Zacks_Analysts' Blog : Lower Spend Narrows Loss at Vivus - Analyst Blog

Vivus Inc. (VVUS) posted adjusted loss of 14 cents per share during the second quarter of fiscal 2011, in line with the Zacks Consensus Estimate. However, the loss was narrower than the year-ago loss of 27 cents per share. Lower operating expenses led to the narrower loss.

The company did not record any revenues during the quarter, similar to the prior-year quarter. The Zacks Consensus Estimate for the quarter was $1 million.

Quarterly Details

During the quarter, research and development (R&D) expenses decreased 18.7% to $11.0 million. Moreover, general and administrative expenses amounted to $5.3 million, reflecting a decline of 21.4%.

Vivus experienced reduced R&D spends during the reported quarter, as both Qnexa and avanafil have completed their clinical studies and have been filed for regulatory approval.

Pipeline Update

In June, Vivus announced the submission of a New Drug Application (NDA) to the US Food and Drug Administration (FDA) for its investigational drug, avanafil. The company is seeking to get the drug approved for the treatment of erectile dysfunction (ED).

Vivus’ NDA for avanafil is supported by data from three phase III trials – TA-301 (REVIVE), TA-302 (REVIVE-Diabetes) and TA-314 (long-term safety study).

We note that once approved, avanafil will primarily compete with Pfizer Inc.’s (PFE) Viagra and GlaxoSmithKline plc’s (GSK) Levitra.

During the quarter, Vivus initiated the FORTRESS study for Qnexa. FORTRESS is a retrospective, observational study of fetal outcomes of offspring of women exposed to topiramate.

Additionally, in July, the company reported top-line results from another trial on Qnexa. The trial was an additional retrospective study of medical claims data on oral clefts (OC) and major congenital malformations (MCMs) associated with topiramate exposure in utero.

The data from this study and the FORTRESS study (expected in the fourth quarter of 2011) is expected to be part of NDA to be resubmitted for Qnexa as a treatment for obesity.

In January, Vivus had an End-of-Review meeting with the FDA in response to the agency’s Complete Response Letter for Qnexa, received in October 2010. At the meeting, the company had discussed its plans to resubmit the NDA for Qnexa as a treatment for obesity.

The company filed a Marketing Authorization Application (MAA) with the European Medicines Agency (EMA) for Qnexa (obesity) in December 2010. A decision from the European regulatory body is expected in the fourth quarter of 2011.

On approval, Qnexa will face competition from currently available obesity treatment orlistat, sold by Roche Holdings Ltd. (RHHBY) as Xenical and by GlaxoSmithKline as Alli.

We note that Vivus is also evaluating Qnexa as a potential treatment for type II diabetes and obstructive sleep apnea.

Neutral on Vivus

We currently have a Neutral recommendation on Vivus. The stock carries a Zacks #3 Rank (Hold rating) in the short-run. We expect investor focus to remain on avanafil and Qnexa’s approval.