VIVUS (VVUS) In the Spotlight Ahead of Likely FDA Obesity Drug Approval
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VIVUS Inc. (Nasdaq: VVUS) will be on watch this evening and tomorrow as the all-important FDA decision on obesity drug Qnexa looms with the PDUFA date scheduled for Tuesday 7/17. After an FDA panel backed the drug in February and the FDA approved Arena Pharmaceuticals' (Nasdaq: ARNA) rival drug Belviq in June with a clean label, many expected approval of Qnexa is in the bag. That said, there remains some skeptics.
Last Friday, analysts at Jefferies weighed in and said they see the decision at 50-50, which is much less than the 80+ percent chance of approval many others see. Citing reasons against approval, Jefferies noted that 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 Contrave despite a positive panel vote, and the overhang of historical post-approval obesity drug withdrawals due to CV safety problems.
On the other side of the trade is Leerink Swann. The firm upgraded VIVUS's other rival Orexigen Therapeutics, Inc. (Nasdaq: OREX) today, mainly citing one thing - feedback suggesting VIVUS's Qnexa will gain approval. Not only that, they see Qnexa getting the greatest use among patients.
With traders placing their bets on both sides, there should be a warning about a potential bear raid in the stock. With a news vacuum for a good part of the day tomorrow and nervousness among investors it sets up for the perfect opportunity for ruthless short-sellers to spread non-approval rumors in the market. Hitting enough bids can create a scenario where even the most logical of investors can believe a non-approval leak has occured. We have seen it again and again, most recently in Arena. So be forewarned.
Last Friday, analysts at Jefferies weighed in and said they see the decision at 50-50, which is much less than the 80+ percent chance of approval many others see. Citing reasons against approval, Jefferies noted that 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 Contrave despite a positive panel vote, and the overhang of historical post-approval obesity drug withdrawals due to CV safety problems.
On the other side of the trade is Leerink Swann. The firm upgraded VIVUS's other rival Orexigen Therapeutics, Inc. (Nasdaq: OREX) today, mainly citing one thing - feedback suggesting VIVUS's Qnexa will gain approval. Not only that, they see Qnexa getting the greatest use among patients.
With traders placing their bets on both sides, there should be a warning about a potential bear raid in the stock. With a news vacuum for a good part of the day tomorrow and nervousness among investors it sets up for the perfect opportunity for ruthless short-sellers to spread non-approval rumors in the market. Hitting enough bids can create a scenario where even the most logical of investors can believe a non-approval leak has occured. We have seen it again and again, most recently in Arena. So be forewarned.
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