NEW YORK (AP) -- Shares of Vivus Inc. stumbled Friday after an analyst slashed his sales estimates for Vivus' new obesity drug Qsymia, saying many physicians may prescribe Qsymia's ingredients for their patients instead of the drug itself.
THE SPARK: Analyst Thomas Wei said he now believes a significant number of physicians will prescribe the two drugs that comprise Qsymia instead of giving their patients Qsymia itself, and that will cut into the drug's sales. Wei said he now thinks sales of Qsymia will peak at $1.2 billion a year, far below his previous estimate of $3.6 billion per year.
Wei downgraded Vivus shares to "Underperform" from "Hold" and cut his price target to $16 per share from $31.
THE BIG PICTURE: The Food and Drug Administration approved Qsymia on July 17. The agency has approved two new long-term weight loss pills this year, and Qsymia is seen as the more effective of the two. Vivus plans to start selling Qsymia later in 2012.
Qsymia is made of two older drugs that have already lost patent protection: topiramate and phentermine. Topiramate is an anticonvulsant, sold by Johnson & Johnson as Topamax, and it makes people feel fuller after eating. Phentermine is a stimulant that suppresses the appetite, and has long been used for short-term weight loss.
Wei said Vivus has argued that most doctors will prescribe Qsymia instead of generic topiramate and phentermine because of concerns about their legal liability if patients who take the generic drugs experience side effects. However Wei said he has become skeptical of the company's reasoning. He added the generics will also be less expensive and a combination of the two generic drugs appeared to be as effective as Qsymia in one clinical trial.
"There is a strong motivator for physicians to prescribe the two generics since branded Qsymia is unlikely to be covered by payors and the two generics will be more affordable for patients," he wrote in a note to clients.
SHARE ACTION: Vivus shares fell $1.75, or 7.7 percent, to $21.01 in midday trading. The stock has doubled in value since late February, when an FDA advisory panel recommended the agency approve Qsymia. However the shares are down 37 percent from their annual high of $31.21, which was set the first trading day after Qsymia was approved.