The obesity segment of the health care industry is turning into a battleground. VIVUS, Inc. (NASDAQ:VVUS) entered the market first with its drug, Qsymia, and at the start of June, Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) also launched its obesity drug, Belviq, with the help of its partner, Eisai. On one hand, we have Qsymia, a drug that comes with a restrictive label and marketing limitations. On the other hand, we have Belviq, which does not face any marketing limitations or restrictive label. The third player in the sector is Orexigen Therapeutics, Inc. (NASDAQ:OREX), which is planning to enter the market soon with its drug, Contrave. The question here is: Which of these companies will come out as the winner in this sector?
Who will be the winner?
The answer to the above question is not simple. VIVUS, Inc. (NASDAQ:VVUS) hoped to capture the market share before any of its competitors entered the market. However, the company failed in attracting patients or convincing physicians. As a result, the sales were very extremely slow and below the expectations. To be fair to VIVUS, Inc. (NASDAQ:VVUS), I believe Wall Street’s expectations of Qsymia were too ambitious. Nonetheless, the failure to meet expectations resulted in massive loss in the stock price.
Many factors contributed to the slow sales, namely high costs, lack of insurance coverage, associated side effects, lack of marketability, and restrictive label. Some of these hurdles may be removed soon as the company was able to win less restrictive label, and VIVUS, Inc. (NASDAQ:VVUS) is also working on increasing the insurance coverage and decreasing the out-of-pocket cost for patients. Furthermore, new management is already having a positive impact on the operations, and the prescriptions are boosting. We might see some growth in revenues over the next two quarters, which could cause the stock price to move up. However, I still expect the sales to fall short of the market expectations.
Arena Pharmaceuticals, Inc. (NASDAQ:ARNA)’s launch of Belviq has been extremely poor, in my opinion. VIVUS, Inc. (NASDAQ:VVUS) had many visible hurdles, and the slow sales of Qsymia are understandable. However, Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) had a lot of time to plan with its marketing partner Eisai, and with a drug boasting safer profile — it should have attracted more patients. The prescriptions rate is disappointing. Without any restrictions and with ample time to strategize and plan, Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) may have botched the Belviq launch, in my opinion. However, I will wait before passing the final judgment on the stock.
As I stated in my previous article about Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) that it is difficult to completely assess the performance of an obesity drug at the early stages of its launch. It should also be kept in mind that the current prescription data for Belviq includes 15-day free trial. The biggest issue with the anti-obesity drugs is the dropout rate. A large number of patients tend to drop out in early stages if they do not see a visible effect of the drug. One positive for Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) is that institutional ownership in the stock has reached almost 50%, which indicates that the market believes in the stock. Arena has mainly been a stock for retail investors in the past. However, increased ownership by institutions might indicate there is potential in this stock.