Vivus (NASDAQ: VVUS) has been seeing relatively modest growth in Qsymia (phentermine and topiramate ER) prescriptions since the drug launched in September 2012 under the FDA's REMS agreement, which restricted the drug's sales significantly due to the inability for patients to have prescriptions for the drug filled at brick-and-mortar pharmacies. Because of this, and because of an apparent and drastic overstatement of the true size of the prescription obesity drug market, investors have mixed and overall bearish opinion on VVUS since the FDA approval of Qsymia. The stock is trading at roughly half of its level post FDA approval.

While the larger trend since FDA approval remains negative, a relief rally that was initially discussed in a Bio-Wire note on April 18th brought the stock 17% higher since. This move was a reaction to a change in the Qsymia REMS which could have a profound (and much needed)

When the discussion turns to Arena Pharmaceuticals (ARNA), there is no shortage of opinion, passion, and banter. This tends to happen with speculative stocks that gain in popularity. While many think it is an "us against them" situation, the savvy investor steps back, watches the ongoing battle and makes profitable trades along the way. Most of my articles are geared toward the short and mid term, active traders, and people seeking an entry point. Personally I have only made my initial buy at $7.32 and one sale (I sold half of my stake) at $10.50. If I were to apply my profits from the sale to Arena, my cost average is about $4.15.

Long ago I learned to minimize my attachment to any company. It was a hard lesson to learn, but it made me a better investor. I learned that no matter what I thought, or what my due

First Manhattan, an investor with about a 10% stake in Vivus (VVUS), has now taken the step of increasing its slate of Board nominations with the addition of a 9th nominee. Essentially, expressing disappointment in the current management and Board of Directors, First Manhattan is seeking to gain control of Vivus through a cherry picked Board of Directors.

The sparring match between First Manhattan and current management has been going on for months with each side seeming to take turns in a game of chess as the time-clock for the annual meeting winds down.

First Manhattan raises some pretty compelling points. Sales of anti-obesity drug Qsymia have been less than stellar, and even 7 months later have not gained the type of traction many investors had hoped for. Meanwhile, current management recently got the REMS restriction using only mail order pharmacies lifted by the FDA and can now distribute

Some equities have a pretty passionate following. Arena Pharmaceuticals (ARNA) happens to be a company that carries a very passionate fan base. On its face this could seem like a great thing, but as with anything in life, there are two sides to any story. The same is true with the upcoming launch of Arena's anti-obesity drug Belviq. Is Arena out to launch, or is it out to lunch?

The answer to that question is not an easy one. It depends on whether you are looking for and measuring company success or the success of the equity. Personally, I look at the equity because that is where I have some money invested.

Circling back to the passionate fan base Arena has, we should now look at a few items:

Positives Of A Passionate Fan Base

• These fans are unofficial ambassadors of the equity. They love the equity, have invested in

In this article I will discuss why I believe public awareness of Arena Pharmaceuticals' (ARNA) Belviq, and to a lesser extent Vivus' (VVUS) Qsymia (due to changes in REMs), will occur at a much quicker rate and on a much larger scale than that which occurred with the now infamous and wildly successful FenPhen drug of the 1990s. I will explain how the existence of Facebook has changed the game since FenPhen was on the market and how "word of mouth advertising" has been taken to a whole new level never before thought possible. While I will also discuss how this phenomenon will also be helpful to Vivus and its weight loss drug Qsymia, my primary focus will be on Arena's Belviq.

Contrary to public perception, the thing that made FenPhen such a blockbuster hit back in the 90's was not because of the way it was advertised. Instead, the

With sales of anti-obesity drug Qsymia not progressing to the desired point, and cash burn at Vivus (VVUS) such that it was faced with either added debt, stock dilution through an offering, or finding a partner, Vivus seems to have chosen the former and came to terms on $220 million in 4.5% covertible notes due in 2020.

This route should not have been unanticipated by anyone. The company has wanted to avoid stock dilution, and the prospects of seeking out a possible partner is a recent development brought on by the actions of 10% stakeholder First Manhattan in its quest to wrestle away control of the Board of Directors.

