I'm shocked that VIVUS (NAS: 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 (NYS: CVS) , Walgreen (NYS: WAG) , and Express Scripts (NAS: 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 (NAS: ARNA) , which is set to launch its obesity drug shortly, should keep their initial expectations in check.

More information about VIVUS' risks and potential can be found in the Fool's new premium research report on the drugmaker. To get the full scoop on VIVUS' potential as an investment -- including reasons to buy, sell, and an in-depth analysis of the challenges it's facing -- click here now to learn more today.

The article Shocker! No Instant Love for Obesity Drugs originally appeared on Fool.com.

Fool contributor Brian Orelli has no positions in the stocks mentioned above. The Motley Fool owns shares of Express Scripts. Motley Fool newsletter services recommend Express Scripts. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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jc

ARNA beat earnings, made deal with Korea and submitted 120 day questionaire to EU- a lot of good news AH today

November 06 2012 at 8:14 PM Report abuse rate up rate down Reply
joelliebesfeld

ARNA (Arena) is oversold in part due to the poor performance of Vivus (VVUS) and in part because the emerging drug sector is currently out-of-favor. With that said the shorts have been establishing a considerable position and they could set off a strong rally in these shares. It should be understood that when so much pessimism is put into the shares of a company, any just 'okay' or 'good' news can become the primer to a solid move. These shares have done that before! However, ARNA in the main, is much more interesting now than it was say 3 or 4 months ago because (1) of its overseas partnering and less problematic patient serious side-effects than VVUS which almost assures European acceptance. And (2) because the shares are about 20% lower than the midpoint of a recently established trading level. Lastly, the sector has not seen an interesting takover yet and for example should DNDN (Dendreon) be bought out, shares of ARNA, which has even greater revenue potential than DNDN, could really move.

November 06 2012 at 3:44 PM Report abuse rate up rate down Reply