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Why Vivus Inc Plummeted Today

By Todd Campbell - Feb 25, 2015 at 2:35PM

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Vivus Inc shares tanked today following results that failed to impress.

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 in Vivus (VVUS) fell by more than 10% earlier today after the company reported fourth-quarter and full-year financial results yesterday that failed to impress investors.

So what: When Vivus Inc's obesity drug Qsymia won FDA approval, some industry watchers had sky-high expectations. However, so far, Qsymia's sales have fallen well short of predictions.

In the fourth quarter, Qsymia product sales totaled $12.7 million, giving the drug an annualized run rate of a shade above $50 million.

During the quarter, Vivus spent more than $26.8 million in SG&A expenses, and the company forked over another $2.7 million on R&D. As a result, the company's net loss in the quarter was $25.4 million, or $0.25 per share. That was worse than the $0.17 net loss per share reported the year before.

The full-year results weren't much better. Total Qsymia sales were $45.3 million. Toss in revenue for commercialization agreements for the erectile drug Stendra, and Vivus' total sales reached $114.2 million in 2014.

However, full-year spending on SG&A totaled $111.5 million, and the company spent an additional $13.8 million on R&D. So once all the various pluses and minuses are taken into account, Vivus reported a net loss of $82.6 million, or -$0.80 per share, last year.

Now what: Although Vivus continues to lose a lot of money, there are some signs that things could improve. The company's fourth-quarter Qsymia sales were up 65% from the fourth quarter of 2013, and Qsymia's full-year net product sales increased by 91%.

That's solid growth that is likely being helped by rising awareness tied to the FDA approval of competing drugs including Orexigen's Contrave and, notably, Novo Nordisk's Saxenda.

At some point, however, the benefit of rising awareness could be offset by the risk of market share loss to these newly approved therapies. The addressable patient population for these drugs is big, so that may not happen for a while, but it's still one more reason to be hesitant when it comes to owning shares in Vivus.

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