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Investors in Vivus (NASDAQ:VVUS) have had good reason to be frustrated. The launch of anti-obesity drug Qsymia has been less than stellar and company management has come under attack by activist, and 9.1% stakeholder, First Manhattan Capital (FMC). While some events at Vivus may indeed have been handled poorly, another consideration is whether or not essentially everyone overestimated the consumer market for a prescription drug solution to obesity.

Wednesday, First Manhattan issued statements relative to its desires to nominate a new Board of Directors, a possible search for a marketing partner, a possible outright sale of the company, as well as the prospects of a theoretical "re-launch" of Qsymia with less REMS restrictions.

For investors this can be a confusing time. On one hand, current management was able to garner FDA approval and get Qsymia to the market. On the other hand, current management has delivered slow sales and placed some of the blame on the very restrictions it agreed to with the FDA. One main question on the minds of all investors is whether or not the best course for Vivus is staying under the umbrella of existing management, or if investors would be better served under a new Board hand selected by First Manhattan. It is an interesting dynamic and unfortunately it may be difficult to get answers in time for the annual meeting when the voting for the new board of Directors takes place.

If competitor Arena (NASDAQ:ARNA) is able to launch its own anti-obesity drug, Belviq, with good sales results it could indicate that the stance of current management - that REMS restrictions are hampering sales - is indeed correct. If sales results of Arena are slow going, then the problems in the anti-obesity sector could be bigger than even First Manhattan is indicating. The timing of the Arena launch of Belviq is therefore critical to Arena, Vivus, and up and coming competitor Orexigen (NASDAQ:OREX) with its own drug called Contrave. One big question is when the street can begin to digest the results of Arena's Belviq. Unfortunately, the DEA has not offered final scheduling of the drug and now everyone is in a holding pattern of sorts.

According to First Manhattan:

The REMS modification for Qsymia, which VIVUS should obtain, will be a step forward. It is necessary but not sufficient for Qsymia's success. In the right hands, retail distribution through certified pharmacies would enable Qsymia to reach the drug's full potential for Vivus shareholders. Achieving this goal requires a new commercial strategy, including the execution of the right partnership strategy. Qsymia should be the drug of choice for many Americans suffering from obesity and its devastating medical consequences.

For Vivus investors this presents an interesting dynamic. The very future and direction of the company management and Board of Directors may well be decided at about the same time the FDA is expected to make the REMS restrictions on Qsymia less stringent. Combine that with a lack of input from sales of Belviq, and it would appear that decisions will happen without a full plate of information. Essentially there may always be a question of whether or not the actions of First Manhattan carry a positive impact, or to what potential degree their actions may impact the shareholders of the company.

In my opinion, the softening of some REMS restrictions on Qsymia can not hurt Vivus, but the upside may be more modest than investors are hoping for. Therefore, it is my opinion that some change in direction is needed. If people are in need of obesity treatment, and the doctor and patient feel that Vivus' Qsymia is the desired path, then the current mail order REMS restriction is not an insurmountable hurdle.

What could be the biggest driver for Qsymia is insurance coverage and price point. At the moment Vivus seems to have a theoretical advantage in pricing vs. the reported wholesale price of Arena's Belviq. The caution here is that the Belviq price can be adjusted at any time in much the same way Vivus has lowered the price of Qsymia. Stay tuned. Things at Vivus are getting interesting.

Source: Vivus May Get Second Wind On Qsymia

Additional disclosure: I have no position in OREX, VVUS, or FMC.