Carl Icahn Involvement with Vivus (VVUS) Seen as 'Very Significant Positive'
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Shares of Vivus (NASDAQ: VVUS) rose nearly 13% Wednesday following a disclosure that Carl Icahn launched a cash tender offer for any and all of the outstanding 4.50% Convertible Senior Notes due 2020 of VIVUS at a price of $680 for each $1,000 of principal amount of Notes. Investors were mixed on the news. Some viewed it as positive given his past record with drug stocks, while others viewed it as a negative since he is going after the bonds on the cheap, not the stock.
RBC Capital analyst Simos Simeonidis appears to be the only sell-sider to comment on the news and he thinks it is a "very significant positive."
Simeonidis notes Icahn has had the "golden touch" in biotech and notes the connection to Vivus board member Dr. Alex Denner.
"Even though Mr. Icahn is known as a fierce street brawler, and has been very successful in that regard in other industries, the vast majority of his most successful company turnarounds in biotech have been during the tenure of the much more diplomatic, bridge-building lieutenant Dr. Alex Denner," he commented.
Icahn's success stories with Denner involved include: Imclone, Genzyme, Amylin and Biogen to name just a few, the analyst highlighted.
"There are however plenty of others, where the approachable and softer-speaking Denner was able to get to a desired outcome without a public fight," he commented. "Mr. Icahn has not been as involved in biotech since Dr. Denner departed to start his own fund, Sarissa Capital. Given the latter's 2.6M share position in VVUS, it looks like they may be getting the band together for this one."
Commenting on what is next for Vivus, Simeonidis reminds investors that Dr. Denner is on the board of Vivus and was part of the effort to unseat prior management. "In the past, part of the Denner/Icahn playbook in biotech had been to look for mismanaged teams and undervalued companies, and force a sale to a larger company," he commented. "This could be a definite possibility here, especially given Denner's deep contacts in the biopharma industry, despite the fact that the branded obesity market has been a disappointment, taking much longer to develop and the company's IP has long been in question."
Further the analyst notes that the following happened two years ago today - "And speaking of IP, it is perhaps worth noting the name of the CEO of one of the two companies (Actavis) that had challenged Qsymia's patents: it is Brent Saunders, and two years ago tomorrow (on 9/10/13) he was appointed CEO of Forest Labs. You may recall who his backer was in the very difficult fight to replace then CEO Howard Solomon..." (answer = Icahn)
While Simeonidis notes while Qsymia sales have been disappointing, to say the least, Qsymia is the best branded obesity agent approved. He views the stock as attractive at current levels. He maintained an Outperform rating and price target of $4 on VVUS.
Shares of Vivus closed at $1.35 yesterday.
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Related EntitiesCarl Icahn, RBC Capital
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