When a drug is struggling to reach its full potential, companies have two options: double down and try to sell more or scale back and try to get expenses in line with the revenue the drug is bringing in.
This month we've seen drugmakers take both approaches. Arena Pharmaceuticals' (ARNA) marketing partner Eisai is doubling the sales force that sells the duo's obesity drug Belviq. Meanwhile, Amarin (AMRN -2.97%), which sells lipid-lowering Vascepa, said it's going to reduce its headcount by 50%.
Money matters
The biggest difference between Arena Pharmaceuticals and Amarin is that Arena has a big pharma partner. Eisai is in charge of selling the drug, and Arena simply collects manufacturing revenue on sales of the drug.
If Arena had to pay for the entire sales force itself, I don't know that it would be expanding right now; the added cost isn't likely to be recouped any time soon.
For example, Qsymia, the other new obesity drug, had net sales of $5.5 million in the second quarter, and VIVUS (VVUS) spent almost $43 million on sales, marketing, and general expenses. Granted that includes more than just the sales force, but it's clear VIVUS has a ways to go before it'll be profitable.
The expenses are a long-term investment in growing sales for VIVUS and Eisai. Before Belviq and Qsymia were approved, the obesity market hadn't seen a new drug in a decade and had more than one get pulled off the market because of safety concerns. Getting doctors to come around is going to take time, but it seems reasonable to assume that a larger sales force will accomplish that goal quicker.
Short-sighted?
It's going to be hard for Amarin to grow sales of Vascepa with a slimmed down sales force, but the company has to be a bit short-sighted at this point. The remaining sales force will target the doctors that are most likely to prescribe Vascepa, maximizing their contribution to profits from the drug.
Amarin was counting on the FDA expanding Vascepa's indication to include patients with moderately high triglyceride levels -- it's currently only approved for treating patients with extremely high triglyceride levels -- but there appears to be no chance of the FDA approving the expanded indication.
At this point, Amarin's only goal is to survive until the company gets data from its outcomes study and can reapply to the FDA. The large trial isn't cheap, so conserving cash is important. Amarin can always ramp its sales force back up -- or, more likely, find a big pharma partner -- if the outcomes trial is positive.
