Vivus (VVUS) update

Vivus (VVUS) current market cap 437MM, closed at $5.41 a share on 7/16/2010.

On Thursday, the FDA advisory panel shocked most biotech analysts with a 9-7 vote rejecting recommendation to the FDA for VVUS obesity weight loss drug Qnexa.  While the panel agreed that Qnexa demonstrated clear weight loss efficacy, concerns over safety ultimately derailed the drug.

There was some initial confusion over the vote, as one member said they voted no where they voted yes.  Unofficially, the vote was 10-6.  In the meantime, many of the panel members votes stated that they were close, with some saying they voted borderline yes, but could have voted no and vice-versa. 

There were three major safety concerns, memory loss, suicide risk, and possible defects with pregnancy. 

In the press release (please see previous post), "VIVUS completed a thorough QT prolongation (TQT) study evaluating subjects taking Qnexa. The study was completed with no signal for QT prolongation. Subjects taking Qnexa also underwent complex and extensive cognitive and psychomotor testing using validated, FDA accepted testing methodologies. There was no clinically significant change in overall cognitive function or effect on psychomotor skills seen in patients taking Qnexa."

Suicide risk was also studied during the Phase III trials.

"Monthly assessments using prospective psychometric instruments in accordance with FDA's guidance showed no signal for suicidality risk. There were no suicide attempts or suicidal behaviors, and there was no signal for suicidal ideation across all treatment groups including placebo. Depression or depressed mood adverse events of a moderate to severe nature were less than 2% and were similar among patients in the Qnexa and placebo groups. Overall, depression scores, quality of life including self esteem and general health significantly improved for patients on Qnexa."

On every doctor visit, the patient group was tested for pregnancy.  When a patient became pregnant, the patient was immediately stopped from taking the drug (whether placebo or not).  None of the pregnancies had any adverse effects.

Michael G King, Jr. of Wedbush Securities said it best, "On a philosophical level, we do not comprehend the moral relativism as to why obesity drugs are “different”, and why the panel was perfectly fine to subject migraine patients to the supposed evil of topiramate, but the obese must wait."

Instead of at least having the option to try medicine, the obese will continue to elect stomach surgery (such as gastric bypass), which can have complications and could be high risk because of their weight. 

What happens now?  The FDA, although rare, can overrule the advisory panel.  According to company management, there will be new information available, a 2 year follow up study on 650 patients.  This information will be available in the next 3 months.

Most likely,  the company will need to reapply in 2011 or 2012 with additional safety data.  In the meantime, the company does have 200MM in cash to sustain itself and will not need to raise capital.  If additional large studies are required, the company may need to raise capital or partner with a larger firm. 

Chump1 is currently long all 3 stocks (VVUS, ARNA, and OREX.