Vivus: Is the Ship Sinking?

May.21.10 | About: Vivus, Inc. (VVUS)

Ask any of the major analysts on the buy-side of Vivus (VVUS,) and you will hear that Qnexa is the next mega-blockbuster. Its 37lb’s of weight loss is so impressive, it is sure to be a multi-billion dollar drug. Wall Street has driven up the price from a 52-week low of $4.18 all the way up to a recent high of $13.68. Even $13.68 is cheap if you are talking about a mega-blockbuster! In my blog entry regarding who will be the First Line Therapy for Obesity, I discussed many of the reasons why Qnexa won’t be that drug and why.

It seems that the Vivus insider who should have the most confidence on the success of Qnexa agrees with me. VVUS filed today yet another Form 4 for Leland Wilson, this time selling another 50,000 shares at a pre-determined price of $13. Basically, Leland had decided that $13 was a very fair price for VVUS, generous even perhaps, so he filed a 105b-1 that said when VVUS hits $13, I’ll sell 50,000 shares. This follows major selling of VVUS by the CEO in 2009, before and after Phase III results for Qnexa came out. These include the following transactions.























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This most recent sell comes on the heels of the resignation of two board of director members on April 27th and April 30th. Vivus stated that those resignations were “not the result of any disagreement with the Company on any matter relating to its operations, policies or practices.” Why would two board members resign after the long awaited NDA for Qnexa was filed, after Qnexa was asked to appear before and Advisory Committee and prior to Lee Wilson selling another 50,000 shares? I don’t know the answer, but the timing is suspicious.

On the CNBC special aired Monday night entitled ‘One Nation Overweight,’ Leland Wilson goes so far as to agree with the reporter than Qnexa could be as big as Pfizer’s (NYSE:PFE) Lipitor. If that is truly the case, why sell 75% of your holdings prior to appearing before an Advisory Committee? On July 15th, Qnexa will be reviewed by the FDA’s Endocrinologic and Metabolic Advisory Committee. If VVUS executive management was confident that Qnexa is a major blockbuster, why do you have a 105b plan in place to sell half your remaining holdings if the stock hits $13?

Now if insiders believe that the FDA will have serious questions as to if Qnexa should be marketed, then it would make sense to be selling prior to that panel. I assume that must be the case here. CEOs are supposed to be aligned with their shareholders. Selling 75% of your holdings prior to the FDA reviewing your drug does not give retail investors a "warm and fuzzy" feeling. In fact, it causes tingling on your skin and a bad taste in your mouth, which happen to be two of the most common side effects of Qnexa. Coincidence? I think not!

Disclosure: No position in VVUS.