What investors need to consider now is the actions that typically transpire with convertible notes. The usual play is that the buyer of these bonds shorts the equity. This locks in a gain while at the same time offering financial

It is no secret that about a year ago Vivus (VVUS) was expected to deliver a blockbuster anti-obesity drug, Qsymia, to the market. It is no secret that there are many, including some large institutions that invested into Vivus at levels substantially higher than the equity trades at today. Adding to the list, it is no secret that the launch of Qsymia last September was not at all what investors were looking for. Taking things a step further, it is no secret that even after six months the sales of Qsymia are far from a point where thinking about blockbuster status ($1 billion of sales in a year) is even realistic.

In response to many of these factors, a 10% stakeholder in Vivus, First Manhattan, has been highly critical of current management, has been vocal and public with its opinion, and has nominated a new slate of Board Members for

With Vivus' (VVUS) anti-obesity drug Qsymia having launched in September of 2012, and Arena's (ARNA) competitive solution Belviq set to launch next month there are many factors for investors to consider over the short and mid-term. One key item of consideration is off-label prescriptions.

An off-label prescription is a script written by a doctor that is not based on the FDA approval of that drug. A good example would be a doctor prescribing Arena's Belviq for controlling type II diabetes when in fact the drug is approved for anti-obesity.

Off-label prescriptions is not new. In fact, off-label prescriptions are written with great frequency. If a doctor feels that a certain drug will be helpful to a patient, even off-label, there is nothing to stop that doctor from pursuing that course of action. After all, a person's health is paramount.

Off-label prescriptions have had a lot of attention in recent years.

Arena Pharmaceuticals (ARNA) has now received its long anticipated scheduling for Belviq from the DEA, and its fate in Europe, at least in the short-term, is a known for investors. The stage is thus set for Belviq's commercial launch in North America, which is expected to occur next month. With the PPS sitting around $8ish and showing fairly decent support at these levels for months (except the quick dip upon Arena pulling Belviq's application in Europe), investors and traders alike now must decide how to play the launch. Spencer Osborne cogently argued that anything below $8 in PPS represents a strong buying opportunity going forward, with his argument couched in terms of projected number of scripts being written during the initial launch. Looking at these numbers and the bullish sentiment on message boards, I am of the opinion that most investors are about to be sorely disappointed.

Vivus (VVUS) has had a challenging year. The company launched its highly touted anti-obesity drug, Qsymia, last September only to see sales numbers dribble in instead of the blockbuster sales some were anticipating when the FDA approval was announced earlier in the summer. Q4 sales revenue from Qsymia was just 2 million, and while Q1 of 2013 showed improvement to $4.1 million, the concern is that Qsymia sales can not muster the revenue needed to get to profits, let alone pay for additional studies.

Vivus management has tried to take steps to turn the story around, but as yet has not really been able to deliver the desired results:

• Vivus announced a price reduction in the form of a free trial in November of 2012
• Announced wider prescription coverage with an ExpressScripts deal in December
• Vivus announced a second price reduction of Qsymia in March of 2013

Many leading fund managers, including Wellington Management, SAC Capital Advisors and T Rowe Price Associates, filed forms 13-D and 13-G with the SEC recently, indicating that they had amended their ownership in U.S. exchange traded healthcare companies.

The 13-D/G reports are statements of significant ownership of more than 5% of the voting class of a company's securities, and they are also important due to their timeliness. While 13-F filings are quarterly, and are required to be reported within 45 days after the end of the quarter, 13-D/G's are required to be filed within ten days of the underlying transaction. Furthermore, 13-D/G's are often a precursor to a hostile takeover, company breakup or other "change of control" events, and will often include a letter to management explaining the reason for their taking a large stake in the company, thereby giving more insight into the transaction.

