VIVUS, Inc. (VVUS): You’ve Got To Spend Money To Make Money

You’ve got to spend money to make money.

VIVUS, Inc. (NASDAQ:VVUS) has the first part down. During the first quarter, the company spent $44.7 million on selling, general, and administrative expenses to sell its obesity drug Qsymia.

The making money part hasn’t come to fruition yet. VIVUS only generated $4.1 million in revenue during the quarter. Sales took a hit because VIVUS, Inc. (NASDAQ:VVUS) is offering free trials and reduced-cost medications for patients; if everyone was paying full price, sales would have been 40% higher or so.

Even with a 40% bump — assuming everyone was willing to pay full price — Qsymia sales are nowhere near blockbuster status. Demand is so low, the company had to write off $5.8 million worth of inventory that expired.

As Eisai and Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) begin to market their competing obesity drug Belviq, it’ll be interesting to see if they eat into each others’ sales or if they’re able to use the increased promotion to drive the overall demand for obesity drugs higher. I’m inclined to guess the latter.

Despite the low demand, there was one interesting number VIVUS, Inc. (NASDAQ:VVUS) shared during the conference call: Qsymia has been prescribed by nearly 15,000 doctors, a 79% increase over the number at the end of the fourth quarter. At least doctors are increasingly willing to give it a try.

Unfortunately “a try” is pretty much all they’re interested in at this point. The company said more than 23,000 patients started on the drug in the first quarter. That’s about 1.5 patients per doctor.

Sure, there were a lot of prescribers added this quarter, but even if you assume that the approximately 6,600 new prescribers this quarter only prescribed the drug to one patient, then the approximately 8,400 doctors that had experience with the drug before the quarter began prescribed the drug to just two patients during the quarter.

There are a few reasons doctors haven’t flocked to prescribe Qsymia in large numbers:

One bitten, twice shy. It’s not particularly surprising that doctors might be a little tentative about prescribing an obesity drug, considering how previous obesity drugs have fared. Wyeth‘s fen-phen, Abbott Laboratories (NYSE:ABT)‘s  Meridia, and Sanofi SA (ADR) (NYSE:SNY)‘s Acomplia were all pulled off the shelves after side effects were discovered. Meridia’s heart issues were uncovered in a post-marketing clinical trial. Acomplia never made it to market in the U.S., and European regulators pulled it off the market after real-world usage showed less efficacy and more-common psychiatric side effects.