Vivus Beats The Street - Still Has A Loss

Aug. 8.14 | About: Vivus, Inc. (VVUS)

Summary

Vivus beat the street by $0.4 per share.

Revenues beat the street by $4 million.

Stendra revenues impress in early stages.

Vivus (NASDAQ:VVUS) announced its quarterly earnings today and beat the street by $0.4 per share. The news sent the stock up in after hours trading, and while beating the street is always good, the company did still post a loss of $0.25 per share.

Getting down to the highlights we can note the following:

  • Total net revenue was $21.9 million for the second quarter of 2014, compared to $5.5 million for the second quarter of 2013.
  • Of the total revenue for the current quarter, net product revenue was $11.0 million from sales of Qsymia, compared to$5.5 million for the second quarter of 2013.
  • For STENDRA® and SPEDRA™, Vivus recognized $4.2 million in license and milestone revenue, $5.7 million in supply revenue, and $1.1 million in royalty revenue.
  • Total research and development expense was $4.1 million for the second quarter of 2014, compared to $9.2 million for the second quarter of 2013.
  • Total selling, general and administrative expense was $28.3 million for the second quarter of 2014, compared to $39.5 million for the second quarter of 2013.
  • Selling and marketing expenses for the commercialization of Qsymia totaled $17.4 million for the second quarter of 2014, compared to $21.2 million for the second quarter of 2013.
  • There were no non-recurring charges in the current quarter, compared to the second quarter of 2013 during which we incurred $3.2 million in non-recurring charges related to the proxy contest.
  • Net loss was $25.8 million, or $0.25 net loss per share, for the second quarter of 2014 compared to a net loss of $55.5 million, or $0.55 net loss per share, for the second quarter of 2013.
  • There were approximately 138,000 Qsymia prescriptions dispensed in the second quarter of 2014, compared to 121,000 prescriptions in the first quarter of 2014 and 81,000 in the second quarter of 2013.

Looking at the anti-obesity pill Qsymia, investors should note that despite continued modest growth, the cost side of this drug (now approaching 2 years on the market) remains higher than the revenue side. One positive is that the revenue growth on a quarter over quarter basis on Qsymia was 21% better than the previous quarter while the script levels went up 14%. This would indicate that the company is increasing the revenue per script while still growing the business. In comparison, competitor Arena (NASDAQ:ARNA) saw a 43% increase in prescriptions but about a 20% increase in revenue. Arena's Belviq sold 110,000 prescriptions in Q2 compared to 138,000 for Qsymia. Arena is partnered with Eisai and gets a percentage of net revenue. Vivus has no partner for Qsymia and gets all of the revenue, but must bear the cost side of the equation as well. Thus, Vivus essentially lost $6.4 million on Qsymia in the quarter while the competitor made about $3.5 million.

Perhaps the bigger story with the Vivus quarterly results is the performance of the erectile dysfunction drug Stendra. The company recognized $4.2 million in license and milestone revenue, $5.7 million in supply revenue, and $1.1 million in royalty revenue. Vivus does not need to market this drug, and the revenue can actually start to offset the costs of Qsymia. Between the two drugs, there was $22 million in revenue while costs of marketing were $17.4 million.

One thing Vivus is demonstrating is that it is cutting costs while increasing revenue. This is something that the street likes to see. While profits are not around the next corner, perhaps there is some light at the end of the tunnel. The company actually improved its cash position from the previous quarter by about $8 million. Vivus finished Q2 with cash, cash equivalents and available-for-sale securities of $324.2 million at June 30,

Investors that began to get disheartened by the slow sales in Qsymia now have a silver lining with Stendra. In addition, after flat sales through Q1 of this year, the company seems to be seeing sales pick up a bit more. It is actually impressive that Qsymia has this level of sales without the same type of direct-to-consumer and television marketing effort that Arena and its partner Eisai are deploying. That being said, I expect Arena to narrow the quarterly prescription gap in the current quarter, and a new competitoir in Orexigen (NASDAQ:OREX) is preparing for an approval of Contrave in September. Orexigen's partner (Takeda) will be dedicating 900 sales reps to the launch of Contrave if approved.

In summary, there are aspects of the Vivus call that look very positive. However, there are challenges ahead that could be quite substantial. I anticipate a bit of a run-up on the news of the quarter, but then expect the equity to settle down a bit until more concrete indications of the fundamentals are demonstrated. Stay Tuned!

Disclosure: The author is long ARNA. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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