Vivus: Primed To Hit $30

| About: Vivus, Inc. (VVUS)
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Edited By Kate Boehme

Vivus Inc. (NASDAQ:VVUS) is a biopharmaceutical company that develops treatments for asleep apnea, diabetes, obesity and male sexual health. Vivus won approval for its weight loss drug Qsymia on 17 July, 2012. As soon as the drug was approved, the company announced plans to launch it in the fourth quarter of 2012. However, the company has clearly moved up this date, as it has already announced the availability of Osymia on the commercial market. There were some fears that the drug launch would be delayed, and that sales would be slow at the start. Despite such fears - or perhaps as an effort to combat them - Vivus has announced the launch of Osymia early in order to align with a very important event: The Obesity Society's Annual Scientific Meeting in San Antonio, Texas.

Vivus has surpassed its closest rival, Arena Pharmaceuticals (NASDAQ:ARNA), which is the only other company with an approved drug for obesity. The FDA approved Belviq three weeks before Qsymia at which time Belviq was the first weight loss drug to gain such approval in over a decade. However, Vivus had already been planning the launch of its own drug. Even before receiving approval, Vivus was prepared for the commercial launch with a distribution and sales team already in place.

The United States obesity market has been waiting for an effective weight loss drug for a long time. The launch of Qsymia seems timely, as it has given the company first mover advantage. It seems that despite doubts to the contrary, Vivus has won the race to place an anti-obesity drug on the market. I think this bold move is likely to provide Vivus with big rewards.

President of Vivus, Peter Tam, recently stated, "VIVUS is proud to be leading the way in the treatment of obesity, a disease with very serious health consequences. Qsymia is the first ever combination treatment made available, and today's introduction marks a new beginning for many patients who struggle with obesity. We are excited about making this new treatment option available to patients because Qsymia is the first FDA-approved oral medication that has been shown to achieve an average weight loss of 10% in obese patients when used in conjunction with a lifestyle modification program".

Following the guidelines set by the FDA, Vivus is training patients and healthcare professionals, making them aware of the drug's safety profile. Specifically, Vivus is emphasizing the Risk Evaluation and Mitigation Strategy [REMS] in order to ensure the safe use of the drug. Vivus intends to price the drug between four and five dollars. The company acknowledges that the drug cannot be priced too high, but that the price should be low enough to be affordable in order to be competitive in the marketplace. However, the company expects Osymia to be covered by insurance companies and employers. Reducing the number of obese employees will give employers an advantage in terms of reduced absenteeism and higher efficiency. In addition, employers will also save with regard to obesity-related diseases.


Stock Price Movement

VVUS Chart

VVUS data by YCharts

Over the previous month, Vivus stock has followed an upward trend. Soon after the news of the launch of Qsymia hit the market the stock gained 6.59 percent on the day. In fact, Vivus hit $29 after the approval of Qsymia. However, the stock could not sustain these high prices and came down to $20 once investors started taking profits.

In a previous article, I calculated the fair price for Vivus based solely on Qsymia sales in North America. In that article, based on the aforementioned criteria, I concluded that Vivus's fair price was $31.76. However, the stock price has been suppressed since investors are currently waiting for the company to launch the drug. Now that the announcement has been made I expect it to drive up the price of the stock. I expect the stock to hit the $30 as soon as investors begin buying in as a result of this news.

Beating the Competition

Entering the market before the competition is always an advantage. Arena is not the only company that Vivus has battled to put a new anti-obesity drug to market. Orexigen (NASDAQ:OREX) also has a drug currently in clinical trials, but Vivus's Qsymia is believed to be the most effective of the three drugs. Furthermore, even if Orexigen is granted approval for its own drug, it will likely not be launched until 2014. This will give Vivus ample time to establish a strong position in the market. On the other hand, the biggest threat for Vivus comes from Arena, which plans to launch its anti-obesity drug, Belviq, next year. At the moment, Belviq is tied up in the DEA classification process, which will delay its launch.


Obesity is an enormous problem all over the world, and especially in the United States. The launch of Qsymia has provided physicians with an effective option to fight this disease, resulting in excitement throughout the medical community. I therefore expect Vivus to record healthy sales during its first run of the drug. However, the battle for supremacy in this market will not be won quickly; Vivus and its peers can expect to be competing for a while yet. While, the obesity market is most likely large enough to accommodate both Vivus and Arena, Vivus has gained a distinct early advantage by launching its drug at this stage. Through its particularly positive efficacy profile this company can expect to attract a handsome number of new customers in the near future.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.