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Summary

  • Suit buys company 30 months of exclusive use.
  • Vivus can use the time to boost sales of Qsymia and Stendra.
  • Decision on suit could impact sector.

Vivus (NASDAQ:VVUS) has announced that the company has filed a lawsuit against Actavis PLC (NYSE:ACT) with regard to the anti-obesity drug, Qsymia. The suit centers on Actavis filing an Abbreviated New Drug Application (ANDA) with the FDA for the rights to make a generic version of Qsymia, a compound of existing drugs that Vivus has conducted trials on, patented, and brought to market. The filing of the lawsuit puts a stay on the activities of Actavis for 30 months or a court decision, whichever comes first.

The Vivus lawsuit was expected, as it is the sole mechanism for the 30-month rule under the Hatch-Waxman Act. Essentially, the company has bought itself some time, but must now get busy in more ways than one. Sales of Qsymia have been relatively flat in 2014 absent any real marketing muscle or a Big Pharma partner. On top of this issue, today is the deadline for an alleged buyout offer from Aspen Investments for a reported $640 million.

With buyouts, lawsuits, and flat sales on Qsymia, the silver lining with Vivus appears to be the erectile dysfunction drug, Stendra. Sales of Stendra seem to be progressing nicely, though the launch is still early in the process. Ultimately, investor speculation on Vivus seems to have its focus on everything but actual sales and fundamental performance. As yet, the street has not seen any new information regarding a possible buyout offer.

From an investor's standpoint, Vivus presents a lot of risk, as well as a lot of potential. This will make movement in the equity volatile, and perhaps gives an advantage to active traders. It will be a couple more months before we can really begin to assess exactly what Stendra sales mean to this equity. That leaves us with Qsymia sales and a potential takeover as a backdrop of near-term value. That can be frustrating.

For the overall anti-obesity sector, the lawsuit could carry implications that need to be considered. Qsymia is a combination of two existing drugs that are available as generics. While Vivus does have patents on its combination, the ability of doctors to simply script generics exists. The generics are much less expensive than the branded Qsymia. This is a consideration that Orexigen (NASDAQ:OREX) investors need to think deeply about because, like Qsymia, Orexigen's Contrave is a combination of two existing generics.

Belviq, a novel drug from Arena Pharmaceuticals, is not immune to the implications of the suit either. While Belviq does not have a generic "equivalent", the existence of inexpensive treatments for anti-obesity may impact the pricing of Belviq.

As if that is not enough for sector investors to consider, there are more anti-obesity treatments in the works. Novo Nordisk (NYSE:NVO) is seeking a label revision to include anti-obesity on the ingredient in Victoza, and Zafgen is currently in trials on a drug of its own that deals with appetite, as well as how the body uses fat. Zafgen is looking to come up with an IPO this year.

The bottom line is that the proverbial clock in the anti-obesity space is ticking in more ways than one. Establishing a market leadership position could be a very important event for any one of these companies.

In my opinion, the activities in the anti-obesity space give any investor a pause in their thesis about the sector or these companies individually. Specific to Vivus, Stendra sales are going to begin to take on a major importance. Stay Tuned!

Source: Vivus Suit Preserves Exclusivity Of Qsymia - For Now

Additional disclosure: I have no position in Vivus, Orexigen, Eisai, or Actavis