Vivus Inc. (NASDAQ: VVUS)

Vivus Inc. (VVUS) is a biopharmaceutical company engaged in the research, development and commercialization of various drug therapies for the sexual health, obesity and diabetes markets of the United States. The Company presently markets and sells Muse, an erectile dysfunction drug therapy. The Company’s late-stage clinical trial drug candidates include Qnexa, in phase III for the treatment of obesity, and in phase II for the treatment of diabetes; and phase III trials of Avanafil for the treatment of erectile dysfunction; and phase II trials of Luramist for the treatment of hypoactive sexual drive in women. The Company partners with Tanabe Seiyaka Co. Ltd. and Acrux for the development, licensing and supply agreements of Avanafil and Luramist, respectively.

Founded in 1991, the Company is headquartered in Mountain View, California.

Source: Reuters.com, SEC Filings.

Financial Summary

Source: Reuters.com, SEC Filings.

Analyst Consensus

The mean of 10 analysts polled by Thomson Reuters rate shares of VVUS an “Outperform.”

Analyst Recommendations and Revisions

Source: Reuters.com, SEC Filings.

Investment Highlights

The Company has generated excitement among investors since late August following announcements of successful late-stage trial results of its weight-loss drug, Qnexa, and subsequent announcements of successful late-stage trials of its erectile-dysfunction drug Avanafil.

The market potential for the treatment of obesity is estimated to exceed $5.0 billion annually, while the market potential for the treatment of erectile dysfunction is estimated to exceed $3.5 billion annually.

The Company’s Muse drug therapy for the treatment of erectile dysfunction has achieved some success but not the blockbuster success achieved by Pfizer with its Viagra; Eli Lilly with Cialis; and Bayer/SmithKline with Levitra. But recent data released by the Company regarding its phase III drug candidate Avanafil shows that the onset of erection appears to be cut in half, 30 minutes or less compared with its competitors Viagra, Cialis and Levitra.

The benefit of reduced time to drug efficacy is vital to this market. A well-funded advertising campaign that communicates this benefit is expected to generate wide-spread appeal among customers of Pfizer, Eli Lilly and Bayer/SmithKline, though Eli Lilly recently stated in a news release that one study showed that half the participants in its trial of Cialis achieved an erection within 30 minutes.

Pfizer’s Viagra alone generates approximately $1.7 billion per year, while Cialis generates $940 million and Levitra $460 million per year.

Avanafil, Viagra and Cialis work by blocking the PDE5 enzyme, but Avanafil appears to act more quickly than the other two blockbuster drugs. But the hurdle facing the Company centers upon its potential for rapid commercialization, as the patent for Viagra expires one year after the expected introduction of Avanafil in 2012. It’s feared that cheaper generic versions of Viagra will pose stiff competition just when Avanafil breaks into the marketplace.

The Company said that trails of Avanafil have achieved all primary goals, including efficacy, limited side-effects as well as safety. The studies did show that some participants experienced similar side-effects of flushing and headaches also associated with its competitors’ product.

Currently, Avanafil is undergoing late-stage trials to study the effects on patients with diabetes or have undergone radical prostatectomy. The results of these studies are anticipated next year, and submission for regulatory approval is planned for late 2010 or early 2011.

As to the Company’s weight loss drug Qnexa, management said that it intends to file for U.S. Regulatory approval by the close of calendar year 2009.

Technical Analysis

VVUS trades above its 13-day moving average. This bullish sign is significant because the 13-day moving average is turning upwardly as well.

The MACD for VVUS currently indicates a bullish signal. The MACD is above the signal line, a 9-day moving average of the MACD. The MACD is, however, below the critical level of 0, which implies the past price action has been negative. Overall, the chart is short-term bullish.

Comparative Analysis

Source: Thomson Financial

Insider Trading Activity

Source: Yahoo Finance

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