Shares of VIVUS
How it got here
The long road to FDA approval finally made its way to VIVUS' door yesterday. Its anti-obesity drug, now named Qsymia, passed its tests and will now enter into direct competition with Arena Pharmaceuticals'
Although VIVUS has gained a lot in the past year, it's actually on the low end of obesity-drug stock megapops. Orexigen Therapeutics
Investors have been expecting Qsymia's approval since February, and the one-day megapop that followed the FDA advisory committee's positive recommendation has been responsible for much of the stock's 52-week gains. Can those gains be maintained, or will investors start looking to trim their gains? Let's take a look at a few possibilities.
What you need to know
Anti-obesity drugs and quick-slim compounds have been a chemical holy grail for decades, but a truly effective and riskless solution has proven elusive. Remember Olestra? How about GlaxoSmithKline's alli? If you do, it's probably because of the singularly unpleasant side effects both shared.
Qsymia, thankfully, doesn't appear to have those particular drawbacks. A combination of Johnson & Johnson's
Heart problems aren't exclusive to this drug. Abbott Labs'
Analysts have given Qsymia a $1.2 billion annual revenue target for 2016, compared to the $1.5 billion Belviq might pull in at its peak, according to Barclays. That still makes Arena's gains look firmer than VIVUS', since profit margins would grant VIVUS a higher hypothetical P/E ratio if their market caps stayed the same.
Can VIVUS keep growing? Will Qsymia become a blockbuster? The American lifestyle is not a healthy one, and demand for get-thin-quick schemes is immense. Few obese people, however, are willing to suffer embarrassing or life-threatening side effects just to lose a small amount of weight. The cost of the drugs and the potential for insurance coverage will also factor heavily into the success of any prescription treatment.
Qsymia may also have a tougher time gaining physician buy-in than Arena's new compound, as its formulation simply combines two existing off-patent drugs.
The Motley Fool's CAPS community isn't sure that VIVUS can be a long-term winner. Our members have given the stock a two-star rating, with 73% expecting it to keep growing.
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