VIVUS Blows Out Estimates, But For All the Wrong Reasons

After the closing bell on Monday, VIVUS (NASDAQ: VVUS  ) shares entered unchartered territory following the release of its first-quarter earnings report -- and by unchartered I mean actually up.

VIVUS hasn't had the best of luck come earnings time. In fact, its track record is downright awful. With the exception of the two most recent quarters, the company had reported a wider than expected loss in eight straight quarters. Furthermore, Wall Street estimates project VIVUS will continue to lose money through 2016, suggesting a predictably wild ride come each earnings season.


Source: VIVUS.

Last night, however, VIVUS delighted shareholders with a big beat. Revenue for the quarter surged nearly 800% to $36.7 million, from $4.1 million in the prior-year period. Meanwhile, net loss shrank demonstrably to just $15.6 million, or $0.15 per share, from $53.6 million, or $0.53 per share, in the year-ago quarter. Wall Street had anticipated a loss of $0.37 per share on just $11.4 million in revenue. So this was a sizable beat.

A big beat, but for all the wrong reasons
But dig a bit deeper and I suspect the luster associated with this earnings beat will be lost very quickly.

Aiding VIVUS' top line for the quarter was $19.4 million in license and milestone revenue, $7.4 million in supply revenue, and $0.8 million in royalty revenue tied to its commercial agreements for erectile dysfunction drugs Stendra and Spedra.

However, buried within its report was more mixed data tied to disappointing weight control management drug Qsymia. Product revenue more than doubled to $9.1 million from $4.1 million in the prior-year period, but -- and this is a huge but -- prescriptions written actually fell from the sequential fourth quarter, from 124,000 to 121,000.


Source: VIVUS quarterly filings. 

According to VIVUS CEO Seth Fischer:

We continue to make progress in educating providers, payors, and patients that the disease of obesity required proactive treatment with a safe and effective agent that is clinically proven to deliver meaningful weight loss. We believe in the long-term prospects for this market as we efficiently deploy our resources to make Qsymia the drug of choice for patients that are obese or overweight with weight-related medical conditions. 

Long story short, VIVUS and its CEO continue to feel they have a long-term winner in Qsymia. The company also announced the addition of actress Shari Belafonte to its marketing campaign to spread awareness about proactive obesity treatments.

I think VIVUS couldn't be skirting further from reality. Qsymia is thus far a monumental failure.

Consider for a moment that initial Wall Street estimates pegged Qsymia's peak sales potential at north of $1 billion annually. In six quarters of having Qsymia available for commercial sale VIVUS has tallied just $34.8 million in cumulative sales. That paltry product revenue is hardly enough to keep the lights on.

Qsymia's quad-fecta of potential problems
I suspect there are a number of factors at play here that are collectively holding back Qsymia's full potential.

First, in clinical trials Qsymia outperformed rival Arena Pharmaceuticals' drug  (NASDAQ: ARNA  ) in terms of overall weight loss, but sank behind Arena's now-FDA approved weight control management therapy Belviq for safety. Physicians simply don't fool around when it comes to safety, and it seems they will usually opt for more modest weight-loss results if it means a safer dosing profile.

Second, drugmakers are having one heck of a time convincing insurers to jump on board when it comes to weight control management products. Even though both Qsymia and Belviq aren't particularly pricey, shortly after Qsymia was introduced to market in 2012 it had a prescription pickup failure rate of close to 30% at pharmacies because consumers weren't willing to purchase the medication using out-of-pocket cash. While I'm confident insurance coverage of Qsymia is improving, it's pretty evident that it's not improving quickly enough.

Third, unlike its two primary rivals, VIVUS has no marketing partner. Arena is partnered with Eisai Pharmaceuticals, while Orexigen Therapeutics  (NASDAQ: OREX  ) , which has lead drug Contrave under review by the Food and Drug Administration, is collaborating with Takeda Pharmaceuticals. These partners may take their fair share of revenue, but they also share in costs and have plenty of global marketing experience. VIVUS' sales team doesn't have that similar experience to lean on.

Finally, physicians might be holding off on prescribing Qsymia until the FDA's decision on Orexigen's Contrave by or before June 10. The move would make a lot of sense given that Orexigen's Light Study -- a 9,800-person cardiovascular outcomes study that demonstrated Contrave didn't increase adverse cardiac events -- could give it a safety profile edge over either of its peers. With this long-term study now in the books, Orexigen could land the lion's share of prescriptions in the U.S., to Qsymia's detriment.

What now for VIVUS?
For now it looks as if VIVUS will have to fall back on erectile dysfunction drugs Stendra and Spedra while Qsymia sales muddle along. For investors this means the expectation of more losses, more cash burn, and erratic quarter-to-quarter milestone revenue. In other words, if you've been sticking to the sidelines that's probably the safest place to remain, at least for the immediate future.

Instead of VIVUS, perhaps you should be focused on this TRILLION dollar revolution set to affect a number of industries, including health care
The Economist compares this disruptive invention to the steam engine and the printing press. Business Insider says it's "the next trillion dollar industry." And the technology behind is poised to set off one of the most remarkable health care revolutions in decades. The Motley Fool's exclusive research presentation dives into this technology's true potential, and its ability to make life-changing medical solutions never thought possible. To learn how you can invest in this unbelievable new technology, click here now to see our free report.


