VIVUS: New Management, Same Ideas?

VIVUS: New Management, Same Ideas?

Investors hoping for a new plan for VIVUS' obesity drug Qsymia from the company's new CEO, Tony Zook, were sadly disappointed yesterday. After pointing out that the company sold just $5.5 million worth of Qsymia in the second quarter, Zook highlighted the issues that he plans to tackle:

  • Improve sales by getting doctors to prescribe the drug and patients to pay for it.

  • Gain approval for Qsymia in the E.U.

  • Eliminate nonessential spending.

  • Get a big pharma partner.

I'm pretty sure that was the old management's strategy, too. Zook was light on the details on how his plan was different. Perhaps it was too much to ask for from a guy who had been on the job just a couple of weeks.

At least on the first point, the old management made some progress in the second quarter before Zook and the new board members took over.

The total number of unique prescribers of Qsymia grew 39% to almost 21,000. VIVUS continues to focus on endocrinologists, which are its "most productive prescribers." That's in stark contrast to Arena Pharmaceuticals and Eisai, which said that primary care physicians account for the majority of sales of their competing obesity drug, Belviq. The difference likely has to do with the size of the respective sales force. There are a lot more primary care physicians that the larger Eisai is capable of targeting.

To counteract the high cost that provides a roadblock at the patient level, VIVUS has pushed the number of commercial lives that cover Qsymia to 36%, up a little from the 34% reported in May. More importantly, VIVUS was able to convince a couple of pharmacy benefit managers to change Qsymia from tier 3 to tier 2, which typically lowers the copay to $25-$30, a pretty reasonable sum in my opinion. For the rest of the patients, VIVUS is offering free or reduced cost drug. A whopping 44% of prescriptions dispensed were free or discounted drug in the second quarter.

Gaining approval in the EU is going to be tough. Without a comparable system to the FDA's Risk Evaluation and Mitigation System, the EU regulators don't seem inclined to approve the drug. Maybe the new management can change regulators minds with the current data, but I wouldn't count on it. The most likely pathway forward for Qsymia and Belviq, which was also turned down in the EU, is to wait for cardiovascular safety data. At that point, they'll hopefully also be able to point to the lack of issues in the U.S. market, which should give EU regulators more confidence approve the drugs.

Assuming that's true, Orexigen's Contrave might have the best shot at an EU approval since it will have safety data before the end of the year. The company plans to submit the EU application now and then update the agency with the safety data when it's available.

As for "nonessential spending" management plans to cut, it's hard to know how much wasteful spending was in place under the old management. Even if it can cut 20% to 30% of spending, I have a hard time seeing this as being the major solution to driving VIVUS to profitability. Increasing sales will be much more important.

Finally, the new management plans to find a big pharma partner. Based on how difficult it's been to launch the drug, all I can say is, "Good luck with that."

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