A Weird, Volatile Day For VVUS
Vivus (VVUS) had a very weird day, even for a biotech company. The stock opened in the green as I sat with coffee in hand, and I began to watch the market drop. With my attention focused on the commodities a few minutes later, I returned to VVUS' chart at about 9:40 to see the stock down a whopping 14%. Did someone prematurely leak news on an FDA rejection on the NDA or something? Yikes.
It didn't take long to find the culprit. Someone out there sold over 1 million shares of the company in one go, and the market simply didn't have the buyers to absorb them. In retrospect, this would have been a great opportunity the catch the knife, but I was afraid that the big player who sold something like $28 million worth of stock so abruptly knew something I didn't. The same entity (presumably) sold an enormous position in Orexigen (OREX) too which only added to the conspiracy. Strangely enough, Arena (ARNA) wasn't included in the giant sell order.
The price action after the huge drop suggested that shareholders were panicking over the drop too - buyers were very slow to bid the shares to a more reasonable level. After all that drama, we waited all day for news on the FDA decision that never came. At the closing bell, I'm sure I wasn't the only one left scratching my head at the lack of a decision.
It seems that after-hours traders were assuming the worst, since VVUS was down another 7% or so (bringing it back to the prices we saw after the huge selloff at the start of the trading day). I retired for the day, checking the wires every hour or so for the decision - it wasn't in yet! By the time I had dinner I assumed that the decision was delayed until today before the bell, or something like that.
Just before 10 o' clock New York time, I checked my email to find that someone forwarded me the confirmation that Qnexa was approved. Talk about last-minute news.
So, now we have Qsymia. The FDA wanted the drug's name changed apparently, because "Qnexa" was too similar to a wide host of other drugs with similar sounds. Also a bit strange, but doesn't actually matter.
Vivus expects to have the drug available in the fourth quarter of 2012, which puts it ahead of Arena's Belviq (formerly known as Lorcaserin) in the race to tap the obesity drug market.
Considering the approval, and the conference call that will clarify all this this morning, shares are set to rebound after the insanity that was yesterday's trading session.
Now that their potential blockbuster drug is approved, traders and investors will have to switch their perception on Vivus quite a bit. While companies like Orexigen are still years away from their entry into the obesity market, Vivus is going all-in very soon and is expected to reap some enormous profits off their weight-loss pill. The price of the shares will have to be supported by Qsymia sales figures after this point.
This is where it gets tricky, because we're not entirely sure what those sales figures should even be. The analysts will have a heck of a time readjusting their price targets once sales data begins to trickle in next year too, which makes VVUS a stock you should be watching for at least a year (if not for entertainment/education purposes).
In my last Vivus article released on July 16th I mentioned that $30/share is a good spot for the bulls to aim for if they expect VVUS to continue its run upwards and squeeze out any remaining shorts. In addition, downside is probably limited now that Vivus has the approval in its pocket.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.