Vivus To Advance On Buyout Trade; Arena Takeout Unlikely
Vivus (NASDAQ:VVUS) announced FDA approval of its anti-obesity drug, Qsymia, last night and importantly, physicians can prescribe the medicine to patients without major restrictions. The drug's label requires women of childbearing age to take a pregnancy test before getting a prescription, but other than that and a patient leaflet on the possibility of birth defects, Qsymia is prescribed similarly to Arena's (NASDAQ:ARNA) recently approved obesity treatment, Belviq...
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Vivus is required by the FDA to conduct 10 post-marketing studies including a long-term cardiovascular outcomes trial (CVOT) to assess Qsymia's risk for major adverse cardiac events such as heart attack and stroke. This study, according to Vivus' filings, could cost between $100 million-$200 million over a period of 5-6 years, however, the big cap drug companies are used to running large outcome studies to support their products.
Pricing for Qsymia is unknown at this time, but perhaps the company may give that information or some pricing guidance on its call today at 8:30am (Dial-in # 877-359-2916 or 224-357-2386 0utside the U.S.). Expectations for a Qsymia prescription are for approximately $150-$175 per month, so pricing that is substantially higher or lower could drive the shares up or down, respectively, when announced. Given peak sales estimates for Qsymia in the $1 billion -$2 billion range, and using a typical acquisition multiple of 4x those sales, VVUS could conceivably be acquired with a substantial premium from yesterday's closing price of $26.46. As a result, VVUS is expected to trade substantially higher off of the Qsymia approval news. Alternatively, competitors ARNA and Orexigen (NASDAQ:OREX) are likely to be substantially weak today following the VVUS news. Wall Street analysts this morning are upgrading VVUS and taking down forecasts for Arena's Belviq, suggesting that a good pair trade for the day is long VVUS and short ARNA.
PropThink is an intelligence service that delivers long and short trading ideas to investors in the healthcare and life sciences sectors. Our focus is on identifying and analyzing technically-complicated companies and equities that are grossly over or under-valued. We offer daily market coverage, weekly feature stories, and a newsletter to investors who subscribe on PropThink.com. To learn more visit us at http://www.propthink.com.
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Vivus (NASDAQ:VVUS) announced FDA approval of its anti-obesity drug, Qsymia, last night and importantly, physicians can prescribe the medicine to patients without major restrictions. The drug's label requires women of childbearing age to take a pregnancy test before getting a prescription, but other than that and a patient leaflet on the possibility of birth defects, Qsymia is prescribed
similarly to Arena's (NASDAQ:ARNA) recently approved obesity treatment, Belviq. This is good news for VVUS shareholders, as it is in-line with best case scenarios for the drug's approval.
Additionally, because Qsymia already has a DEA controlled-substance classification, the product is likely to be on pharmacy shelves sooner that Belviq, which still has about 5 months left for its DEA controlled-substance review. Qsymia's superior weight loss effects vs. Belviq (~10% placebo adjusted weight loss for Qsymia vs. Belviq's 3-4%) plus getting to market first are two major advantages for VVUS, and as a result, investors are likely to begin speculating that the company could be acquired by a large pharmaceutical suitor. Unlike ARNA, Vivus retains full worldwide rights to its obesity treatment, so any major drug company looking at adding such a treatment to its line up would likely favor VVUS over ARNA.
Vivus is required by the FDA to conduct 10 post-marketing studies including a long-term cardiovascular outcomes trial (CVOT) to assess Qsymia's risk for major adverse cardiac events such as heart attack and stroke. This study, according to Vivus' filings, could cost between $100 million-$200 million over a period of 5-6 years, however, the big cap drug companies are used to running large outcome studies to support their products.
Pricing for Qsymia is unknown at this time, but perhaps the company may give that information or some pricing guidance on its call today at 8:30am (Dial-in # 877-359-2916 or 224-357-2386 0utside the U.S.). Expectations for a Qsymia prescription are for approximately $150-$175 per month, so pricing that is substantially higher or lower could drive the shares up or down, respectively, when announced. Given peak sales estimates for Qsymia in the $1 billion -$2 billion range, and using a typical acquisition multiple of 4x those sales, VVUS could conceivably be acquired with a substantial premium from yesterday's closing price of $26.46. As a result, VVUS is expected to trade substantially higher off of the Qsymia approval news. Alternatively, competitors ARNA and Orexigen (NASDAQ:OREX) are likely to be substantially weak today following the VVUS news. Wall Street analysts this morning are upgrading VVUS and taking down forecasts for Arena's Belviq, suggesting that a good pair trade for the day is long VVUS and short ARNA.
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PropThink is an intelligence service that delivers long and short trading ideas to investors in the healthcare and life sciences sectors. Our focus is on identifying and analyzing technically-complicated companies and equities that are grossly over or under-valued. We offer daily market coverage, weekly feature stories, and a newsletter to investors who subscribe on PropThink.com. To learn more visit us at http://www.propthink.com.
Copyright Thomson Reuters
This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients.
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.
Source: %s via Thomson Reuters ONE
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