Vivus Shifting Gears

| About: Vivus, Inc. (VVUS)

Vivus (NASDAQ:VVUS) has had a challenging year. The company launched its highly touted anti-obesity drug, Qsymia, last September only to see sales numbers dribble in instead of the blockbuster sales some were anticipating when the FDA approval was announced earlier in the summer. Q4 sales revenue from Qsymia was just 2 million, and while Q1 of 2013 showed improvement to $4.1 million, the concern is that Qsymia sales can not muster the revenue needed to get to profits, let alone pay for additional studies.

Vivus management has tried to take steps to turn the story around, but as yet has not really been able to deliver the desired results:

Despite these moves, the equity has been challenged to show traction and large investors like First Manhattan are calling for some sweeping changes including the nomination of a new slate of Board members. First Manhattan wants to see the company take on a distribution partner in a fashion similar to the path taken by competitor Arena (NASDAQ:ARNA) with its anti-obesity drug Belviq. First Manhattan has also stated that an outright sale of the company should be open for consideration.

Vivus announced its Q1 earnings recently, and while the story was pretty much as expected it appears that current management is taking the suggestions of First Manhattan seriously. The current Board is up for a serious challenge in the next few months. The indications that the current board may be considering new paths simply may not be enough to keep their posts. The street wants some of these changes, and to date the current management has fallen short. Perhaps a new Board is just what the doctor ordered.

Vivus investors need to pay attention to the sector now more than ever. Competitor Arena just received final DEA scheduling on Belviq and will be launching in early June. This means that patients have a choice in the marketplace and Qsymia is no longer the only show in town. If Arena sales prove to be much more robust than the performance of Vivus, the impact to the equity could be profound. Another consideration is that the prescription weight loss market is simply not as big as many had modeled, thought, or hoped for. The answers will develop as Belviq sales figures begin to roll in. Essentially, the Vivus story is a work in process that has the plot just now taking shape. There is room in the market for more than one anti-obesity drug. In fact, there is a need for more than one. The big question is how long it will take for the market to develop and whether or not that happens with current management in place. Stay Tuned!

Disclosure: I am long ARNA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I have no position in Vivus.

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