VIVUS, Inc. (VVUS): This Obesity Bet Just Became More Attractive

Page 1 of 2

The importance of an FDA drug approval cannot be denied, but it is also a fact that the event can have different effects on the stock price. The ideology of buying on the rumor and selling on the news is a major factor when it comes to stock slides after drug approvals. This is because Investors sometimes prefer taking profits after approvals and sell the stock on the approval news. This is of course only applicable to small-cap biopharmaceutical companies, where valuations are entirely dependent on a single drug approval.

VIVUS, Inc. (NASDAQ:VVUS)Despite approval, there is still no guarantee that a specific drug will finally live up to expectations, no matter how much analysts think it will earn. Recent examples of this phenomenon are the below par sales of VIVUS, Inc. (NASDAQ:VVUS)’s Qsymia and the failure of Pfizer’s Inc. (NYSE:PFE) Exubera. These drugs were being hailed as billion dollar star products that demanded sky high valuations of their respective stocks. The reality however was different; Exubera was canceled after extremely poor sales figures, especially when analysts had predicted stellar sales of above $2 billion. However, being one of the largest biopharmaceutical companies in the world has its advantages. The loss of a multi-billion drug could have annihilated any other developer but Pfizer has not even been fazed by this loss. The company is still one of the best biopharmaceutical bets on the block and is a strong buy. Pfizer doesn’t only have a very strong pipeline and chances for capital appreciation, but also an attractive dividend yield of 3.6%.

These examples demonstrate effectively the unpredictability of actual commercial success of a drug. The most important factor at the end of the day is the willingness of insurers to provide coverage and doctors to prescribe the drug. Qsymia was being valued pretty high by analysts but the stock has depreciated significantly since FDA approval. As I mentioned above, the two primary constraints to Vivus appreciation are the insurance coverage and the willingness of doctors to prescribe the drug.

Vivus

Qsymia is still fighting to penetrate the obesity market, and despite mediocre sales, it’s still too soon to write it off completely. The company is facing tough competition from its archrival and competitor Arena Pharmaceuticals, Inc. (NASDAQ:ARNA). Belviq is a safer product as compared to Qsymia but is also less effective. Arena stock has been suspended between $8 and $12 despite stellar analyst ratings. This is because compared to Qsymia, Belviq is safer but also less effective.

Page 1 of 2
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 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

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

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!