Will the FDA Approve VIVUS' Obesity Drug?

I'm going to go out on a limb and say VIVUS' (Nasdaq: VVUS  ) Qnexa gets approved next week.

I admit I'm now standing on a branch that's 6 inches in diameter and only a foot off the ground, but this is the Food and Drug Administration, after all. Anything is possible.

The confidence in an approval, from me and most of the rest of the investing world, comes from three sources:

  • The FDA advisory committee gave the drug a resounding 20-2 endorsement back in February.
  • The FDA delayed the decision in April, which seems like a strange move if the agency had other problems with the drug beyond needing to review the Risk Evaluation and Mitigation Strategy.
  • And most recently, the FDA approved Arena Pharmaceuticals' (Nasdaq: ARNA  ) Belviq, signaling an end to the agency's apparent stance that obesity drugs had to be perfect to gain approval.

The smaller, less-stable limb that investors have to venture out on if they want to hold over the binary event is what the REMS will look like. Qnexa will have restrictions on its use -- that's what a REMS is for -- but the different scenarios could have different effects on how well Qnexa sells.

The FDA doesn't want Qnexa prescribed to women who might become pregnant, because one the components of the drug is Johnson & Johnson's (NYSE: JNJ  ) epilepsy medication Topamax, which has been shown to cause oral clefts in babies of women who took the drug.

How the FDA determines whether patients are pregnant is key to whether the drug is a commercial success. At one extreme, the FDA could simply tell doctors they need to ask female patients whether they're pregnant. At the other extreme, the FDA might require patients to get a monthly pregnancy test from their doctor. The added inconvenience of a monthly trip to the doctor's office could hamper sales. Somewhere in between those extremes, the FDA might be content with self-reporting of a home-based pregnancy test.

The FDA tends to error on the side of caution -- just look at the large preapproval heart trial it's requiring Orexigen Therapeutics (Nasdaq: OREX  ) do on its obesity drug -- so I think some sort of pregnancy test will be required. Whether it's an overly burdensome requirement remains to be seen, but my guess is that the FDA will be somewhat reasonable given the recent approval of Belviq, which also wasn't a perfect drug (they never are).

That's my take. What's yours? Take our Foolish poll and let us know your reasoning in the comment box below.

Fool contributor Brian Orelli holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson and creating a diagonal call position in Johnson & Johnson. We Fools don't 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. The Motley Fool has a disclosure policy.


Read/Post Comments (16) | Recommend This Article (9)

Comments from our Foolish Readers

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  • Report this Comment On July 14, 2012, at 12:02 PM, ravens9111 wrote:

    I think the stock is already priced in for approval of Qnexa. At this price, the risk/reward is not in the longs favor if you buy at these levels. How much more upside is left in the stock? Probably not much, but I guess it could go up another 10% or so max. What happens if the drug is not approved? You are probably looking at high single digits to low teens? Longs should also ask themselves why insiders are dumping shares before the FDA decision? Is that a vote of confidence for shareholders? At this point, I would stay away from this stock. I think going short is the play here.

  • Report this Comment On July 14, 2012, at 12:08 PM, BMFPitt wrote:

    "At the other extreme, the FDA might require patients to get a monthly pregnancy test from their doctor."

    Is there actually precedent for something like that? It sounds insane.

  • Report this Comment On July 14, 2012, at 12:43 PM, HammerAndNail wrote:

    If you are writing about a company at least do a good research instead of hit and run piece.

    last time I stop by in motley fools website was so long ago i can even remember and this type of bs. the exact reason why

    One thing is for sure if you are simply try to pump VVUS poison drug Qnexa , I might say ok , writer did not do enough research about these drugs or simply trying to benefit his positions or his buddies or even ..... (you know what I mean)

    But dont try to pull ARNA(BELVIQ=approved and safe next blockbuster) into the Qnexa crap and try to compare these like they are similar with similar side affects etc.

