Last week we wrote about the fact that Vivus Pharmaecuticals (VVUS) has it's oral hearing in front of the European Medical Agency's Committee for Medicinal Products for Human Use (EMA/CHMP). In that article we said the following regarding VVUS stock:
VVUS is currently range-bound between the 50-day and 200-day exponential moving averages. If a run-up in VVUS is to occur ahead of the EU approval decision, look for the stock price to close above the 50-day moving average within the coming week. Should this occur, there is potential for a short-term move to $29-$30 between now and late October because EU approval potentially doubles Qsymia's addressable market.
Yesterday, exactly one week after that article was published, VVUS closed above the 50 day exponential moving average with the largest trading volume of the past 10 sessions. The catalyst for that move was VVUS' announcement in an 8-K disclosure that Qsymia is now commercially available in the United States. Today the company issued a press release regarding the U.S. availability and stating that the company will be introducing the drug to obesity experts at the Annual Meeting of the Obesity Society, which starts September 20. Vivus is a platinum sponsor of the meeting this year.
On Friday evening, VVUS is giving a corporate sponsored presentation entitled "The New Treatment Paradigm in Obesity: Proper Patient Selection, Assessment of Comorbidities and Stepped Interventions." On Saturday morning, VVUS is giving another corporate presentation entitled "New Treatment Options for Obesity." These are corporate presentations as opposed to peer-reviewed scientific papers but they are important because they are the beginnings of VVUS' marketing efforts.
Arena Pharmaceuticals' (ARNA) obesity drug, Belviq will also be featured in a corporate sponsored presentation entitled "Managing Obesity & Co-Morbid Conditions: A New Era of Treatment Strategies." Arena's marketing partner, Eisai (ESALY.PK), is giving the presentation and is also a silver sponsor the obesity society meeting this year.
By the time these presentations take place, VVUS management will most likely know the trend vote of the EMA. In our last article we suggested that, even though VVUS would know the trend of the EU decision this month, it was unlikely that the company would make a public statement regarding the trend before the official decision comes out. We argued that announcing the decision closer to the time of Qsymia's launch made sense because, in the event of a positive decision, the news would add to the upward momentum of the stock, and in the event of a negative outcome, the U.S. launch news would carry the bulk of media attention.
With Qsymia's U.S. availability beginning this week, and with the obesity society meeting beginning Thursday, we now believe that the EU trend vote may be disclosed publicly by the company this month if it is favorable. In the event that this happens, expect the stock to reflect the increased addressable market within a few trading sessions.
In the case of a negative trend vote we do not expect news this month about the EU decision; however, this does not imply that absence of EU trend information is confirmation of a negative trend vote because, as we outlined in our last article, there are still valid reasons why the company may choose to remain silent regarding the trend vote until the EU decision is finalized next month.
Investors on the sidelines who wish to speculate on the possibility of a run-up related to the EU approval decision should establish a position ahead of the Obesity society meeting. Given the press release this morning, today's trading will most likely confirm the breakout for VVUS stock. Investors are cautioned to keep in mind that this is September options expiration week; therefore, VVUS stock is likely to experience high volatility. The recent news has undoubtedly attracted more momentum players and the stock price movement is biased to the upside. We stand by our previous cautionary note that investors playing the run-up should take some profits off the table in the $29 to $30 range prior to the final EU decision to protect against a negative outcome in the absence of CHMP opinion trend information ahead of time and against a "sell-the-news" event on a positive outcome.
Over the longer term, launching in September gives VVUS two weeks of Q3 sales prior to the first full quarter of sales. This "soft-launch" means that if the initial uptake goes well, Q4 sales will have a slight boost from the extra two weeks in Q3.
Disclosure: I am long ARNA.
Additional disclosure: The authors may establish a long position in VVUS within the next 72 hours.