Vivus (VVUS): Unclear How Potential AIF Bid Will Help Qsymia Longer Term, Says Wells Fargo

Wells Fargo maintained a Market Perform rating on Vivus (NASDAQ: VVUS). The stock gained after Aspen Investment Fund said it is currently contemplating a conditional non-binding offer to acquire it for total consideration of $640 million. In the view of Wells Fargo analyst Matthew J. Andrews, it is unclear how this would address important strategic and operational issues related to Qsymia's growth longer term.

"This morning in a 13D filing, Aspen Investment Fund (AIF) disclosed a 9.65% holding (3.8M call options; 6.2M forward purchase contracts) in Vivus and shares traded up as much as ~+14% in early morning trading vs. IBB's 0.53%. In addition, the filing notes that AIF is currently contemplating a conditional nonbinding offer to acquire the Issuer (VVUS) for ~$640 million, to be financed using AIF working capital, Issuers cash/cash equivalents and debt from top-tier investment banks, and that an offer may be submitted to the board by June 13, 2014," said Andrews.

"While at face value this offers the short-term potential for additional upside for shares in the coming weeks and values VVUS at ~$5.18 (using our Q2 ~124M diluted estimate which includes VVUS' convertible debt) to ~$6.19 (nondiluted basis), it is unclear how an acquisition will help address key long-term commercial, clinical, and regulatory issues for Qsymia/Qsiva, beyond management's current plan to increase Qsymia sales," he added. "Specifically: (1) in the face of potential approvals of NB32/Contrave and Victoza in June and Q4, respectively, what is the plan to increase Qsymia sales in H2 2014/2015+? (2) When will the AQCLAIM CVOT study be initiated and when will the Qsiva MAA be refiled (in order to obtain EU approval)? (3) How would an acquisition increase the likelihood of accelerating a large pharma partnership (important to growing U.S. sales, in our view)? (4) Is AIF committed to pursuing a T2 diabetes label to help improve reimbursement over the long-term with U.S. private payers."

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 $4.67 yesterday.

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