7/18 release from Michael Murphy. Forgive me if this is a repeat, but reading this confirmed my decision to go long ARNA.
Dear New World Investor:
Vivus (VVUS) received approval last night for Qsymia, formerly Qnexa, as I expected, and held their conference call this morning. I first thought the new name was pronounced (kiss' my a...), but the company says it is (kyoo sim ee' uh). I thought the FDA might not approve the top dose for safety reasons, but they did.
The drug is administered for two weeks at the low dose, then 12 weeks at the mid-dose. If the patient doesn't achieve 3% weight loss at 14 weeks, they can be moved to the highest dose for another 12 weeks. If they don't get to a 5% loss at the end of 26 weeks, patients are supposed to stop the drug.
The trials were not titrated the same way, but about 80% of patients on the mid-dose of the drug lost 3% of their weight by week 12, and 80% of the top-dose patients lost 5% of their weight by week 28.
In contrast, Arena Pharmaceuticals' (ARNA) Belviq is measured for a 5% weight loss at the 13 -week point. So the FDA has set a tougher standard for Belviq, although doctors are not required to stop administering Belviq if a patient is losing some weight. In the real world, I expect obesity doctors to add phentermine to Belviq and give that combination a try before they give up on Belviq.
The Risk Evaluation and Mitigation Strategy (REMS) for Qsymia is quite weak. It requires only a medication guide for patients and a healthcare guide for doctors focused on preventng and testing for pregnancy, and mail-order pharmacy distribution at first. Vivus can apply later to modify the REMS to get rid of mail-order distribution.
Vivus will be required to do 10 postmarketing studies. Like Arena, they have a few to extend the use of Qsymia for pediatric and adolescent use, and a cardiovascular outcomes trial (CVOT) for at-risk patients. In addition, Vivus has to do a study to assess renal function.
Vivus has hired district managers, but it did not sound like they have many sales people yet. On August 7 the company will hold another conference call to discuss the launch plan. They plan to launch in the fourth quarter.
Although the tougher weight loss standard for Belviq, 5% weight loss at 12 weeks versus 3% at 14 weeks, is inexplicable, I doubt it will have any real market impact. I have always expected doctors to start with Belviq, because 80% of the obesity patients are women of child-bearing age. (Not 80% of the obese, but 80% of those who seek help.) It will be safer to start with Belviq, and in the trials 42% of those on the drug achieved 5% weight loss after 12 weeks. My spreadsheet assumed that only 35% in the real world will achieve that level of weight loss, and the rest will move on to Qsymia or, if it is approved, Contrave. Given those assumptions, Arena can achieve my target prices and be a huge success.
Also, there is a lot of FUD about who will be in the market first. Eisai does not have to wait for DEA approval to start calling on obesity clinics and doctors, and getting them ready for the Belviq launch. I expect them to train during the summer and begin the sales campaign after Labor Day, September 3. Vivus won't even have their whole sales force hired by then. So whether Belviq clears the DEA process in September or January will make little difference in the long run.
We should get the European Medicines Agency 120-day questions for Arena tomorrow, and I am hoping for a conference call within a week - it is not required, of course. All in all, I see the Qsymia approval as about what I expected, and therefore there is no change to my outlook for the launch or first few years of sales. ARNA remains a Core Holding and a Trading Buy under $10 for the European/ROW partnership announcement and Belviq rollout, with a $22+ target in 2012.
