Vivus Beats The Street - Sort Of

| About: Vivus, Inc. (VVUS)

Vivus (NASDAQ:VVUS), best known for its anti-obesity drug Qsymia beat the street today with its earnings on the addition of a one time licensing payment of about $34.8 million, or about $0.34 per share relating to its erectile dysfunction drug. Thus, while the headline says that Vivus beat the street, it really only did so because of the licensing payment. The street was expecting a loss of $0.40 and the company delivered a loss of just $0.17. If you take away the licensing payment, the loss would have been about $0.51 per share.

Vivus announced that sales of the anti-obesity drug Qsymia totaled about 124,000 for the quarter and that those sales delivered $7.7 million. This implies an average of $62.09 per prescription filled. Qsymia sales were 14% better than the previous quarter despite the holidays. Vivus also announced that its erectile dysfunction drug already developed sales of $1.5 million. For the year of 2013 sales of Qsymia came in at just under $24 million, while licensing deals generated a total of about $56 million. Unless 2014 can bring about licensing deals for Qsymia, the company will be most reliant on sales revenue that averaged $2 million a month last year.

Vivus does have $343 million in cash and cash equivalents on hand, so this can help the company as it progresses forward. Cash burn in 2013 was $175 million (bear in mind that the proxy contest cost over $30 million). This would seem to indicate that the company has about 2 years worth of cash on hand for operations. Essentially, the faster the company can ramp up sales revenue of Qsymia and Stendra the better. Vivus does have additional studies to perform with regard to Qsymia.

The story with Vivus appears to be one of the company being able to ramp up sales of its products and to try to work out a partnership deal on Qsymia. Even if sales of the anti-obesity drug were to double to $50 million in 2014, it would not be enough to mitigate the cash burn.

What investors need to see is improvement in the anti-obesity space and a great launch in the erectile dysfunction space. The anti-obesity space has a competitor in Arena Pharmaceuticals (NASDAQ:ARNA) already on the market with Belviq, and an up-and-comer in Orexigen (NASDAQ:OREX), seeking approval for Contrave mid year. The erectile dysfunction space has the big boys of Viagra and Cialis to contend with. Improvement in the numbers this year will be a process, not an overnight event. Possible catalysts include a deal for Qsymia here in the states, and perhaps other regions of the globe. Vivus is up after hours by about 2%, but if you remove one-time events, there is nothing very exciting about this past quarter. 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 or Orexigen.