Why VIVUS Shares Surged

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 biopharmaceutical company VIVUS (Nasdaq: VVUS  ) surged 15% on Wednesday after receiving approval from the Food and Drug Administration for its new weight-loss pill Qsymia.

So what: The decision marks the second diet drug approval by the FDA within just the past month, giving overweight consumers the choice between VIVUS' Qsymia and Arena Pharmaceuticals' (Nasdaq: ARNA  ) Belviq. Of course, FDA studies suggest that Qsymia is the more effective of the two, so it's no surprise that Arena shares are down significantly on the news.

Now what: Analysts estimate that the weight-loss-drug market can reach roughly $6 billion annually, with Qsymia expected to generate sales of about $1.2 billion in 2016. "We are pleased with FDA's decision today because patients and physicians now have another treatment option available to them," said VIVUS President Peter Tam. "It is expected that Qsymia will be available in the fourth quarter of 2012." The stock's huge run-up makes me nervous given the safety concerns that still surround Qsymia, but when you consider just how large the market is -- according to the U.S. Centers for Disease Control and Prevention, more than 78 million U.S. adults are obese -- more aggressive growth investors might want to take a closer look.

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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  • Report this Comment On July 18, 2012, at 1:32 PM, Foreeverlong wrote:

    Brian,

    You should be concerned about the safety issues with Qsymia, because I can assure you that the FDA was, and "physicians" already are.

    You can invest in what I am about to say. To say that tthe FDA's REMS for Qsymia is "onerous" is an understatement! You have to hand it to them, while they may have given in to the political pressures, they knew what they were doing. It will be darn hard to qualify for Qsymia, much less stay on it. Physician's simply don't have the time or interest to participate in such a program. It's remindful of the program for Acutane. And, a few percentage points of efficacy, believe me, will not matter.

    Physicians today are as compassionate as ever, but are in no mood to put up with unproductive beauracracy! For women, Qysmia will require an intitial pregnancy test, and another one each month thereafter that the patient stays on the drug. In addition, prospective patients must have a BMI greater than 27, and a co-morbidity of hypertension, diabetes or dyslipidemia. They can only get the drug from a limited number of mail-order pharmacy's. Just coordinating the logistics of pregnancy tests between the doctor's office and the mail-order pharmacies will be a nightmare, and for what? A few percentage points of efficacy? This is where Belviq will be looking at Qsymia in the rear view mirror.

    Doctors in the U.S. are in no mood to take on liability exposure for any reason, and Qsymia is malpractice suit waiting to happen! Think about it from the physiician's standpoint. How much is a child's cleft palate worth in compensatory and punitive damages over a life time of 80 to 90 years?

    On a short-term basis, an argument can be made for Belviq, Qsymia and Contrave, but in the long run watch how quickly Belviq comes out of the gates, and maintains profitability worldwide. Belviq is by far the best investment! Ask virtually any doctor and they will tell you the same. And, doctors are the only ones that can order these drugs...not analysts, institutions or investors!

    "First do no harm" to the patients. Doctors live this mantra.

  • Report this Comment On July 19, 2012, at 2:00 AM, nobsperiod wrote:

    Wow, how low did fda needed to go to let this drug

    get an approval? Fraud and manipulation is so

    rampant everywhere it's scary.

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