    Apparently editorial oversight is missing in MF to allow cheap shot ,superficial bias articles to go undetected

    very disappointed with MF management

    MF is turning to Seeking Alpha website

  • Report this Comment On July 14, 2012, at 12:48 PM, Bob0215 wrote:

    The FDA is very conservative and must maintain its high standard of drug approvals and not base its decision to push Qnexa through the system because Belviq got approved. At present Belviq is sufficient to address the obesity issue. Belviq has an excellent safety and efficacy profile.

    Phentermine & Topiramate have been known to cause major side effects. I would not recommend this drug be used. Drs. know patients lie. Non compliance by patients is very real.The problem is patients simply cannot be trusted not to get pregnant, its like telling teens to avoid sex.

    Even if one patient took Qnexa and problems arose the FDA would be under fire from congress, press, and the world. Additionally the drug would have to be withdrawn not to mention the litigation the company would face.

    I think VVUS is a good company that should concentrate on their ED medication and withdraw their NDA application on Qnexa. The risk is very high for problems with Qnexa even if its approved.

    Finally as you mentioned, any sort of REMS would cripple any chances of Qnexa being a success.

  • Report this Comment On July 14, 2012, at 2:15 PM, nobsperiod wrote:

    Why would FDA approve a drug that has very dangerous side effects as Qnexa when Belviq is

    already approved and is safe. What has become

    of MF being short sighted or just throwing out an

    opinion so irresponsibly.

  • Report this Comment On July 14, 2012, at 3:03 PM, Wolfeman132 wrote:

    Hammer and Nail: For the precise reason you can post your somewhat less articulate opinion the author can voice his. That's what MF is all about.

    Regarding VVUS, it sounds like they are better prepared to go to market and have already secured DEA classification unlike ARNA who must wait to launch.

    I still don' t like either stock long term. I don't have confidence in ARNA's ability to successfully launch and an efficacy of 5-6% seems less than moderate. Regarding VVUS, side effects worry me here. Why would a pregnant woman want or need an obesity drug?

  • Report this Comment On July 14, 2012, at 3:15 PM, trophytwin wrote:

    It is my understanding that women age 16 to 45 comprise 70% of the obesity market in the US. Due to the danger of accidental pregnancy, a Dr.'s malpractice insurance will never permit these women to be put on Qnexa, if there are these dire warnings with the drug. Also, it is my understanding that Phentermine is banned in Europe and that is why Vivus withdrew their application for approval from the EU. If Qnexa is approved, aren't addiction issues with the Phentermine another piece of this puzzle we have heard little about? There are too many unanswered questions here.

  • Report this Comment On July 14, 2012, at 3:29 PM, Foreeverlong wrote:

    I really don't think that Qnexa will or should be approved. If it does pass, the restrictions will be severly limiting on its marketability, and it will be at a mid-dose level or less. that puts it even with the efficacy of Belviq, without Phentermine.

    The FDA has a approved a safe drug in Belviq that can be combined with Phentermine, as the attending physician chooses. The Belviq/Phentermine combo gives the physician a course of therapy that he can prescribe with confidence in a very litigious world.

    Finally, the FDA has yet to receive the Fortress Study data from VVUS, and could rightfully elect to delay a decision as a result. I would!

    I simply feel that the passing of Qnexa would open up much more liability for the physicican, and really add nothing to the market beyond what Belviq and Phentermine can produce safely. After all, Qnexa is nothing more than a combination of Phentermine and Topiramate, and Topiramate was only added to the formula so that VVUS could get a patent on Qnexa. Both drugs are available on the market now, so what is the point of the FDA legitimizing the combination now when they don't need to do anything?

  • Report this Comment On July 14, 2012, at 3:32 PM, lucy0007 wrote:

    Thanks Brian for a well written article. These "Arniacs" are a bit unstable and think Lorcaserin is going to be this great blockbuster drug. They are in for quite a surprise when the FDA approves Qnexa next Tuesday. Qnexa in the investment community is considered the gold standard and will dominate the market. The majority of shareholders in ARNA are retail versus the majority institutional holders. I'd say institutions have much better access to information that the retail investor any day or the week. Anyway this will all be settled in a few days.

  • Report this Comment On July 14, 2012, at 4:15 PM, genesis667 wrote:

    FDA may approve with a patient registry...Bad for VVUS...Stock gets slaughtered...

