Does Vivus Get A Second Wind With Qsymia?

| About: Vivus, Inc. (VVUS)

With its anti-obesity drug Qsymia recently launched, Vivus (NASDAQ:VVUS) is already looking into new uses for increasing the potential possibilities on the table. Vivus has announced that a new study shows that Qsymia may also have benefits for people that suffer from Obstructive Sleep Apnea (OSA), a condition that impacts an estimated 5% of the population. While the market is not as big as the anti-obesity market (no pun intended), it does give the drug even more potential, something that may be needed if Vivus has a chance of living up to lofty expectations of the street.

Vivus suffered a street backlash when it reported earnings. The scare was that Qsymia did not seem to have the traction that the street was expecting. When expectations are that a blockbuster will be delivered, it is sometimes quite difficult to live up to the hype.

Now that Vivus has tempered enthusiasm a bit, and the street has had time to digest that Vivus's Qsymia can still be a success with more time and marketing, the company put on the table some new information for the street to digest.

On the news of positive sleep apnea results the equity shot up 5%. Are we setting up yet another round of lofty expectations? It very well could be the case. Qsymia is not FDA approved for treatment of OSA, and an approval process could take many months. Essentially, the benefit of OSA treatment is off in the horizon and will not help the bottom line any time soon. In fact, it will add costs before it ever delivers revenue. Be excited about the potential, but temper it with the reality that the FDA process can be long and slow.

This brings us back full circle to the potential of Qsymia for its approved use, the anti-obesity market. It is my contention that the initial results of Qsymia were a decent start. After all, the product had only been on the market for 5 weeks. Launching a product takes time.

There are concerns that investors need to be aware of. Prescriptions being written is only part of the equation. The other parts are getting them filled and insurance. Vivus, being first to market, has to blaze the trail in getting insurance companies to buy into the concept that getting obese patients treatment for their weight and type 2 diabetes will have overall benefits and reduce risk to insurers. Unfortunately for Vivus, they will foot that bill to the benefit of Arena (NASDAQ:ARNA), a company that is awaiting DEA approval so that it can get its own anti-obesity product, Belviq, to market.

What we want to watch for is an improvement on the 30% of patients who do not get the script filled as well as the percentage of the drug covered by insurance plans. If the company can improve these metrics while adding new patients on a steep growth curve, the financial results could be compelling.

Simply stated, the Obstructive Sleep Apnea possibilities are in my opinion overblown at the moment as it relates to this equity. The news is positive, but it is also a long way away from being accretive to the bottom line. Investors need to keep a laser-like focus on the anti-obesity market. That is what will drive Vivus in the coming year.

Disclosure: I am long ARNA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I have no position in Vivus.

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