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

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.

As opposed to Arena, Vivus has taken a beating after poor sales results of Qsymia. However, a recent filling shows that sales are finally picking up. According to data released by the company, shipments for the period ending 12/21/12 were 12,978 as compared to 7,749 in the previous period, an increase of approx. 68%.

The company has also released data for its study on the effect of Qsymia on weight loss. According to company disclosures, the study shows that treatment with Qsymia led to significant improvements in blood pressure, triglycerides and cholesterol in obese patients suffering from one or more of these ailments. Moreover, the positive effects were even more exaggerated in patients who lost 10% or greater weight during the treatment.

According to an investigator in the study, Suzanne Oparil, M.D. (Director of the Vascular Biology and Hypertension Program, University of Alabama at Birmingham):

“This provides clear evidence that patients with hypertension or high cholesterol treated with Qsymia for one year experienced significant weight loss and clinically meaningful improvements in their underlying cardiovascular risk factors.”

This should be exciting news for Vivus investors because it gives doctors more reason to recommend weight loss drugs to their obese patients. I reiterate my buy rating on Vivus due to my belief that Vivus has a greater ability to reduce weight as compared to alternatives, and new studies should reduce doctor reluctance in prescribing the drug.

The article This Obesity Bet Just Became More Attractive originally appeared on Fool.com and is written by Mohsin Saeed.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

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

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How 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

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!