I'm shocked that VIVUS (VVUS) is trading down more than 20% today after releasing earnings for the first quarter that its obesity drug, Qsymia, was on the market.
I'm not shocked that the drug is off to a slow start. I'm just surprised investors care that much. The number of prescriptions written in the initial six weeks gives very little insight into the peak sales that VIVUS will ultimately be valued on.
The challenges facing VIVUS aren't anything that couldn't be seen from a mile away. Only about 20% of patients are covered under insurance. The average retail price for those that aren't covered is $160 per month, and those with insurance are paying an average co-pay of $62. That's led to about 30% of patients abandoning their prescriptions because of high cost.
As expected, doctors are taking a taste test rather than an open buffet for all their patients. Through the week of Oct. 26, 3,504 patients had received at least one shipment of Qsymia. Add back in the 30% of abandoned prescriptions and you get about 5,000 prescriptions written. Management said that 2,614 doctors had prescribed the drug, so the average doctor has written prescriptions for less than two patients.
Qsymia is only available from a few mail-order pharmacies: CVS Caremark (CVS -1.07%), Walgreen (WBA -1.33%), and Express Scripts (ESRX). At this point, it isn't really clear how many patients might not be filling their prescriptions because they don't want to go through the mail. VIVUS has asked the Food and Drug Administration to expand the distribution to include select retail pharmacies, so even if there is a problem, it'll hopefully go away soon enough.
While the launch has been slow, there's still a lot of potential; the obese patients are still out there. VIVUS is targeting 25,000 doctors and only 10% have written prescriptions. It's going to take a few calls by the sales force to get them to make their first prescription, and then feedback from the initial patients will likely drive more prescriptions.
Qsymia could still have obese sales some day, but it's going to take time. Investors in Arena Pharmaceuticals (ARNA), which is set to launch its obesity drug shortly, should keep their initial expectations in check.
