VIVUS Shares Skyrocketed: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of biotechnology company VIVUS (Nasdaq: VVUS  ) soared a staggering 90% Thursday after an FDA panel voted to recommend approval of its diet drug Qnexa.

So what: While it isn't required to, the FDA generally follows the recommendations of its panels, so it's no surprise that Mr. Market is betting that approval is in the bag. In fact, the news also lifted the hopes for competing diet drug developers Arena Pharmaceuticals (Nasdaq: ARNA  ) and Orexigen Therapeutics (Nasdaq: OREX  ) , whose stocks are both up today.

Now what: I'd be cautious about jumping onto this massive pop. While the chances of Qnexa approval are pretty high, analysts note that a negative cardiovascular panel next month or even just an independent FDA decision could spoil VIVUS' party. Given just how high the shares have already rocketed, the risk/reward trade-off at this point seems particularly unfavorable.

Interested in more info on VIVUS? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

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