Vivus Needs Catalyst For Qsymia

Dec. 4.13 | About: Vivus, Inc. (VVUS)

Vivus (NASDAQ:VVUS) is the company responsible for the anti-obesity drug Qsymia. The company is marketing the drug on its own and of late sales have been pretty flat. Vivus is seeking a big pharma partner for the drug, but as yet has not been able to woo suitors into a deal. For investors, this can be frustrating because of what appears to be an overwhelming amount of potential in the anti-obesity space. Millions suffer from obesity and Vivus has one of the few possible drug solutions on the market. Competitor Arena Pharmaceuticals (NASDAQ:ARNA) has Belviq, and coming down the outside lane seeking approval is Orexigen (NASDAQ:OREX) with Contrave.

Five months ago, the weekly sales figure for Qsymia was about 9,500. This past week, the sales figure was about 10,500. In essence, the sales growth for Qsymia has stagnated for about 5 months now. Yes, there have been weeks where the drug has eclipsed the 11,000 mark, but that is the exception rather than the rule, and growth at this level is not going to deliver the type of revenue needed to keep things going. If not for some possibilities with its erectile dysfunction drug, the Vivus story would have little to be excited about. Compounding issues is that anti-obesity prescription sales are now in a very challenging period. The data that will be reported this week will include the Thanksgiving holiday and will show a sharp decline. Later this month, Christmas will arrive on a Wednesday, essentially meaning another bad sales week.

Vivus is between a rock and a hard place with Qsymia. The company needs to show traction to have hopes of landing a partner, but getting traction now is challenging. The company has cut costs and jobs, but right now it actually needs to beef up the sales force to show the growth needed. In many ways, the company is in a position many college grads are in. You need a job to get experience, but need experience to get a job. It could well be argued that the fact that a partner has not been announced at this juncture is actually good. Let's face it, the negotiating power is with the buyer here and not the seller.

In my opinion, 2014 cannot come fast enough for Vivus. At least with the new year, the potential that some consumer pull could boost sales a bit exists. Analyze any weight loss product's numbers and you will see that the first two quarters of the years are where the dollars are. That is because consumers are more involved in weight loss during that period of time. Even with that, it is my opinion that Vivus needs more than just consumer pull. Especially considering that Arena and Eisai are ramping up marketing and Orexigen seems poised to be on the road to approval with big pharma partner Takeda.

Should Orexigen gain approval in mid 2014 as some speculate, the landscape will shift in what could be a dramatic fashion. This means that Vivus has a small window over the next 6 months in which to keep the costs under control, increase sales, and show viability. The company's erectile dysfunction drug Stendra can buy Vivus some time, but it has to get to market and deliver meaningful revenue as well, something that in my opinion is highly unlikely within the next three to six critical months.

At the right price, Vivus could be a tempting play, but there seems to be no rush to get in. There is simply no real company catalyst to indicate that a big spike in the stock price will transpire any time soon. I see Vivus as a "wait and see" equity, and one that is not going to go on a monster run without you. Watch the sales data over the coming weeks with caution. Wait to see if there is any traction in early January on sales numbers. If you already hold the stock, you will want to watch the entire sector with a careful eye. If Arena's Belviq keeps gaining traction and Qsymia remains flat, especially after the new year, then you will want to think hard about where this is going.

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 or Orexigen.