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VIVUS Loss In Line with Ests, Shares Fall

Zacks Equity Research

VIVUS Inc.’s (VVUS) share price fell almost 12.5% after the company reported disappointing third quarter financial results.  

The company reported third quarter 2013 loss (excluding one-time items and including share-based compensation) of 40 cents per share, in line with the Zacks Consensus Estimate and the year-ago loss.

The company’s total revenue for the third quarter of 2013 came in at $27.4 million as compared to $41,000 recorded in the year-ago period. The third quarter 2013 revenues included $21.0 million of license fee received from the privately-held Italian pharmaceutical company, Menarini, for the erectile dysfunction (ED) drug, Spedra. The Zacks Consensus Estimate stood at $19 million for the third quarter of 2013.

Qsymia Performance

We remind investors that Qsymia was launched in the U.S. in Sep 2012. The U.S. Food and Drug Administration (:FDA) cleared Qsymia in Jul 2012 as an adjunct to a healthy diet (low on calories) and increased physical activity for chronic weight management in obese (Body Mass Index, or BMI - 30 or more) or overweight (BMI - 27 or more) adults suffering from at least one weight-related co-morbid condition.

Net product sales of Qsymia in the reported quarter were $6.4 million, up 15% sequentially. In contrast, Qsymia prescriptions (approximately 109,000) witnessed a 35% sequential jump in the reported quarter. Qsymia, gross sales (excluding free goods) were also up 40% sequentially to $11.1 million.

The sharp difference between net product sales and prescription growth was because 56% of total prescriptions were a free good or on a discount offer in the reported quarter.

At the third quarter conference call, the company stated that Qsymia was available at over 31,000 certified retail pharmacies in the U.S., reflecting a three fold increase sequentially. The company further stated that reimbursement trends for the drug are improving.

Meanwhile, Qsymia availability is expected to improve as VIVUS has several contracts in process expected to be completed this year. VIVUS is looking for a partner for Qsymia and is in discussion with several companies.

We remind investors that apart from Qsymia, another weight-loss drug, Arena Pharmaceuticals, Inc.’s (ARNA) Belviq, received approval in the U.S. last year. Belviq was launched in the U.S. in Jun 2013. Other companies are also developing candidates targeting the lucrative obesity market.


Apart from Qsymia, the company’s portfolio consists of another approved product, Spedra, which received approval in the U.S. in Apr 2012 and in the EU in Jun 2013.

VIVUS has entered into a license and commercialization agreement with Menarini. As per the terms of the agreement, Menarini will get the rights to Spedra in more than 40 European countries and Australia and New Zealand.

VIVUS has entered into an agreement for Spedra with Auxilium Pharmaceuticals, Inc. (AUXL). As per the terms of the agreement, Auxilium will get the rights to Spedra in the U.S. and Canada. Auxilium is expected to launch Spedra by the year end. In Oct 2013, VIVUS received $30 million as upfront payment from Auxilium.

In the third quarter of 2013 research and development expenses were $8.4 million, down 9.6% year over year. Selling, general and administrative expenses were up 22.1% to $38.2 million due to increased expenditure related to the commercialization of Qsymia.

The company is also working on reducing its expenses and has initiated a cost reduction plan for the same. As a part of the plan the company intends to reduce approximately 17% (20 employees) of its workforce. VIVUS intends to complete the plan by end of this year. The company expects to incur pre-tax non-recurring charges of $6 – $8 million in the fourth quarter of 2013 and realize $6 – $8 million in annual savings from 2014.

We are concerned about the slower-than-expected ramp up in Qsymia sales. The promotional programs and upcoming holidays in November and December are expected to negatively impact revenues in the fourth quarter of 2013. Additionally, the competitive nature of the obesity market given the presence of Arena’s Belviq among others also keeps us concerned.

The successful commercialization of Qsymia is crucial for the financial performance of VIVUS as it can drive the company to profitability.

VIVUS, a biopharmaceutical company, currently carries a Zacks Rank #3 (Hold). Actelion Ltd. (ALIOF) appears to be well placed in the biopharma space with a Zacks Rank #1 (Strong Buy).

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