Read/Post Comments (7) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 07, 2014, at 10:26 AM, rontron3 wrote:

    I have been in the markets for 40 years.........and naive young folks you sean keep pps's ridiculously high or low...........nothing in your recent article on Vivus points to the fact that ARNA market cap is three times what Vivus's is............three freaking times...........do you really think Vivus at a half billion dollars is a wait and see............do you really think you will have time to jump aboard when the right this ship..........would you really buy ARNA at a billion and a half and sell Vivus at a half billion.........do you know that half the patients that take Belviq experience absolutely NO benefit........have you really done your homework........or are you just another basher.......?

  • Report this Comment On May 07, 2014, at 11:00 AM, mrrock99 wrote:

    Making money for the wrong reasons? It is obvious that you are clueless. VVUS is surging toward revenues from the soon to be blockbuster Stendra and it's worldwide sells and you don't get it. Yet it seems investors are rewarding ARNA which has even worse sells, huge cash burn and no pipeline for at least 3 years. I wonder if you will still get it when VVUS post their third earnings beat in a row come Q2, because it sure looks like this current VVUS management if FOOLing everyone including the author of this article.

  • Report this Comment On May 07, 2014, at 1:15 PM, gazoo99 wrote:

    Very well written and to the point article about VVUS and it's on going troubles.

    No money, no pipeline, no real revenue, huge debt & tons of expenses & operating costs.

    VVUS may not make it through 2014 without either share dilution or bankruptcy.

  • Report this Comment On May 07, 2014, at 6:47 PM, iongreen wrote:

    Your negative comments about VIVUS are only fueling the fire for current shareholders and future buyers of this soon to be wall street gem. If they corner 35% of the ED market, Avanafil will be a blockbuster. As far as Qsymia is concerned, it reminds me of the tortoise and the hare. We will see who has the last laugh when this race is over.

    THE VIVUS SHORTS HAVE REASON TO BE SCARED. NO SHARES AVAILABLE TO SHORT AND NO ONE WANTS TO SELL AT THIS RIDICULOUSLY LOW PRICE. THERE WILL BE A BLOOD BATH WHEN THE SHORTS TRY COVERING 34 MILLION SHARES.

  • Report this Comment On May 07, 2014, at 7:02 PM, iongreen wrote:

    i have a price target for VIVUS of 20.00 during the next 24 months based on the success of Avanafil. I have another price target of 40.00 during the next 48 months based on the success of Qysmia. This is a buy and hold investment. The big money is always made on long term buy and hold investments. To wit:: I purchased 10,000 shares of US Airways at 3.00 per share. I sold it four years later at 20.00 per share. The rumors were flying all directions, that US Airways was going to file bancruptcy. 170,000 dollar gain. When stock demoters (SHORTS) are saying nothing but doom and gloom, ITS TIME TO BUY.

  • Report this Comment On May 08, 2014, at 4:29 AM, marp11 wrote:

    hahhaa ARNA BELVIQ CASH THE PIPELINE

    THE PARTNERS THE R.O.W. DEALS

    BEL/PHEN

    SMOKING CESSATION

    ARNA CLEARLY A 10-15 BILLION CAP WHEN THE BOYS LET IT GO.

    OH AND THE 54 MILLION SHORTS

  • Report this Comment On May 08, 2014, at 12:57 PM, iongreen wrote:

    Should You Worry About the Short Interest in VIVUS (VVUS)? - Tale of the Tape

    8:20a ET May 8, 2014 (Zacks.com) Print

    Many investors appear to be quite bearish on VIVUS, Inc. (VVUS), especially if you look at the percentage of the float that is sold short for this stock. Currently, 34.2% of the float is sold short, suggesting an extreme level of bearishness for VVUS.

    However, it is worth noting that earnings estimates have actually been moving higher for the company, despite the pessimism. Thanks to these rising estimates, we have a Zacks Rank #2 (Buy) on VVUS, so we clearly don’t believe in the negativity surrounding this firm, and are instead looking for shares of VVUS to move higher in the weeks ahead.

    Don't be FOOLED by the negative comments. We are at the base of the pyramid and are at the beginning of a meteoric climb. VIVUS is 15% off its low and it is about to make a huge gain creating a long white candle. Don't miss out on this opportunity to become financially secure over the next 48 months.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2944556, ~/Articles/ArticleHandler.aspx, 10/24/2014 8:50:25 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 16,805.41 127.51 0.76%
S&P 500 1,964.58 13.76 0.71%
NASD 4,483.72 30.92 0.69%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2014 4:00 PM
VVUS $3.41 Up +0.01 +0.29%
VIVUS, Inc. CAPS Rating: **
ARNA $4.17 Up +0.07 +1.71%
Arena Pharmaceutic… CAPS Rating: ***
OREX $4.39 Up +0.01 +0.23%
Orexigen Therapeut… CAPS Rating: **

Advertisement