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VIVUS (VVUS) Q1 Loss Narrower Than Expected, Qsymia Falters

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VIVUS Inc. (VVUS - Free Report) reported a loss of 10 cents per share for the first quarter of 2018, wider than a loss of 1 cent reported in the year-ago period but narrower than the Zacks Consensus Estimate of 11 cents.

Quarterly revenues plunged 55.9% from the year-ago period to $11.9 million mainly due to lower product sales. Moreover, the company did not record any license and milestone payment in this quarter compared to a one-time payment of $5 million in the year-ago period.

VIVUS’ marketed drugs have not been performing well with steady decline in sales. Management has taken certain business initiatives to put the company on growth track. These include leadership transitions, acquisition of rights to a drug and debt restructuring.

So far this year, VIVUS shares have outperformed the industry. The stock declined 2.5% during the period, while the industry witnessed a decrease of 12.3%.

 

Quarter in Detail

The company’s weight management drug Qsymia generated net product sales of $9.6 million, down 45.3% from the year-ago period due to reduction in Qsymia inventory by wholesalers and unfavorable impact of change in revenue recognition methodology. Excluding the impact of change in revenue recognition methodology, sales fell only 6.8%.

Supply and royalty revenues from Stendra/Spedra were $2.3 million in this quarter, down 48.4% due to the timing of orders.

Selling, general and administrative expense was $10.1 million, down 11.9% year over year.

Research and development expense decreased almost 35.6% to $1.4 million in the reported quarter. The company paid a license fee of $1.1 million to Selten Pharma related to acquisition of tacrolimus in the year-ago period. Excluding the license cost, R&D expense increased on continued development cost of tacrolimus.

New CEO

In April, the company announced the appointment of John Amos as its new chief executive officer (“CEO”). He was also added as a board member. Kenneth Suh was appointed as CEO and Scott Oehrlein as the chief operations officer of Willow Biopharma, a wholly-owned subsidiary of VIVUS.

Pancreaze Acquisition

In May 2018, the company announced an agreement with Janssen, a subsidiary of Johnson & Johnson (JNJ - Free Report) , to acquire all rights to the latter’s exocrine pancreatic insufficiency (“EPI”) drug, pancreaze, in the United States and Canada. VIVUS will have to pay Janssen $135 million upon closing of the deal. The transaction is expected to close in the second quarter.

Pancreaze, delayed release capsule, was approved in 2010 for EPI, the inability to properly digest food due to a lack of digestive enzymes made by the pancreas owing to cystic fibrosis or other conditions. In the press release, the company stated that Pancreaze's cash flow is positive, which is expected to boost VIVUS’ revenues.

Debt Restructuring

VIVUS entered into an agreement with Athyrium Capital Management for a new line of credit of $120 million through issuance of Senior Secured Note. The notes will bear an interest of 10.375% for a period of three years. It will be interest free after that period. These notes will be issued after successful completion of PACREAZE acquisition.

Concurrently, VIVUS will repurchase Athyrium’s Convertible Notes of $60 million face value issued earlier, which is due in May 2020, at a discount or on par.

2018 Objectives

VIVUS remains focused on improving Qsymia and Stendra’s sales through innovative strategies and expansion into new geographies.

The company is on track to file an investigational new drug application for tacrolimus to develop it for the treatment of pulmonary arterial hypertension. The company is also focused on expanding its commercial portfolio through the acquisition of cash-flow positive drugs.

VIVUS, Inc. Price, Consensus and EPS Surprise

 

VIVUS, Inc. Price, Consensus and EPS Surprise | VIVUS, Inc. Quote

Zacks Rank & Stocks to Consider

VIVUS currently carries a Zacks Rank #4 (Sell).

A couple of better-ranked stocks in the biotech sector are Ligand Pharmaceuticals (LGND - Free Report) , and Enanta Pharmaceuticals, Inc. (ENTA - Free Report) . While Ligand sports a Zacks Rank #1 (Strong Buy), Enata carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ligand’s earnings per share estimates moved up from $4.20 to $4.43 for 2018 and remained stable at $5.32 for 2019 over the last 60 days. The company delivered a positive earnings surprise in three of the trailing four quarters, with an average beat of 31.79%. The company’s shares have rallied 23.4% year to date.

Enanta’s earnings per share estimates have significantly increased from 86 cents to $2.48 for 2018 over the last 30 days. The company came up with an average beat of 372%. The stock has surged 68.9% so far this year.

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