5 Reasons Why VIVUS (VVUS) Stock Should Be in Your Portfolio

Campbell, CA-based VIVUS, Inc. VVUS is a biopharmaceutical company developing and commercializing innovative, next-generation therapies to address unmet medical needs. The company's portfolio comprises two drugs, Qsymia for chronic weight management and Stendra (EU trade name: Spedra) for erectile dysfunction (ED).

The stock sports a Zacks Rank #1 (Strong Buy) and looks like a good investment now. You can see the complete list of today’s Zacks #1 Rank stocks here.

Strong Q1 Results: VIVUS reported a loss of 1 cent per share in the first quarter of 2017, which was narrower than a loss of 12 cents in the year-ago period as well as the Zacks Consensus Estimate of a loss of 13 cents.

Quarterly revenues increased 76.3% to $27 million from the year-ago period. Qsymia is the first weight-loss drug in 13 years to receive FDA approval. Sales of Qsymia have been weak since its launch due to high out-of-pocket cost burden for patients owing to lack of reimbursement for the product. However, sales rose in the first quarter due to revenue recognition change as well as seasonal growth of the anti-obesity market. VIVUS is also working on boosting Qsymia sales by expanding reimbursement and promotional initiatives.

Meanwhile, the obesity market represents huge commercial potential. Given the unmet medical need, upside potential in this market remains high.

Rising Estimates: VIVUS’ loss estimates for 2017 have narrowed 22% over the past 30 days. In fact, VIVUS’ earnings performance has been pretty impressive, with the company exceeding expectations consistently. The average positive earnings surprise over the last four quarters is 233.69%.

Favorable Share Price Movement: Following the earnings report, shares of VIVUS have risen 6.7% in the past one month while the Zacks classified Medical - Biomedical and Genetics industry registered a loss of 3.1%.

Stendra Also Doing Well: Supply and royalty revenues from Stendra/Spedra were $4.4 million in the first quarter, up 50.8% from the year-ago period due to an increase in supply revenues, which were driven by increased orders from commercialization partners compared with the year-ago period.

Meanwhile, VIVUS is collaborating with several companies for the commercialization of Stendra including collaborations with Menarini, for over 40 European countries, Australia and New Zealand, and Metuchen for U.S., Canada, South America and India.

We are positive on the agreements for Stendra as these provide VIVUS with a steady stream of cash flow in the form of upfront and milestone payments. Apart from that, the company also stands to gain from the vast marketing experience of its partners.

Pipeline Boost: In Jan 2017, VIVUS added tacrolimus to its pipeline by acquiring its exclusive, worldwide rights for the development and commercialization from Selten Pharma. Tacrolimus is being developed for the treatment of pulmonary arterial hypertension (PAH) by addressing a fundamental cause of PAH. Currently available drugs treat the symptoms of PAH but none address the underlying disease. Hence, if developed properly, the drug can be a boost for the company.

Conclusion

VIVUS faces its share of headwinds such as challenges in the obesity market. Also, the branded obesity market has quite a few players including Arena Pharmaceuticals, Inc.’s ARNA Belviq, Novo Nordisk A/S’s NVO Saxenda and Orexigen Therapeutics, Inc.’s OREX Contrave.

However, we believe that if Qsymia and Stendra revenues continue to improve and the pipeline delivers, the stock should do well this year.

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