Contrave ready for a turnaround
According to IMS prescription data provided by the company, Contrave’s share of the total obesity market has fallen from around 7% to 6.0% but appears to have stabilized (see Exhibit 1). Its share in the branded obesity market also seems to have stabilized and continues to be over 40% despite continued inroads from Saxenda (injectable liraglutide, originally developed for diabetes) from Novo Nordisk.
Exhibit 1: Contrave share of total obesity market
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Exhibit 2: Contrave share of branded obesity market
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Source: Wolters Kluwer, Bloomberg
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Exhibit 1: Contrave share of total obesity market
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Exhibit 2: Contrave share of branded obesity market
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Source: Wolters Kluwer, Bloomberg
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With Contrave already controlling a large part of the branded obesity market and Belviq XR (a once-a-day formulation of Belviq, which is currently twice a day) recently launched by Eisai/Arena in October, Orexigen recognizes that Contrave’s market share gains will have to come from phentermine, which represents around 80% of the total obesity market, rather than from the other branded products. Phentermine is related chemically and pharmacologically to amphetamines and, while efficacious, also carries with it significant abuse potential and risk for anyone with cardiovascular issues. The main driver of this share growth will be increased physician education on the product, as well as greater payer coverage.
Increased insurance coverage would have a two-pronged positive impact for the company. First, it would reduce the cost of the product for consumers, which would stimulate demand. For participants in the Contrave savings card program, those with a prescription covered by insurance pay no more than a $30 co-pay per month (approximately in line with the cost of phentermine), while those who do not have a covered prescription pay $90 per month.
Second, it would increase the net realized price for Contrave as there is a much steeper discount for those paying cash compared to those paying with insurance. Right now the gross-to-net discount for Contrave as a whole is around 64% (down sequentially from 67% in Q2), which means that for every $1 in the wholesale acquisition cost (WAC), the company only realizes $0.36. Orexigen believes that if insurance covered closer to 30% of prescriptions (currently ~20%), the gross-to-net discount might fall to 40-50%.
International launches in progress
In 2016, Contrave, which is known as Mysimba in most international markets, is in the process of launching or will be launched in about a dozen countries. In June, Contrave was launched in South Korea through partner Kwangdong after just a seven-month approval process, which was faster than expected. According to the company, the Korean anti-obesity market had $71m in sales in 2015, up 21% compared to 2014. Orexigen’s partner Valeant has targeted launching Mysimba in 11 different countries in Central and Eastern Europe, namely Slovenia, Slovakia, the Czech Republic, Hungary, Croatia, Lithuania, Latvia, Estonia, Poland, Bulgaria and Romania, and has already launched in five of them, with the remaining six targeted for launch in Q416. Valeant expects to launch in Greece and Cyprus in Q117. Additionally, the company’s local partner, Laboratorios Farmaceuticos Rovi (ROVI), will be launching Mysimba in Spain in January.
Additionally, regulatory filings in Canada, South Africa, New Zealand and Australia (the last two were included in a recently announced deal with Valeant) are all expected in H117.
