Vivus Inc reported lackluster initial sales of its weight-loss pill Qsymia as a lack of reimbursement coverage prompted concerns about the drug's adoption and dragged down shares of diet-drug makers.
Shares of Vivus were down 24 percent at $11.38 on Tuesday afternoon on the Nasdaq after recovering from an earlier low of $11.00.
Arena Pharmaceuticals Inc's shares were down 6 percent at $7.51, while those of Orexigen Therapeutics Inc were off 5 percent at $4.99.
Arena's diet pill Belviq is set to launch early next year and Orexigen is planning a re-submission of the marketing application for its competing product, Contrave.
Earlier this year, Belviq and Qsymia became the first new diet pills to receive marketing in 13 years as pressure mounts on the U.S. Food and Drug Administration to approve obesity treatments for some two-thirds of Americans who are considered overweight or obese.
Vivus recorded $41,000 in Qsymia sales since its launch on September 17 through the end of the month. Analysts on average had expected about $310,000, according to Thomson Reuters I/B/E/S.
The company's chief commercial officer Mike Miller flagged concerns over the drug's lack of insurance coverage and said "about 30 percent of patients chose not to fill after receiving a (Qsymia) prescription due to cash outlay."
"The average retail price for the patient for 30 days or the recommended dose is approximately $160," Miller said on a post-earnings call.
"Currently, we are seeing one out of five (patients) being covered by third-party insurance with an average co-pay of $62."
Robert Hazlett of Roth Capital Partners, who maintained his "neutral" rating on the stock, said reimbursement was an obstacle, but given that the company is in the very early stages of selling the drug, it can overcome these hurdles over time.
A total of 656 Qsymia prescriptions were shipped from certified network pharmacies in September. That number rose to 5,560 through the week of October 26.
Cowen & Co analyst Simos Simeonidis also said insurers will slowly start reimbursing obesity drugs over the next few months, following the example set by the Centers for Medicare & Medicaid Services, which has started reimbursing weight-loss counseling.
"We continue to believe that in order for Qsymia to become a blockbuster, Vivus needs the help of a big pharma partner," Simeonidis said in a note to clients, highlighting the importance of a large sales force.
Vivus's shares saw much investor love during the period leading up to Qsymia approval in July, but have slid 30 percent since European health regulators rejected the drug in October, citing the potential for heart risks and birth defects related to its long-term use.
The company plans to appeal the decision and expects a fresh verdict in the first half of 2013.
(Reporting by Zeba Siddiqui in Bangalore; Editing by Maju Samuel)
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