Why Vivus Missed On Revenue

| About: Vivus, Inc. (VVUS)

Summary

Vivus reported a loss of $0.11 per share.

Qsymia sales are down sharply year over year.

Loss of Stendra partner impacted revenue in big way.

Vivus (NASDAQ:VVUS) reported its Q2 results and tried to put a good face on numbers that are not great comparison when compared to a year ago. The company saw flat sales on Qsymia when compared to Q1 and was able to eek out a bit more money, but the bottom line is still a loss.

The company seems to be behind in its quest to deal with the erectile dysfunction drug Stendra. Vivus CEO Seth Fisher stated:

We are concurrently preparing to commercialize Stendra in the U.S. while maintaining discussions to license or sell Stendra's U.S. commercialization rights. On September 1, when the U.S. commercial rights are returned to us, we or a third party will assume Stendra's promotion activities from Auxilium. We continue to explore opportunities to drive stockholder value through identifying commercial and development stage products to build our portfolio of offerings.

With September 1st just a few weeks away, not knowing the full direction for a launch seems a bit concerning.

For the quarter the net lass for Vivus was ($11.4 million). Overall revenue was about $13.8 million while costs were $17.4 million. A loss was to be expected, but the devil is oft in the details.

  • Qsymia script sales are down to 116,00,0 bringing in just $12.7 million
  • Marketing costs for Qsymia came in at $6 million
  • General and administration costs were about $7.7 million
  • Revenue for sales of Stendra were just $1.02 million
  • Cost of goods sold was $2.6 million

The bottom line is that marketing efforts for Qsymia have been cut to the bone, and we are seeing a lack of ability for sales to climb in a manner that delivers positive results in the equity. It seems that the company is in hopes that Qsymia sales will grow organically, but the bigger question is whether or not the street will have the patience to wait.

On the Stendra front, sales of the drug are about $1 million. That is not very encouraging for a drug that has label advantages over the competitors Viagra and Cialis. Further, with just a few weeks left in the already delayed acceptance of the Stendra rights back, Vivus has not yet determined if it will market the drug itself or bring in a partner. Realistically speaking, sales of Stendra in the U.S. will likely see a very rocky Q3 as well. If the company marketing the drug has not yet been determined, how can the company expect to get labeling requirements through the FDA in a timeframe that allows Stendra to hit shelves without delay?

In addition to what is noted above, Vivus is now in litigation with both Qsymia as well as Stendra. While a settlement could be reached at any time, it has not been something that has presented itself as yet. Negotiating through litigation is not always the most sound partnership strategy.

Revenues are down because this company is operating a sales force on a shoestring budget. More money was spent on management last quarter than was spent on marketing efforts. It would seem that Vivus is in a mode of preparing for selling itself rather than in a mode of trying to bring about stock price appreciation. Longer term investors are at a distinct disadvantage, while savvy speculative traders can make an educated guess about the strategy going forward and play the possibility of a "good news" event driving the stock up a10% for a quick gain.

Sales of Qsymia in Q3 will likely be lower than Q2. Sales of Stendra in Q3 are a big question mark, and indeed, the revenue story does not look like it will unfold in a favorable manner.

This equity has its die-hard fans, but they are getting harder to find. It appears that many have taken their lumps on a poor anti-obesity sector and moved on. In my opinion this equity is now dominated by active traders looking for a few points here and there, and in hopes of a deal that sells the company for a quick double (which I find unlikely because the drugs controlled by this company are tied up in litigation). Stay tuned.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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.