    Fda rejects...Stock gets slaughtered...

    Lose/lose

  • Report this Comment On July 14, 2012, at 4:26 PM, genesis667 wrote:

    One further thing, During the VVUS trials under the best of circumstances, 34 women became pregnant, 19 women had the baby, nothing was reported on what happened with the other 15 women....Aborted?

    If that many women ended up pregnant while being monitored, what will happen when they release that poison into the wild...Tens of thousands of women are going to become pregnant and will be forced to make a decision of aborting the child for fear of it being born deformed, or roll the dice and have the child which may have a life long birth defect....Heck of a choice to have to make....

    Given the above scenario, why in gods name would the FDA bless that drug.....

    My prediction stands as is....

    Patient registry or outright rejection...

    The FDA in my opinion will be more concerned about babies born with birth defects, than they will about VVUS shareholders, as it should be!

  • Report this Comment On July 14, 2012, at 9:41 PM, mincasa wrote:

    Regardless of the FDA decsion, its is very difficult for me to respect and trust a company that its own top exec. dumped thier own shares a few eekd befor a major decsion. Havimg siad that, it will be very difficult for me to trust any product , let alone, an obesity drug that is full of side effects, that may come out of this company. As for the fact that institutions are the majority stake holders of VVUS stock, makes me belive that this company is run by and supported by greedy, non caring individuals..Qnexa is not a safe drug, it was a safe money makers for hedge fund mngrs..now its time for it to go away...wachh, the only players for obesity drugs for the next five years are ARNA and OREX..mark my words.

  • Report this Comment On July 15, 2012, at 2:21 AM, Truthbuster wrote:

    It is such a fallacy to state that the obesity market is dominated by women of child bearing ages. A study of the latest US census per population by age and sex revealed that women of child bearing ages (18-44) constitute only 18.58% of the US population whereas men between the age of 18 and 44 constitute 17.92% of US population and the over-45 crowd make up 39.4% of US population. This means that a whopping 57.32% of the US population are prime candidates for QNEXA whether or not the drug is severely restricted to women of child bearing ages. Besides, it is a well-known fact that all weight loss drugs (Belviq included- pregnancy label) are contra-indicated for pregnant women anyway. According to statistics by Kaiser Hospital, men has a much higher obesity rate (71.2%) than women (57%). Among women, the older groups have a much higher obesity rates (36% in the 40-59 age group, 42.3% for women over 60) than the women of child bearing ages (31.9% in the 20-39 age group). Therefore, any REMS regarding pregnant women won’t affect any potential sales by QNEXA if it can outsell its competitors due to its higher efficacy.

  • Report this Comment On July 15, 2012, at 11:16 PM, genesis667 wrote:

    At the dosage Qnexa would be approved for, there is no higher efficacy than Belviq....Quit spreading lies....

    At the low and mid doses it is right on par with Belviq. You heard it here first that there is no way on gods green earth they will get an approval on the top dosage, not when the FDA is very concerned about heart rate, heart attacks and the well known birth defects.

    Be prepared for severe restrictions with a high probability of a patient registry required, due to the very real birth defects. That's if they even approve it at all....

  • Report this Comment On July 16, 2012, at 12:20 AM, CPAamongus wrote:

    The following is from the text of Arena's own press release announcing Belviq's approval on June 27:

    "BELVIQ should not be taken during pregnancy or by women who are planning to become pregnant."

    It would seem that BELVIQ has little advantage over Qnexa when it comes to the pregnancy issue. The institutional investors know this, but the typical retail Arena investor has overlooked it.

    Arena and Vivus are both good companies, and there is plenty of room for both of their drugs in the marketplace.

  • Report this Comment On July 16, 2012, at 11:02 AM, bevus1 wrote:

    you people keep focussing on how dangerous diet drugs are. Obesity is WORSE and causes more death and expense than ANYTHING ELSE... a diet pill is certainly better than certain death FROM A HEART ATTACH, HIGH BP, DIABETES, ETC.

    SLIGHT possibility of injury by drug, or

    certain death by food.

    Which would you choose? Or are you stupid too?

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