Will Vivus EARN an Arena Style Victory Tomorrow?
Vivus Inc. (NASDAQ:VVUS), a California-based bio-pharmaceutical company, has been on a tear this year. In just the past three months, shares have surged more than 25 percent. Recent drug approval developments in the industry have investors’ hearts pumping faster than ever, but insider-selling actions are casting doubt on the company’s upcoming approval decision.
In April, the Food and Drug Administration awarded regulatory approval for Vivus’ Stendra. The drug, known chemically as avanafil, is suppose to provide erections within 15 minutes, nearly half the time of Pfizer Inc.’s (NYSE:PFE) Viagra drug. “I do think it’s a differentiated product. Unlike competitors such as Eli Lilly & Co.’s (NYSE:LLY) Cialis, Vivus’ drug features rapid onset; rapid off,” explained Rodman & Renshaw LLC analyst Michael King, according to Bloomberg. Stendra is the only product on the market for Vivus and may bring in $68 million in sales next year. However, another FDA decision could soon add to those gains.
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Tomorrow, on July 17th, Vivus awaits word from the FDA on its diet pill Qnexa. The approval decision was originally expected in April, but was delayed until this week. It was rejected by the agency in 2010, but received backing earlier this year by a panel of government advisers. If approved, it would become the second weight-loss pill to be approved by the FDA this year. Last month, Arena Pharmaceutical (NASDAQ:ARNA) won approval for its Lorcaserin drug that affects an area of the brain that helps people eat less and feel full after eating only small amounts of food. It was the first obesity medication cleared for sale in the United States in 13 years.
Although the FDA decision on Stendra is drawing near, Vivus shares are up 6.45% in the past month, yet down over 3.76% in the past 5 trading days. Concerns appear to be growing about insider transactions by three Vivus executives. TheStreet explains, “Insider sales ahead of major FDA drug approvals decisions should always trigger alarm bells. For Vivus, the worry is that insiders — CEO Leland Wilson, President Peter Tam and Chief Commercial Officer Michael Miller — are selling stock now because they know or suspect Qnexa isn’t going to be approved on July 17, as most investors expect it to be. This is the doomsday scenario being spread by shareholders of Arena, Vivus’ rival in the ever-expanding weight-loss pill stock bubble. What’s bad for Vivus is good for Arena, naturally.”
However, as TheStreet points out, these transactions have been occurring under trading plans that are suppose to provide legal cover from insider trading allegations. The insider selling has been going on for years now and is likely a poor indicator of how the FDA will rule next week. Furthermore, you would expect executives to book profits at some point. Shares of Vivus have surged more than 300 percent over the past three years.
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