The FDA on Tuesday approved the weight loss drug Qsymia (formerly known as Qnexa) from Vivus Inc (VVUS). Many consider the pill to be more effective than Arena's (ARNA) recently FDA approved weight loss drug Belviq, but potentially the more dangerous of the two.
Studies have shown that Qsymia raises the risk of birth defects if used by pregnant women, can cause elevated heart rates and cognitive problems.
Qsymia is a combination of two existing drugs, one of which is phentermine, an appetite suppressant that is the component of the fen-phen combination that remained on the market. Phentermine is a stimulant that suppresses the appetite, and has long been used for short-term weight loss. The other ingredient is Topiramate, an anticonvulsant sold by Johnson & Johnson (JNJ) as Topamax, which is designed to make people feel more satiated after eating.
It appears that Qsymia will only be available to doctors via mail-order due to concerns of potential patient abuse along with the other factors mentioned here, so this is a constraint on the drug that puts Belviq in a much better position to dominate market share.
As I have predicted in my videos on YouTube, Vivus saw a sell off Tuesday before and after the news, with a last trade in the after-hours session $24.65, down $1.81 (6.84%) as of 7:00PM EDT Tuesday evening.
Antares Pharma (ATRS) has been in full-out rally mode lately, hitting another 52 week high intra-day Tuesday of $5.58, before being bear raided down to a low of $5, then closing at $5.26, down $0.04 (0.75%).
Also from my YouTube channel and various articles here on Seeking Alpha, I predicted that Antares would see a stock price of $5 a share in July, based on warrant expiration which would lead to short covering, and an earlier than expected New Drug Application (NDA) for VIBEX MTX. The history of the current Antares management has been to under-promise and over-deliver. Last year, the company stated that the NDA for VIBEX MTX could be filed around this time, but later moved its target date for to February 2013. From the Q1 earnings conference call (CC) of this year, CEO Paul Wotton stated that Antares would reveal in December of this year, the exact drug its Vibex QS1 would be comprised of. However, during the company's last CC from May, it was revealed months in advance that the Vibex QS1 would be a quick shot low Testosterone (LowT) treatment--Antares management shows a clear history of engaging in under-promising and over-delivering.
Other possible factors for the large and sustained price appreciation could be:
- A deal for Nestragel might be close to being announced. Nestragel is a gel formulation designed to stop ovulation in women--birth control. However as a poster named LokoDaug from the Antares Yahoo board has speculated, Nestragel might be used to address males - possibly being a form of male birth control, designed to temporarily sterilize men. While this would be an exciting proposition for Antares, I am not sure the speculation is correct, but it is something to be considered for an explanation for why the Antares stock price is soaring.
- Revelation of the unknown mystery drug Antares and Pfizer (PFE) are partnered in is another strong possibility for the stock price breakout. Some stock writers who cover Antares speculate that this unknown drug may be a Lipitor Gel. This cannot be correct as Antares can no longer develop new gel formulations, as per its agreement with Ferring Pharma, who Antares sold the rights to its gel tech in 2007. This sales agreement flatly states that all rights to its gel technology now belong to Ferring; only currently developed gels as of 2007 remain the property of Antares. This only leaves Antares rights to Nestragel and an Advil (Ibuprofen) gel.
Because the deal is with Pfizer's over the counter human health division (OTC), there are really only 2 possibilities for this mystery drug - the Advil Gel, or a fast melt Advil tablet. Either one of these drugs would be a significant revenue booster for Antares, so the revelation of this mystery drug could be in part why the stock price is rallying.
Lastly, a tender offer for the company might be in play here. I first heard some back channel rumors in January of this year that Antares and Pfizer could have a hand-shake type of deal for Pfizer to acquire Antares at some point within the next year. While rumors like these are very hard to confirm - if not impossible, this could be another explanation. Perhaps the best explanation for the price jump is the fact that Antares recently moved to the Nasdaq from the NYSE Amex, and is getting the proper speculation value it truly deserves
Regardless, Antares is my largest holding, as I personally own 86,200 shares at an average price of $2.25 a share, with no plans to sell anytime soon. I originally made this investment with a minimum 3 to 5 year time frame to cash out. I strongly believe Antares is a ground floor business opportunity - an investment, not just a trade. My business modeling of Antares shows me the company will likely be taking in over 1 billion dollars in revenue by 2016, so I speculate a market cap by then to be approaching 5 billion dollars-- $50 a share. After all the hype and speculation has run its course, really all that matters on Wall Street are earnings and profits - company execution.
If Antares is acquired by a larger pharma before then fine, but it better be for a share price over $13. If it's anything less, I would feel management would be slighting the long term shareholder of the company.
Two companies to watch:
Obagi Medical Devices (OMPI), $16.88, down $0.22 (1.26%). The buyout rumors with Obagi have strong validity in my opinion. I have no doubt that an offer will be coming very soon for the company that should fetch shareholders around $25 a share. I am looking for an announcement sometime between now and August 2nd, when the company plans to announce its earnings from the past quarter.
Orexigen Therapeutics (OREX), Orex's stock moved to $7.60, up $0.46 (6.44%), in after hour trading Tuesday on the heels of Qsymia's FDA approval. Because Orex is developing its own weight loss drug Contrave, it appears that speculation is growing stronger on the company's chances for approval within the next 2 years or so.
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