VIVUS (VVUS) may have beaten its rival Arena Pharmaceuticals (ARNA) in getting an obesity drug on the market first, but its shares plunged almost 20% this morning after reporting underwhelming third-quarter results. While earnings releases have the power to move markets in the short term, investors need to look at the long-term potential of a business in order to fully assess its value.

In order to help you weigh the opportunities and risks associated with this stock, we've prepared a brand new premium report on VIVUS. It takes an in-depth look at VIVUS' business and also includes compelling reasons to both buy and sell this stock. Below is just a sneak peek of what you'll find in the full report.

The opportunity
I can spout out the statistics -- 36% of U.S. adults are obese, according to the Centers for Disease Control and Prevention -- but you really don't have to do much more than look around a public place to see the potential opportunity that VIVUS has with its obesity drug, Qsymia.

The drug is approved to treat patients with a BMI above 30, and, while that's considered to be clinically obese, it isn't really that big. For instance, a woman who stands at 5 feet, 5 inches, and weighs 180 pounds is considered to be obese. For a 6-foot man, 220 pounds pushes the BMI into the obese level.

Qsymia is also indicated for patients with a BMI of just 27, which is only considered overweight, but only if they have a comorbidity such as high blood pressure, diabetes, or high cholesterol.

The only real restriction is that patients can't be pregnant; one of the components of Qsymia is the same active ingredient as Johnson & Johnson's (JNJ -1.08%) migraine and seizure drug, Topamax. Studies have shown the drug increases oral clefts in babies born to women who took the drug during pregnancy.

Keeping it in perspective
While there's no doubt that plenty of people could take Qsymia, the real question is whether they will. No obesity drug to date has been a blockbuster for a combination of reasons.

First and foremost, obesity drugs have to compete with diet and exercise -- which, short of grumbling stomachs and shin splints, tend to have less side effects than most medications. Most doctors are going to encourage patients to hit the gym and cut the calories before they'll pull out their prescription pads.

Doctors will, perhaps reluctantly, prescribe drugs to those who can't lose weight through diet and exercise alone, but obesity drugs are no magic bullet; they're most effective if combined with diet and exercise. But since doctors have selected for patients who didn't respond to diet and exercise (perhaps because they were too lazy to stick with it), the patients receiving the drug often only see a modest effect.

Qsymia's label recommends that doctors stop prescribing the drug if the patient hasn't experienced a 5% weight loss after 12 weeks on the highest dose. Many patients that are paying out of pocket for Qsymia will likely stop filling their prescription before that if they're not seeing significant weight loss.

Slow and steady
Investors need to be realistic. I think Qsymia can hit blockbuster status, but it's going to take a while, likely years, to push sales that high.

Like any new drug that treats a disease that isn't immediately life threatening, doctors will try it out on a few patients – perhaps those who come in asking for it – and doctors will increase the number of prescriptions they write as they become more comfortable with the drug.

Qsymia has an added challenge because it's currently only available through mail-order pharmacies. VIVUS has asked the FDA to expand the distribution to select retail pharmacies, which should help increase access — but until the FDA signs off on the plan, Qsymia sales could be constrained a little by the added inertia required to fill prescriptions through mail-order pharmacies, which some patients don't have experience with.

This is just a short excerpt from our senior biotech analyst's new premium research report on VIVUS. To get the full scoop on this company's potential as an investment -- including reasons to buy, sell, and an in-depth analysis of the challenges VIVUS is facing -- click here now to learn more today.