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

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

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!