Vivus, Inc. (VVUS): Earnings Preview

In some ways, this coming Monday is a moment of truth for Vivus, Inc. (NASDAQ:VVUS). That’s when the biopharma company reports its fourth-quarter earnings results for 2014.

Vivus, VVUS stockVivus’ weight-loss pill Qsymia has been on the market since the third quarter of 2012, and had gradually ramped up sales to tens of millions of dollars per quarter over the course of the first year of availability.

However, quarterly revenue has been uneven for VVUS lately, and broadly speaking, it has been falling more than growing in recent quarters as competing drugs have started to catch on and some of Qsymia’s earliest users decide not to renew their prescriptions.

In other words, with Qsymia being on the market for more than a year, the Vivus earnings report due Monday will give us a pretty good idea of just how marketable the weight-loss drug is apt to be for the long haul — and give us a better read on Vivus stock.

Vivus Earnings Expectations

As of the latest calculations, analysts collectively expect VVUS to post a loss of 25 cents per share of Vivus stock for its fourth quarter of 2014 on $20 million in sales. That’s a 47% wider loss than VVUS took in the year-ago quarter, and a whopping 54% dip in the top line of $44.1 million.

It’s not out of the realm of possibility for Vivus to actually post such pathetic numbers. As was noted above, sales and therefore profits have been broadly slumping since the Q4 2013 peak.

Fans and owners of VVUS stock may point to Q3’s revenue surge — to a total of $33.9 million — and suggest this is proof that Qsymia is finally regaining traction after a modest stumble in mid-2014.

But that’s not what’s going on.

Of that $33.9 million in sales generated two quarters ago, only $12.5 million of it was driven by sales of Qsymia; $15.1 million was licensing and milestone-payment revenue. Although Qsymia sales in the third quarter were well up from $6.4 million in the third quarter of 2013, Q3’s Qsymia sales came in lower than Q2’s figure of $11 million, which wasn’t remarkably better than Qsymia’s sales of $9.1 million in Q1.

In other words, the Vivus’ core product is losing ground. And one more quarter of declining revenue could potentially torpedo Vivus stock.


Hot Topics

While U.S. sales of Qsymia will be the initial focal point of the VVUS earning conference call and official quarterly filing, there are actually other (some semi-related) items that current and prospective owners of Vivus stock need to think about, and perhaps even ask about if given the chance.

In no particular order …

  • Stendra: Stendra is the only FDA-approved erectile dysfunction medication that only needs to be taken 15 minutes before sexual activity. The previous labeling indicated a 30-minute wait time was necessary, but as of September, the FDA officially dialed back the suggested turnaround time. In the meantime, European regulators made the same change to the drug’s label/instructions. Although investors have heard and seen little about Stendra relative to Qsymia, given how the erectile dysfunction market is worth more than $3 billion per year on a global basis, it may be a market Vivus wants to up its efforts with.
  • Contrave: VVUS might not want to talk directly about it (or talk about it at all), but at some point in the near future it’s going to have to face the fact that competing diet drug Contrave, from Orexigen Therapeutics, Inc. (NASDAQ:OREX), is taking a lot of U.S. market share in a very short period of time. In fact, by the end of last year, as many prescriptions for Contrave were being written every week for Qsymia. This is a great deal of the reason Qsymia sales are fading, and Vivus needs to address it soon.
  • Europe: although the European Union’s Committee for Medicinal Products for Human Use has already twice denied approval of Qsymia for its member nations, never say never. The FDA initially rejected Qsymia too, but after further research was performed, the U.S. medicine regulatory body finally gave it the green light. It’s always possible a reformulated or relabeled version could win approval in the EU, especially now that Contrave has been approved there. That said, the EU’s overseers like the fact that Contrave is something of a “middle ground” pill between Qsymia at one end of the spectrum and Belviq, from Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), at the other end of that continuum.

Bottom Line for Vivus Stock

Although the Vivus earnings report could dish out a pleasant surprise Monday, it’s not likely in the cards. If VVUS is going to remain viable for the long haul, it’s going to have to do something radically different.

Such changes take time, however, and investors are already growing impatient.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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