had many visible hurdles, and the slow sales of Qsymia are understandable. However, Arena had a lot of time to plan with its marketing partner Eisai, and with a drug boasting safer profile -- it should have attracted more patients. The prescriptions rate is disappointing. Without any restrictions and with ample time to strategize and plan, Arena may have botched the Belviq launch, in my opinion. However, I will wait before passing the final judgment on the stock.

    BUT THEN

    As I stated in my previous article about Arena that it is difficult to completely assess the performance of an obesity drug at the early stages of its launch

    SO ITS VERY VERY POOR

    BUT

    TOO EARLY TO ASSESS

    EOM

    FOOLS IS THE PERFECT NAME

  • Report this Comment On August 22, 2013, at 4:57 PM, marp11 wrote:

    SO LETS ASSESS

    200 million share float

    110 million institutionally owned

    35 million NON SELLING RETAIL OWNED

    that leaves our special friends

    65 MILLION SHORTS BURIED DEEP

    ohhh and their friends

    ADAM AND SPENCER AND FOOL

    who here thinks these hit pieces will help those shorts when the big boys decide to really get longer????? huh??? anyone have a clue...

  • Report this Comment On August 22, 2013, at 5:08 PM, marp11 wrote:

    contrave doesnt even come up for FDA approval for a year,,then months for possible DEA...at least 2 years away,,if EVEN APPROVED,,but nice try

  • Report this Comment On August 22, 2013, at 5:09 PM, AreaRich wrote:

    Did you ever consider that Belviq being a completely new drug compound would have an influence on initial sales? Eisai approach was to first inform the medical community, which by the way they could not begin to do until the drug was scheduled by the DEA, so really all the advanced planning had no actual effect on sales since nothing other than contacting insurance companies could be done beforehand. Also, many doctors take a wait and see approach with new drugs? I believe the fall medical conferences where information is exchanged and a direct to consumer marketing program will greatly influence sales. But really, it makes no sense to have patients showing up at doctors offices asking for a drug the doctors know little about. The roll out will be slow and steady and soon will gain momentum.

  • Report this Comment On August 22, 2013, at 5:11 PM, Tryout13 wrote:

    Yes, we get it and don't need to hear your unchanged and bought opinion three times a week!

    Vivus has run into a very restricted market and getting a bad beat, Arena's Belviq is just doing plain bad (it isn't, but it sounds great as a soundbite) and Orexigen's Contrave is your entry ticket to the promised land...!!

    I have been following all three very closely and if I have learned anything, it is that NOBODY knows where this is going...certainly not the average bought and paid for analyst/publicist on MF.

    There is a huge market for all three if they can get insurance coverage and get rid of an unsafe product stigma. Period.

    As I am invested in Arena, I wish Eisai/Arena would openly advertise and market their product on the largest scale possible.

    I have no idea why they are on the presently chosen path and they are not communicating effectively why.

    They have a product that works for a very large responder group, but is expensive and needs general exceptance.

    With the abundant availability of generics, I expect Vivus to continue to have a very tough road.

    Orexigen.....well, that one will take a very long time.

    But hey, I can only guess like the rest of us.

  • Report this Comment On August 22, 2013, at 5:36 PM, JustPassinThru wrote:

    "VIVUS hoped to capture the market share before any of its competitors entered the market. However, the company failed in attracting patients or convincing physicians."

    Or PARTNERS! No business partner wanted a piece of Qsymia: poison is hard to market effectively. The REMS and Cleft Pallet Fetal Birth Defects were big giveaways that this drug was going to be a colossal failure (to anyone with eyes to see).

    "Arena's launch of Belviq has been extremely poor, in my opinion. However, Arena had a lot of time to plan with its marketing partner Eisai, and with a drug boasting safer profile -- it should have attracted more patients. The prescriptions rate is disappointing."

    Arena is spending their time and energy educating the medical community about Belviq. This displays a respect for the medical community and their role providing quality medical care to their patients. And real-world results that show that Belviq's weight loss effectiveness is 200% to 300% what was seen in the clinical trials are being documented by new users. Even without advertising, Belviq's initial sales are approximately three times what Qsymia's sales were for the same period in the roll-out, and Belviq's current refill rates are 6 TIMES (!!!) what Qsymia is showing. This graph of prescription sales for Belviq vs. Qsymia illustrates nicely what is happening with Belviq's drug roll-out: http://stocktwits.com/message/15268613#15268613

    And you characterize this as "disappointing"? You might want to consider another career: Stock Analyst might not be the career for you.

    "The biggest issue with the anti-obesity drugs is the dropout rate. A large number of patients tend to drop out in early stages if they do not see a visible effect of the drug."

    Obviously, a refill rate 6 TIMES that of their nearest competitor demonstrates that real-world dropout rates are not an issue with Belviq. (You are aware, I hope, that Wall Street cares first about real-world results. Belviq's Clinical trials are complete and the drug was approved. The real-world results are driving Belviq's increasing success (and Qsymia's failure)).

    News articles and testimonials about Belviq's effectiveness and safety are already starting, but Direct To Consumer marketing hasn't yet begun. When commercial advertisements begin, your "third, and probably the most important, player in the sector..." comment will demonstrate to investors how poorly you pick the "winning horse" in this race.

    It is a BAD time to be short this stock! Good time to be Long. Not too late to avoid being one of the millions of investors who think to themselves: "How could I have missed this? - it was so OBVIOUS!"

