VIVUS, Inc.: Slow and Steady Can Win the Diet Drug Race

Published: Feb 12, 2013

Vivus Inc, vying to create the world's first billion-dollar weight-loss pill, is taking a cautious approach to marketing in an attempt to overcome the skepticism, safety concerns and lawsuits that have dogged the diet drug industry. The company has lost nearly half of its market value since lackluster sales tarnished the September launch of the first new weight-loss pill in the United States for 13 years. Two of its it's largest shareholders have questioned the company's strategy. But Vivus, which sent out only 150 sales representatives to a target market of 25,000 doctors, is betting on slow, steady marketing of the Qsymia drug to win over customers. Its model, say analysts, could become the blueprint for diet drug makers. "A slower launch that allows people some time to try and use the drug, and make sure the effects they are seeing are good and any risks are more modest, makes more sense both in the medical and financial sense," said Kurt Kessler of ZS Associates, which consults on pharmaceutical marketing. Thomson Reuters Pharma estimates sales of Qsymia will reach $1.2 billion by 2017, up from $128 million in 2013, making it the largest weight-loss pill on the market. A drug with annual sales of $1 billion is known as a "blockbuster" in the industry. That potential goldmine has analysts rating the stock of Mountain View, California-based Vivus highly. Six of 12 analysts recommend buying Vivus stock and none has a "sell" recommendation, according to Thomson Reuters StarMine. Their mean price target for the stock is $20.30, more than 50 percent above its Wednesday close of $13.45 on the Nasdaq. More than one-third of Americans are obese, a condition that can lead to problems such as heart disease and diabetes. A September 2012 report by lobby group Trust for America's Health estimated the annual burden on the U.S. healthcare system from obesity at between $147 billion and $210 billion.

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