In an interesting development, a large Vivus (VVUS) shareholder has called for the sale of the company. QVT Financial holds an impressive 8.3% stake in the company and has met with management to discuss a potential sale as well as Board representation. Vivus CEO Leland Wilson has agreed to pursue further conversations with the board.
Vivus launched an anti-obesity drug in September and early sales projections fell short of the exuberant expectations of the street. It seems that everyone got a bit ahead of themselves in relation to whether or not Vivus's drug, Qsymia, would be a blockbuster.
While early sales did fall short of expectations, they are not deplorable and actually show promise. Vivus's stock took a hit on the early data, but now that the street has a better sense, there could be a decent entry point for investors in the wings. It is simply a question of whether the equity is fairly valued at current levels. That debate rages on.
Meanwhile Vivus is not standing still. The company has been meeting with analysts to better outline realistic models, has approached the FDA for eased prescription requirements, has cut a deal to widen the mail order filing, has been working with insurance companies on the benefits of covering the drug, and has expanded research into new uses for Qsymnia that include its use as a possible treatment for Sleep Apnea. While Vivus's version of Qsymia for Europe was declined, the company is still moving forward in an effort to win over the European regulators so that Vivus can market in Europe.
What appears to be happening here is that a large stakeholder wants results. In my opinion management has limited time to show meaningful growth or this issue could fester and become a cloud over the company. Shareholders in Arena Pharmaceuticals (ARNA), a competitor in the anti-obesity drug market, are certainly watching closely. At this point Vivus and Arena have the only FDA approved drugs to treat obesity. Vivus got to market first because Arena is awaiting DEA scheduling that is required prior to launch.
One big question mark in the segment is whether the sales of Arena will fare any better than Vivus. While shareholders love to debate efficacy, safety profiles, and markets, the fact of the matter is that the expectations were likely set way to high. There could certainly be a surprise if the sales results of Vivus move substantially higher in Q4.
The stage is essentially set for the moment. We have a shareholder seeking that Vivus be sold, and an analyst community that can now better model the potential market. Essentially, even with viable products, Arena and Vivus remain speculative plays that can offer great reward or investor frustration. There is not much of anything in between. The bottom line: Management needs to perform or the clouds of uncertainty will gain strength. Stay tuned!
Additional disclosure: I have no position in Vivus