Just two months after Vivus finally won FDA approval for its Qsymia prescription diet pill, the drugmaker late last week disclosed that European regulators are not inclined to issue the same recommendation. Not surprisingly, Vivus stock dove and analysts rejiggered their forecasts, underscoring ongoing uncertainty about the potential success - at least on a near-term basis - for the first crop of new diet drugs in more than a decade.
After a hearing last week, Vivus (VVUS) issued a brief statement saying, "based on preliminary feedback from the European Medicines Agency's Committee for Medicinal Products for Human Use," the drugmaker expects a negative decision, which would formally be announced next month. The disclosure came just three days after Vivus launched Qsymia - which contains phentermine, the surviving half of the fen-phen cocktail, and topiramate, the active ingredient in the Topamax seizure med - in the US (back story).
The failure to win EMA approval is clearly a setback. "Based on our discussions with management, the European regulatory environment appears less accommodating to new weight loss drugs than we had appreciated," Needham analyst Alan Carr writes in an investor note this morning. "We do not expect Qsymia approval in that region in the near future and have removed EU sales and collaboration revenue from our models." Specifically, he lowered 2012 and 2013 US Qsymia sales estimates to $10.6 million, from $25 million, and $258.9 million, from $290 million, respectively.
A negative decision by the EMA suggests European regulators are taking a decidedly different view toward the risk-reward ratio the FDA weighed (pun intended) in approving the Vivus pill. Fighting fat is a key priority in the US, where the percentage of obese Americans, which is already a hefty 36 percent, is expected to swell to 42 percent by 2030. And by then, 11 percent could be severely obese, which is deemed to be about 100 or more pounds over a healthy weight, compared with 6 percent two years ago, according to a recent study in the American Journal of Preventive Medicine (look here).
In choosing to approve the Vivus pill, the FDA was convinced to overcome concerns about cardiovascular and teratogenic risks – specifically, cleft palates – which prompted the agency to reject the drug in 2010. To combat such worries, the agency recommended heart rate monitoring for all patients, especially when starting the drug or increasing the dose, and required a Risk Evaluation and Mitigation Strategy, or REMS, program for the pill (read here).
Nonetheless, Vivus retains an advantage over its rivals simply because it is available. Arena Pharmaceuticals is not expected to make its Belviq pill available until it is listed on the US Drug Enforcement Agency schedule for controlled substances, which can take up to six months. And Contrave, which is being developed by Orexigen Therapeutics, faces a prolonged regulatory hurdle and is scrambling to complete a large cardiovascular study that may yield FDA approval for its Contrave pill, but not until 2014 (read more here).
Meanwhile, another Wall Street analyst believes doctors are excited about the new crop of diet drugs. After attending the annual Obesity Conference in Texas this weekend, "our main impression from the meeting is that obesity specialists are excited and willing to try the two new agents that were recently approved," he writes Cowen analyst Simos Simeonidis in an investor note today. About 70 percent to 75 percent of the physicians that he spoke with said they would use Qsymia right away and the same for Belviq, once it becomes available. He adds that about 30 percent of those physicians have signed up on the Qsymia website and had become certified, a reference to the REMS program.
However, Carr reminds investors that litigation with J&J is a "meaningful possibility" once Qsymia goes on sale, he adds in his note this morning. H "conservatively" assumes a royalty payment to Johnson & Johnson, which sells Topamax and holds key patents, of up to 10 percent. The likelihood of a lawsuit clearly suggests that Vivus may encounter yet another difficulty fattening its bottom line while helping Americans to slim down. scale pic thx to alancleaver on flickr