Is it Time to Buy Vivus on the Dip?

From an investing standpoint, Vivus, Inc. (NASDAQ:VVUS) appeared to get ahead of itself again earlier this year, as hype in the obesity market reached a fever pitch. The company saw its stock price rise to over $22 earlier this month, only to see it take a nosedive and fall 20% last week. Despite these short term losses, Vivus does show solid prospects since the introduction of its anti-obesity drug Qsymia.

VIVUS, Inc. (NASDAQ:VVUS)

For 3Q, Vivus reported EPS at a loss of $0.40, compared to the same quarter last year of $0.10. The loss was contributed to increased selling and administrative expenses on drug commercialization. Most notably were the results for Qsymia, which saw prescriptions up 30%, and over 700 physicians employing the drug in only its fifth week on the market.

In mid-September, the company announced it was launching its drug Qsymia and that it would be eligible for home delivery through CVS Caremark Corporation (NYSE:CVS) and Walgreen Company (NYSE:WAG), two of the nation’s top pharmacies. Both trade in line on various metrics, including P/E and profit margins. The recent fallout over the Express Scripts contract is now being felt by all three companies, with each down over 3% during the last month. CVS has taken the least amount of damage, and is actually seeing positive gains thanks to Walgreen’s mishap. Express is down the most over the last three months at 15%, and will likely continue to feel most of the pain going forward. Walgreen is still attracting shareholder interest thanks to its +3% dividend yield.

Other notable biopharma company and top Vivus competitor Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) is also making a name for itself in the anti-obesity market. This drug maker was down 5% after its 3Q results, but its obesity drug Belviq is not expected to hit the market until 1Q 2013. The EPS results showed Arena had lost $0.07 per share, compared to $0.16 for the same quarter last year.

Questcor Pharmaceuticals, Inc. (NASDAQ:QCOR) is another widely popular biopharma company that has traded in wide swings this year. The pharma company took a hit when concerns arose over marketing practices of its drug hit the newswire, and coupled with that were limitations of insurance reimbursement for only specific uses of the drug. The ramifications have been that the company tumbled 40% year to date, but it recently begin paying a dividend that yields over 3%, signaling that management is a strong believer in its earnings stability. This biopharma company has seen several funds dump their 1Q stakes during 2Q, including Palo Alto Investors and Adage Capital, both selling off over 40% of their holdings.

Hedge funds made some big bets in pharma during 2Q, with those investing in Questcor and Vivus losing out big. Both anti-obesity companies continue to be speculative plays. While we see Questcor as being less speculative than the other two, given the company’s positive earnings, the long term growth is likely not as robust for its drug as that of Vivus and Arena. Valuation at this point is virtually useless with both anti-obesity companies still running negative earnings and hemorrhaging cash to commercialize their drugs. Thus, we look to the companies’ long-term growth rates for guidance.

Currently, Arena is up a ridiculous amount year to date at 340%, with Vivus up only 10%. Meanwhile the expected five-year growth rate for Vivus blows Arena’s away. Sell-side analysts expect Vivus to grow EPS at a 5-year CAGR of 50%, compared to Arena’s 25%.

The fund interest in Vivus has also dominated that of Arena. The top fund owners in Arena were small firms with moderate stakes, while Vivus saw both Passport Capital and QVT Financial owning over eight million shares each. QVT’s position made up almost 20% of the firm’s 2Q 13F, while Passport’s made up over 7.5%; check out all the funds owning Vivus. As another vote of confidence for Vivus, Passport announced in a 13G filing last month that it had increased its share ownership by 5%, from 8.1 million shares to 8.5 million shares. Now may not be a bad time to “monkey” Passport into Vivus if you haven’t already.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!