Vivus’ Qsymia (formerly Qnexa) Wins FDA Approval Without Onerous Restrictions, Take-Out Speculation Likely to Drive VVUS Shares Higher

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 (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 (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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