With Plenty of Good Arguments for Both Bulls and Bears, VIVUS (VVUS) Qnexa Approval at 50/50 - Jefferies
Tweet Send to a Friend
Get Alerts VVUS Hot Sheet
Price: $13.76 -1.78%
Rating Summary:
6 Buy, 6 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 12 | New: 30
Rating Summary:
6 Buy, 6 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 12 | New: 30
Trade VVUS Now!
Shares of Vivus (NASDAQ: VVUS) are jumping early Friday ahead of next week's (7/17/12) all-important PDUFA date for obesity drug Qnexa. However, one analyst thinks the enthusiasm for approval should be tempered.
Jefferies' Thomas Wei sees the Qnexa decision as a 50-50 outcome; much riskier than the "strong optimism for Qnexa approval reflected in the current share price."
Wei goes over the bull and bear debate on Qnexa:
The Bulls:
Wei considers heart rate (HR) elevations to be the remaining critical issue for Qnexa approval by July 17. He notes that bulls point to the fact that the CRL did not specifically request a cardiovascular (CV) outcomes study and the panel voted 20-2 for approval. Further, bulls cite recent FDA commentary that another obesity drug is in the process of designing postapproval CV studies, which they view as positive for Qnexa. They also argue that if the FDA requires pre-approval risk assessment, VVUS could exclude harm prior to approval with the non-adjudicated MACE in its clinical program, as was done for the diabetes drug Victoza and Arena's (Nasdaq: ARNA) Belviq. Wei notes however, "This is predicated on the FDA not viewing HR elevations as a harm signal (which would automatically require an outcomes study), for which bulls invoke the small magnitude of HR increases and the example of GLP-1 drug." Conducting additional research on the GLP-1 precedent, Wei acknowledges that this bull argument is difficult to refute. Bull argued the PDUFA extension suggests a REMS remains the only significant issue under review and the clean Belviq label is also seen as a positive for Qnexa.
The Bears:
On the other side of the trade, Bears would argue: "residual CV risk issues in the Qnexa data that have not been fully addressed, recent FDA commentary that sympathomimetic mechanisms and drugs with heart rate elevations may qualify as examples of theoretical risk or signals of potential harm, the FDA's history of requiring pre-approval CV studies for Orexigen's (Nasdaq: OREX) Contrave despite a positive panel vote, and the overhang of historical post-approval obesity drug withdrawals due to CV safety problems.
Based on the mix of arguments, Jefferies sees the FDA decision on Qnexa "very difficult to call" and thus "see an unfavorable risk-reward at the current valuation, where the Street has already priced in FDA approval with blockbuster Qnexa sales ($2-3bn at peak)."
Jefferies maintains an Underperform rating and $9 price target on VVUS.
For an analyst ratings summary and ratings history on Vivus click here. For more ratings news on Vivus click here.
Shares of Vivus closed at last traded at $28.55, up 3 percent.
Join StreetInsider.com FREE and get immediately alerted when news breaks on your stocks and other market items - JOIN NOW
*NEW - Download StreetInsider's FREE iPhone and iPad App - Click Here
Jefferies' Thomas Wei sees the Qnexa decision as a 50-50 outcome; much riskier than the "strong optimism for Qnexa approval reflected in the current share price."
Wei goes over the bull and bear debate on Qnexa:
The Bulls:
Wei considers heart rate (HR) elevations to be the remaining critical issue for Qnexa approval by July 17. He notes that bulls point to the fact that the CRL did not specifically request a cardiovascular (CV) outcomes study and the panel voted 20-2 for approval. Further, bulls cite recent FDA commentary that another obesity drug is in the process of designing postapproval CV studies, which they view as positive for Qnexa. They also argue that if the FDA requires pre-approval risk assessment, VVUS could exclude harm prior to approval with the non-adjudicated MACE in its clinical program, as was done for the diabetes drug Victoza and Arena's (Nasdaq: ARNA) Belviq. Wei notes however, "This is predicated on the FDA not viewing HR elevations as a harm signal (which would automatically require an outcomes study), for which bulls invoke the small magnitude of HR increases and the example of GLP-1 drug." Conducting additional research on the GLP-1 precedent, Wei acknowledges that this bull argument is difficult to refute. Bull argued the PDUFA extension suggests a REMS remains the only significant issue under review and the clean Belviq label is also seen as a positive for Qnexa.
The Bears:
On the other side of the trade, Bears would argue: "residual CV risk issues in the Qnexa data that have not been fully addressed, recent FDA commentary that sympathomimetic mechanisms and drugs with heart rate elevations may qualify as examples of theoretical risk or signals of potential harm, the FDA's history of requiring pre-approval CV studies for Orexigen's (Nasdaq: OREX) Contrave despite a positive panel vote, and the overhang of historical post-approval obesity drug withdrawals due to CV safety problems.
Based on the mix of arguments, Jefferies sees the FDA decision on Qnexa "very difficult to call" and thus "see an unfavorable risk-reward at the current valuation, where the Street has already priced in FDA approval with blockbuster Qnexa sales ($2-3bn at peak)."
Jefferies maintains an Underperform rating and $9 price target on VVUS.
For an analyst ratings summary and ratings history on Vivus click here. For more ratings news on Vivus click here.
Shares of Vivus closed at last traded at $28.55, up 3 percent.
Join StreetInsider.com FREE and get immediately alerted when news breaks on your stocks and other market items - JOIN NOW
*NEW - Download StreetInsider's FREE iPhone and iPad App - Click Here
You May Also Be Interested In
- Tesla (TSLA) Ramps Higher (GM)
- Gene Patent Limited by High Court in Mixed Ruling for Myriad (MYGN)
- BlackBerry (BBRY) Deal 'Safe' Following Nokia (NOK) Chatter
Create E-mail Alert Related Categories
Analyst Comments, FDA, Momentum Movers, Trader TalkRelated Entities
Jefferies & Co
Login with Facebook
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