  • Report this Comment On August 22, 2013, at 5:59 PM, shaso wrote:

    wgt loss on belviq is 200-300% higher than in the clinical trials. I started this week and I can tell you belviq turns off hunger without speeding up the heart. No desire to snack and when I eat I only want small, healthy portions.

    From ymb:

    dr. reports his 9 weeks progress with Belviq

    I am the Dearborn Mi. ophthalmologist who has now been taking Belviq since 6/12 13.At that time I weighed 242 lbs. had diabetes a heart stent hypertension and back problems. Today I weigh 214 lbs. and am off insulin.I was taking about 100 units a day! I am still taking two oral hypoglycemic. My weight loss is 28 lbs.My waist size has shrunk by 5 in.

    My sugars are under great control. I m 68 yrs. old and now have a chance to live another ten to 20 yr. before I probably would have been dead in 5yrs. or less. I intend to loose another 40 lb. to reach my ideal weight of about 175.lbs. (I am 6 ft. tall) I feel so much better it is a miracle. I have put at least 12 people on BELVIQ AS THEY SEE THE PROGRESS I have made and want to do the same. I am on a no carb. diet eating meat(fish meat and chicken) vegies and salads). I have not increased my exercising.I am eating half of what I used to and am not hungry. Absolutely no snacks.Belviq has exceeded my expectations. It is working as well as bariatric surgery without the danger or expense.My blue cross is paying for it (100 dollar co-pay for 3 mos. supply.I will report again in 2 weeks.

  • Report this Comment On August 22, 2013, at 6:09 PM, Foreeverlong wrote:

    I don't believe the question of "what drug of the three will be most successful (Belviq, Qsymia or Contrave) is hard to answer at all. The winner will clearly be Belviq. Not to lecture, but don't confuse Belviq's product sales or Arena's PPS to date with potential. And, those who have thoroughly looked at the clinical trial results of both Belviq and Qsymia (Contrave is not available) have found that there is a minimal difference in efficacy. And, when Arena adds Phentermine (option already available generically) to Belviq (to form Bel/Phen) effectively there will be no competition in the world for this combo in terms of a safe and effective drug. And, of course Arena has the Patent for Bel/Phen. Game over!

    The PPS of Arena, although disappointing to date, is not a reflection of the potential of Belviq. It is the result of the "soft marketing approach" that Eisai has intentionally taken. "Soft", in that Essai's marketing campaign for Belviq is code for "we're going to educate the physicians, simultaneously establish insurance coverage so that when the public learns of Belviq and what it can do, patients will go to informed physicians to "who will" write a prescription for them for Belviq. Do we all wish the process was going faster? You bet!

    Finally, the PPS of Arena as everyone should know by now is a "tug of war" between Institutions who bet on the wrong horse (VIVUS), Hedge Funds who unmercifully shorted Arena only to find that they made a huge mistake, and a group of highly informed, stubborn and extremely confident Retail Investors who refuse to give up their shares so that the Shorts can cover.

    Why aren't Belviq sales skyrocketing? The answer is that the world does not know that Belviq exists yet. When the "direct to consumer" advertising campaign starts this Fall, the current Arena PPS bargain prices will be gone. This is why the Institutional investors are quietly and rapidly accumulating the stock. Everything I have said and more, the institutions already know. In effect, the real answer to the question of which drug will prevail is clearly being answered by the panic of the Hedge Funds, the accumulation of Arena by the Institutions, and the unwillingness of the retail investors to give up their shares of Arena. Everything is telling you that Belviq will be the winner.

    IMO

  • Report this Comment On August 22, 2013, at 6:27 PM, Foreeverlong wrote:

    And, yes I left off a very important point that all of physician and other informed investors of Arena would mention, and that is that both physicians and their patients are finding that Belviq does markedly improve the condition of patients suffering from Type 2 Diabetes(T2DM). Diabetes is clearly a co-morbidity of many obese patients. Again, the world has yet to find this out in a major way, but they will in due time. That is a fact you can count on. I would refer prospective investors to the many postings on YMB by Dr.s Steven Vig, Dr. Dan UCLA, and JDStevens55 and Suave9 and many more who have expertly posted on the potential of Belviq over the last few years. The aforementioned people are intelligent, extremely well-researched professionals who have turned over every stone in their ongoing analysis of Belviq and, after everything that has happened are still standing in support of Belviq, Arena, Belviq and management. Sorry that I could not name everyone.

  • Report this Comment On August 22, 2013, at 7:49 PM, billcatedit wrote:

    I tell my friends not to read MF because it is mostly garbage like this. Why bother?

  • Report this Comment On August 23, 2013, at 1:19 AM, BelviqSuccess wrote:

    Haven't I read this same ARNA bash article 2 months ago, and 4 months ago, and 6 weeks ago, and 5 months ago, and 6.5 months ago and 9 weeks ago...

    It's incredible the effort being spent to bash ARNA when it is clearly the only safe and effective obesity medication on the market.

    Here are a couple of website everyone should check out:

    http://belviqsuccessstories.com/

    and

    http://belviqdaily.blogspot.com/

    These websites show story after story of people who have lost massive amounts of weight using Belviq, while experiencing no side effects.

    Please stop publishing these obvious ARNA bash articles. It makes The Fool look truly foolish, unprofessional and like a prostitute.

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