By Spencer Osborne
Chaz Bono is famous for several reasons. First and foremost Chaz was born the child of Sonny and Cher. Secondly Chaz was famous for being transgender and undergoing a sex change operation. Next Chaz gained more fame by having a brave and memorable appearance on the hit television show Dancing With The Stars. Now Chaz is gaining acclaim again for losing and impressive 71 pounds in the last 9 months.
Chaz started the prescription weight-loss drug Qsymia from VIVUS Inc. (NASDAQ:VVUS) in November of 2012. While Chaz is not a spokesperson for Qsymia, he has gone forward with his weight-loss journey, identifying Qsymia as an integral part of it.
According to Dr. Eva Cwynar, an endocrinologist, Chaz started out his transformation at 253 pounds and is down to a much more healthy 182 pounds now (see before and after photos). Not only is Chaz looking good, he is seeing other health benefits as well.
“He’s off his cholesterol meds and his hypertension meds, and his sugar is stabilized.”
– Dr. Eva Cwynar
One important factor noted by Dr. Cwynar is that Qsymia changes eating habits. This can be just the motivation patients need to get the weight loss process started. Chaz combines Qsymia with better eating and exercise.
Another recently approved weight-loss drug that recently launched is Arena Pharmaceuticals Inc. (NASDAQ:ARNA) Belviq. Similar to Qsymia, it curbs the appetite and gives patients a feeling of being full (Belviq also helps with other health issues). This can help with binge eating as well as simple over-eating. While not as famous (yet) as Chaz Bono, Belviq patient Ellie Wenker has seen dramatic results already from her 1 month on Belviq. Like Chaz, Ellie is embracing a healthier diet and exercise into her journey.
Ellie has stated that Belviq has helped her change her life. She blogs about her weightloss very openly in an effort to help others to have the confidence to try this themselves. I interviewed Ellie recently on Playground Radio (a link to the radio show is on her blog), where she shared her story, took calls, and spoke to her early experiences on Belviq. Ellie has seen her blog gain traction quickly. She is now approaching 16,000 page views, with about half of those coming in the last week.
“The day I took my first pill I went to lunch and only ate half of my meal. I was shocked, and knew that this would be something wonderful for me”
– Ellie Wenker
For investors in this sector stories such as this are very compelling. Many investors wish that these stories would get out more. Neither Arena nor Vivus has direct to consumer advertising yet. There is a tried and true process of drugs being on the market for a period of time prior to television and radio campaigns. This allows the pharmaceutical reps to educate doctors about the drugs prior to consumers lining up outside the door. Advertising will come at some point. Investors simply need to be patient.
The launch of Qsymia last Fall was very modest. Weekly prescription sales have not fared well despite showing a trending growth. The biggest problem was that expectations were so high. The common perception was that obesity is an epidemic, and if there is a solution to that it should certainly do well. Over 33% of the population of this nation is obese with another 33% being overweight. A second issue hampering growth is insurance coverage. It is estimated that about one third of insurance companies cover these drugs and that even those that cover do so on higher tiers of the plans or have several conditions attached to qualifying for coverage. Specific to Qsymia was a REMS program that places certain restrictions on the drug. The REMS were recently modified to allow retail availability for the first time. Lastly there are still many doctors that are simply not familiar with the drugs yet, and some that feel the risks associated with the drugs outweigh the benefits.
Arena’s Belviq launched on June 7th. Sales of Arena were more brisk than Qsymia (channel checks showed sales of Qsymia at about 4,000 after 1 month whereas Belviq was above 7,000 according to IMS Health), but as yet neither is flying off of the shelves in numbers that were thought about a year ago when both drugs received FDA approval.
Despite a sales pace that may be more modest than many had hoped for, these drugs still carry a lot of potential. Remember, Insurance is a big factor. The insurance story is changing each week. Last week Vivus announced that it had negotiated an improvement in its deal with ExpressScripts and Medco, while this week Arena’s Belviq saw great traction by possibly getting added to the Tricare formulary, which covers millions through the Department of Defense (Tricare initially showed Belviq as accepted, but then changed again – We are seeking clarification). A second consideration is that neither drug has a “Direct-To-Consumer” advertising campaign. A good ad campaign can go a long way in delivering commercial success of a drug.
Arena and Vivus are still speculative investments. It is too early to declare success or failure. What investors have to do is decide what level of risk they are willing to take against what the potential rewards will be. Blockbuster status ($1 Billion of sales in 1 year) is not in the cards yet, but may be at some point. Both drugs trading at a 40% to 50% discount from the 52 week highs that came with FDA approval. There is opportunity here for a savvy trader. If just one compelling story such as Chaz or Ellie’s can go viral it could be enough to launch these drugs to higher sales. Temper that with caution though, there are still hurdles to consider. Watch the insurance news closely. It will help the bottom line more than anything else.
Spencer Osborne is a partner in SiriusBuzz.com and SiriusBuzz Premium, a website dedicated to discussion about SiriusXM Satellite Radio. He also writes exclusive articles for Seeking Alpha on a wide range of companies. Osborne brings researched based facets of companies to light that investors may want to consider.