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Why VIVUS Inc. Shares Slimmed Down

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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 VIVUS (NASDAQ: VVUS  ) , a biopharmaceutical company developing therapies to treat unmet medical needs such as obesity and sexual health, nosedived as much as 15% after reporting disappointing third-quarter earnings results.

So what: For the quarter, VIVUS recognized $27.4 million in revenue, although $21 million came from its licensing agreement to commercialize and market erectile dysfunction drug Spedra from Menarini Group in more than 40 European countries. Obesity drug Qsymia, on the other hand, delivered just $6.4 million in sales. Net loss rose 19% to $48.2 million, or $0.48 per share. By comparison, Wall Street was forecasting a narrower loss of just $0.39 per share. VIVUS also announced that it would be reducing its workforce by 17%, or 20 employees, excluding its sales force, and improving efficiencies in other areas of its operations to produce cost-savings of $6 million to $8 million by the end of next year.

Now what: Amid the announced licensing agreements with Menarini Group to market Spedra and Auxilium Pharmaceuticals to market Stendra, and underneath its cost reduction plan, investors really just wanted to see Qsymia sales improve and they hardly budged. Through the first nine months of the year, Qsymia sales have totaled just a paltry $16 million, and we can't really blame insurers anymore because many of them have gotten on board by covering Qsymia. Qsymia certainly offered the most impressive weight-loss reduction percentages in clinical trials relative to Arena Pharmaceuticals' (NASDAQ: ARNA  ) Belviq, but the concern has always been that Belviq's more favorable safety profile would trump Qsymia's weight-loss advantage. Thus far both drugs have been somewhat of a bust, but I still feel Belviq has the slight upper hand in this battle. With that being said, I'm still not personally touching VIVUS here even after today's drop.

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Read/Post Comments (5) | Recommend This Article (1)

Comments from our Foolish Readers

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  • Report this Comment On November 06, 2013, at 2:49 PM, RSRdriver wrote:

    All this tells me is Arena and Belviq don't stand a chance. If this is what a drug company with a drug that works can look forward to, imagine what is in store for Arena!

    Someone is sure to come along and partner or buy out Vivus.

    When ARNA is trading below $3 in a few weeks, that will help Vivus for sure in the meantime.

  • Report this Comment On November 06, 2013, at 3:20 PM, gazoo99 wrote:

    RSRdribble strikes again with useless comments.

    Must have gotten an As*Wo*p*ing on VVUS today!

    What's the matter..... your cornflakes all messed up?

  • Report this Comment On November 06, 2013, at 4:10 PM, feelinIrie wrote:

    All this tells me is arena and Belgique have the best chance of being successful.

    More importantly no one will come along to partner with VVUS and qysmia!

    As You can see Vvus is heading downhill will be trading below two dollars soon!!!

    Get out if VVUS while you can!!!!!!!!!!

  • Report this Comment On November 07, 2013, at 9:15 AM, bmc007 wrote:

    Slowly but surely the cream rises to the top. Soon ARNA/Belviq will be the only game in town soon.

  • Report this Comment On November 10, 2013, at 11:22 AM, marpieslice09 wrote:

    the Eisai deal is excellent. $60 million up front single handedly takes out the dilution issue. But, I think just as important are the following about this Eisai deal:

    1. Worldwide marketing infrastructure for Belviq;

    2. Eisai has more experience and name recognition in dealing with regulatory approvals;

    3. Synergies in research and development for BELVIQ life cycle;

    4. Single Brand marketing plan;

    5. Easier to manage 1 consolidated and comprehensive relationship;

    6. Gives Arena management more time to improve Wallstreet relationship;

    7. I bet their were some more discussions about marketing spending because the last agreement did not include any reference to DTC advertising. I know we have written Arena and Eisai about DTC TV advertising ASAP.

    8. I would rather sees sales growth accelerate than a 1 time payment of say 150 million. In general, Wallstreet and investors want the consistent and growing income stream. I mean Arena gets a good percentage of sales approx 31%. If Eisai had paid 150 million I think the 31% would have gone down significantly. If they can get to a Billion in sales say in two or three years then 31% of sales is better than the extra money, today, in the bank.

    9. Eisai now has a nearly worldwide responsibility and commitment for the drug. In other words, its success in the US will breed success in the other parts of the world. I think they will throw everything at making the first market BELVIQ available in (US) a success. It's much easier to sell in Europe when the US is a success etc.

    10. It will be a cost savings in the BELVIQ life cycle for Arena since Eisai will be doing most of the heavy lifting and product life cycle planning/expense. Needless to say, developing and managing a weight loss drug is very costly, which seems to be commensurate with the size of the potential market nearly 1 Billion people.

    I am more confident about Arena's success today than I was at any other time.

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