New York-based hedge fund Glenview Capital

Q1 2013 Earnings Conference Call

May 7, 2013 08:30 AM ET

Executives

Leland F. Wilson - CEO

Timothy E. Morris - SVP, Finance and Global Corporate Development and CFO

Peter Y. Tam - President

Michael P. Miller - SVP and Chief Commercial Officer

Barbara Troupin - VP, Scientific Communication & Risk Management

Analysts

Charles Duncan - Piper Jaffray

Matt Lowe - JPMorgan

Simos Simeonidis - Cowen & Company

Irene Lau - Leerink Swann

Lee Kalowski - Credit Suisse

Alan Carr - Needham & Company

Steve Byrne - Bank of America

Michael Tong - Wells Fargo Securities

Jason Butler - JMP Securities

Eric Roberts - Caxton Advantage

Jonathan Aschoff - Brean Capital

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the VIVUS First Quarter 2013 Conference Call. At this time all participants are in a listen-only mode. (Operator Instructions) As a reminder, this call may be

The SPDR S&P Biotech ETF (XBI) is up about 32% in the past twelve months, in new high territory, while the broader market is up about 18% during the same period. Within that group, many small-cap biotech stocks (those with market-caps of less than $2 billion) are up even more sharply. These small-cap biotech companies are generally considered very speculative and a risky investment, in contrast to large-cap and some mid-cap biotech companies that have well established commercialized product portfolios that generate revenues, and maybe even profitability. We believe it is significant when the world's largest or mega money managers invest even a small portion of their portfolio in these small-cap biotech companies, thereby giving their seal of approval in what is otherwise considered a very risky investment.

These mega fund managers, such as Fidelity Investments, Goldman Sachs (GS), BlackRock Inc., Vanguard Group, and 23 others, manage between $100 billion

Responding to news that the company would withdraw its MAA (Marketing Authorization Application) for Belviq (lorcaserin) from the EMA, shares of Arena Pharmaceuticals (NASDAQ: ARNA) tanked by 9.2% last Friday, as investors questioned whether obesity drugs had a future in the EU market. Also adding to the anxiety amongst ARNA investors is the lack of DEA scheduling of Belviq as we approach the 1-year anniversary of the drug's FDA approval on June 27th, 2012.

Investors knew that European regulators were not as fond of this new generation of obesity drugs after Vivus (NASDAQ: VVUS) failed to attain approval for Qsymia (phentermine and topiramate ER) in late 2012, although it appears that a large number of Arena investors believed that the better-established safety profile of Belviq would lead to a successful MAA. It seems that Arena's correspondence with European regulators implied that there was little promise in Belviq's current

Arena Pharmaceuticals (ARNA) has taken a 15% hair cut on the day of its earnings release. While several numbers missed expectations, it can be explained away in the fact that the anti-obesity drug Belviq has yet to launch as it still awaits final DEA scheduling. What is likely the biggest driver of the sudden stock price decline is the fact that Arena has pulled its application for marketing authorization in Europe.

Investors once looked at Arena as having more potential than competitor Vivus (VVUS) because Vivus was rejected in Europe and many felt that European approval for Belviq was a sure thing. This obviously is not the case. A company does not pull an application if it believes it has a decent shot at approval at the current time. A company pulls an application because there is likely a fundamental issue that makes current approval unlikely. This news is a

Vivus (VVUS) has announced a new deal with Medco (MHS) that places the company's anti-obesity drug Qsymia in a status whereby the drug will get more insurance coverage. The essence of the deal is that Medco has now placed Qsymia into the tier 3 category, which allows for insurance reimbursement. Prior to this deal, Qsymia was uncovered.

The tier 3 status with Medco means that Qsymia can be covered by insurance as long as pre-authorization is obtained. With insurance footing part of the bill, Medco plan participants are now expected to have an out-of-pocket expense of between $50 and $60 per month. This deal is substantial in that Medco carries 38 million patients on its rolls.

This deal is not only a positive development for Vivus, but also for competitors Arena (ARNA) and Orexigen (OREX). Insurance companies that cover any one of these drugs will likely cover all three in