Does VIVUS Need a Partner?


There's no doubt that the potential market for VIVUS' (NAS: VVUS) obesity drug, Qsymia, is enormous. The Centers for Disease Control and Prevention says there are 78 million obese adults in the U.S. With such staggering numbers, it's safe to assume that every primary care physician in the country sees an obese patient every day.

But VIVUS isn't going after every patient. And I think that's probably the best strategy at this point. The company has rented a sales force of 150 sales reps, through contract sales organization PDI (NAS: PDII) , which VIVUS thinks is sufficient to call upon 25,000 physicians.

Rather than target patients who are looking to lose weight for cosmetic reasons, VIVUS is promoting the medical benefits of losing weight: improved cardiovascular health, reduced risk of developing diabetes, etc. Those 25,000 doctors it's targeting understand that (or are poised to) because they either work at obesity centers or treat a lot of patients with underlying secondary conditions.

I like the strategy, at least for now.

A large pharma partner -- like rivals Arena Pharmaceuticals (NAS: ARNA) and Orexigen Therapeutics (NAS: OREX) both have -- could put more sales reps in front of more doctors, but I think it's unlikely to help at the initial launch. Given the history of side effects with obesity drugs -- Wyeth's Fen-Phen and Abbott Labs' (NYS: ABT) Meridia -- primary care physicians are likely to take a wait-and-see attitude and are unlikely to jump in writing multiple prescriptions.

This isn't going to be a quick launch to blockbuster status in large part because there's no pressing need to treat the patients. Obesity is a lifelong disease that kills slowly; treating patients in a few months or a few years doesn't matter that much. More sales reps aren't going to change that.

If you're thinking long term and not quarter to quarter, VIVUS' goal should be to get those 25,000 doctors to try the drug in a few patients, getting them comfortable with the risk-benefit profile. Once they see the see the pounds coming off, more prescriptions will be written. At that point, VIVUS can strike a deal with a big pharma marketing partner and demand premium terms or, more likely, sell the company at a higher valuation than it's at right now.

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