Vivus (VVUS) is an extremely undervalued stock even though it has enjoyed immense success recently through speculative investing. The stock price still sits just above $22 dollars. This is a bargain considering the projects Vivus has in its pipeline. Although the firm suffered from missing its stated and expected projections, that is beginning to look more and more like a unique transgression. While there is no way to predict exactly how the public will react to the supply of any new drug, the Vivus product line seems more than promising due to the specific market for two new drugs it plans on introducing. Even more exciting is that one of these drugs is already in late developmental stages and merely waiting for approval.
The first of these drugs is Avanafil, the newer of the two products. Avanafil is an erectile disfunction (ED) drug, currently awaiting approval by the FDA. Although the ED drug market is extremely crowded, I believe that the market also has an elastic demand. In other words, new ED medications surface on a constant basis, yet the market never seems to be overcrowded. This is important because Avanafil could potentially gain significant market share if it is approved on April 29, its evaluation date.
Another drug that has the potential to be extremely relevant is Qnexa. It, too, is currently waiting on FDA approval. However, it is fully developed and ready for the market. Qnexa will be used to treat obesity, and has the potential, if approved, to drive the stock price to unprecedented heights. Obesity drugs, like ED drugs, have vast global appeal, resulting in a crowded and always evolving market. It also means plenty of demand, which, even as some dies out, there will always be more interested parties. Avanafil and Qnexa will therefore enter into very friendly territory if they are approved. Also, if Vivus is able to release the two around the same time, one will hedge any failures with the other's success. If both drugs are successful, watch for a breakout in its stock price.
Vivus is always, by default, in competition with Abbott Laboratories (ABT), since both companies are drug developers. Abbott currently trades at about $60 a share, however. It is an extremely well-established company, and has been rising due to its new injectable drug for arthritis, Humira. Humira is single-handedly driving Abbot's stock price up, and at a relentless pace. In fact, Humira is on pace to become the world's No. 1 selling drug, surpassing Pfizer's Lipitor. I, for one, am impressed by Humira's ability to stand up to Lipitor, and I think this bodes extremely well not only for the stock itself, but also for the well-being of Abbott. In other words, not great news for Vivus -- though it seeks to compete with drugs treating different ailments.
Arena (ARNA) is yet another company that is in direct competition with Vivus. As opposed to being just another run-of-the-mill drugmaker, it happens to compete in the same corner as Vivus: weight-loss drugs. Arena is a much smaller firm then Vivus, but it is in the process of developing the drug Lorcaserin, which should compete directly with Qnexa. The FDA delay on the approval of Qnexa means that the launch time will be approximately the same for both drugs. However, as I mentioned previously there will undoubtedly be room for both companies within this market sector. The weight-loss sector offers enough market opportunity for both drugs to sell; the question is whether it has room for both to sell well. That will depend more on the drug itself and the marketing techniques used by Vivus and Arena.
However, it is important to note that Vivus will undoubtedly have an advantage over Arena in this battle. I believe investors will remember the first Lorcaserin fiasco, in which the initial version of the drug was denied by the FDA. Given the fact that Vivus is starting with a clean record, investor confidence will be on its side. Also, in clinical trials Qnexa was actually reported to be more effective than Arena's Lorcaserin. This means that initially, before generics hit the market, Vivus could have the chance to grab an immense amount of the market share until Arena pharmaceuticals can adapt to Vivus' superior offering.
Amgen (AMGN) also poses some competition for Vivus. However, given the fact that many of Amgen's blockbuster patents are expiring, it is looking to diversify into other sectors of the market. So, while other companies are looking to push out new drugs, Amgen is taking a back-seat approach and putting its solid cash flow to use. Amgen has recently acquired KAI Pharmaceuticals. KAI is in Phase III of development for a drug used in the treatment of patients on dialysis and suffering from a hormonal imbalance. The latter affliction is frequent in these types of patients, and I see it as a safe and smart play. For Amgen, it remains to be seen whether the acquisition of a new drug company will pay off as well as developing those new drugs itself. The news of both will reveal how Amgen may play as a competitor to Vivus in the coming months.
Teva (TEVA) is easily one of the strongest competitors, not only for Vivus but with any drugmaker. Teva currently boasts a share price of around $40 and is one of the most versatile pharmaceutical companies on the market. For instance, at a recent neurological medical conference, Teva announced several new drugs and how these could help people. The diseases that these new drugs could potentially affect are Multiple Sclerosis, Parkinson's disease, and even wakefulness caused by Shift Work Disorder. The versatility of these drugs alone should be enough to keep Teva afloat. Though Teva is not currently competing with Vivus for a specific treatment market, the influx of cashflow from Teva's diversified successes keep the company as a formidable competitor and opponent to Vivus for quite some time. With enough money, any healthcare company can release a competing drug, or string of generic copycats and strip a competing company of its sales' possibilities.
The major companies of the pharmaceutical industry are all busy at work. Vivus has its own projects going on, with the hopes that these will trump those of its competitors. Assuming its two new drugs find success, the company should see some easy sailing for the rest of the fiscal year.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.