Loss at Vivus Wider-Than-Expected


Vivus Inc.’s (VVUS) second quarter 2012 loss of 24 cents per share was wider than the Zacks Consensus loss Estimate of 23 cents and the year-ago loss of 20 cents per share. Higher general and administrative (G&A) expenses for pre-commercialization activities of obesity drug Qsymia led to the wider loss.

The company did not record any revenues during the quarter, similar to the prior-year period.

Quarterly Details

During the quarter, research and development (R&D) expenses decreased 19.6% year over year to $8.9 million. The decrease was attributable to lower R&D spends during the quarter as both Qsymia and erectile dysfunction (ED) drug Stendra (avanafil) have completed their clinical studies.

However, G&A expenses shot up 191.2% year over year to $15.4 million. The huge rise in G&A expenses was due to higher pre-commercialization expenses of Qsymia.

FDA Approval for Qsymia and Stendra

We note that 2012 has been a highly successful year for Vivus so far with the US Food and Drug Administration (:FDA) clearing two drugs of the company.

In April 2012, the FDA approved Vivus’ new drug application (:NDA) for its ED drug, avanafil, submitted in late June 2011. The candidate is currently under review in Europe and Vivus expects a decision in the first half of 2013. Vivus is currently looking for potential partners for the worldwide commercialization of avanafil.

Already approved ED treatments include Pfizer Inc.’s (PFE) Viagra and GlaxoSmithKline’s (GSK) Levitra.

In July 2012, the FDA also approved Qsymia formerly known as Qnexa, for the treatment of obesity. The FDA cleared Qsymia as an adjunct to a healthy diet (low on calories) and increased physical activity for chronic weight management in obese patients (BMI > 30 kg/m2), or overweight patients (BMI > 27 kg/m2), with weight-related co-morbidities such as hypertension, type II diabetes mellitus, or dyslipidemia.

Approval was granted with a Risk Evaluation and Mitigation Strategy (:REMS) and post-marketing requirements. The REMS will keep doctors and pregnant women informed about the risks associated with Qsymia to the unborn baby.

Vivus expects launch of Qsymia in the US in the fourth quarter of 2012 and has also issued patent protection for Qsymia till June 2020. We note that Qsymia is currently under review in the EU and the European Medicines Agency (:EMA) has scheduled for oral hearings from the Committee for Medicinal Products for Human Use (CHMP) in September 2012.

We however note that Vivus did not taste success in its first attempt to gain FDA approval for Qsymia. In February 2012, an advisory panel of the FDA voted 20-2 in favor of approving Qsymia on the basis of a favorable risk-benefit profile of the drug. The action date was pushed back by three months following Vivus’ submission of the REMS for Qsymia in the first week of April. The REMS was a major amendment to the NDA and the FDA approved the drug on the new action date of July 17.

Obesity treatments currently in the market include orlistat, sold by Roche Holdings Ltd. (RHHBY) as Xenical and by Glaxo as alli.

Neutral on Vivus

We currently have a Neutral recommendation on Vivus. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

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