Obesity Drug Stock VIVUS, Inc (VVUS): No More Weight Gain for the Shorts? ARNA, ETRM & OREX

Small cap obesity drug stock VIVUS, Inc (NASDAQ: VVUS), who's potential obesity treatment peers include Arena Pharmaceuticals, Inc (NASDAQ: ARNA), EnteroMedics Inc (NASDAQ: ETRM) and Orexigen Therapeutics, Inc (NASDAQ: OREX), has elevated short interest of 35.63% according to Highshortinterest.com. However, obesity drug stocks in general have caused investor portfolios to loose weight amid safety concerns, costs, reimbursements and the fact that players in the space tend to be small - making it more difficult for them to reach out to large numbers of doctors or consumers.

Why is VIVUS, Inc Being Shorted?

Small cap VIVUS is a biopharmaceutical company developing therapies to address unmet needs in obesity, diabetes, sleep apnea and sexual health for US, European and other world markets. The company is commercializing Qsymia (phentermine and topiramate extended-release) for the treatment of obesity. Currently, Qsymia is approved in the US and is indicated as an adjunct to a reduced-calorie diet and increased physical activity for chronic weight management in adults with an initial body mass index (BMI) of 30 kg/m2 or greater (obese) or 27 kg/m2 or greater (overweight) in the presence of at least one weight-related medical condition such as high blood pressure, type 2 diabetes or high cholesterol.

In the middle of December, VIVUS, Inc announced that Qsymia is the sole anti-obesity agent listed on the CVS/Caremark Performance Drug List while in late November, the company announced two additional patents for the drug.  

In early November, VIVUS, Inc reported third quarter revenue of $33.9 million verses $27.4 million for the third quarter of 2013. Revenue included net product revenue of $12.5 million from sales of Qsymia verses $6.4 million for the third quarter of 2013 as there were approximately 140,000 Qsymia prescriptions dispensed in the third quarter of 2014 verses 138,000 prescriptions in the second quarter of 2014 and 109,000 in the third quarter of 2013. In addition and under commercialization agreements for STENDRA and SPEDRA, the company recognized $15.1 million in license and milestone revenue verses $21.0 million for the same period last year plus recognized $5.3 million in supply revenue and $1.1 million in royalty revenue. Net loss was $15.8 million, or $0.15 net loss per share, verses a net loss of $48.2 million, or $0.48 net loss per share, for the third quarter of 2013. The CEO commented:

"While the obesity market develops, we are encouraged by an improving reimbursement environment for Qsymia, increasing net revenue per prescription, and feedback from clinicians who emphasize that our product delivers on the promise of clinically significant weight loss. Because of its favorable efficacy and safety profile, combined with actual clinical experience since launch, Qsymia is top-of-mind in many conversations taking place about obesity, whether among key healthcare providers, payers, patients or policy makers… Additionally, we were pleased to announce in September 2014 the approval by FDA of our supplemental new drug application for STENDRA® (avanafil), making it the only erectile dysfunction medication indicated to be taken as early as approximately 15 minutes before sexual activity. Finally, the control of our operating expenses remains a key area of focus, and we continue to make good progress in this regard."

Back in the middle of September, VIVUS, Inc announced that the FDA had approved a supplemental new drug application (sNDA) for STENDRA (avanafil) which makes the drug the only FDA-approved erectile dysfunction (ED) medication indicated to be taken as early as approximately 15 minutes before sexual activity (Note: The drug was first approved in 2012 when it was indicated for use 30 minutes before sexual activity). STENDRA is available in multiple dosage strengths (50, 100 and 200 mg tablets) and may be taken with or without food and moderate alcohol consumption (up to three drinks).

Reuters quoted Wells Fargo analyst Matthew Andrews as saying in a a note that the label expansion was "incrementally positive." It should be added that last fall, VIVUS, Inc sold the rights to sell Stendra in the United States and Canada to Auxilium Pharmaceuticals, Inc (NASDAQ: AUXL) in a deal that could be worth $300 million - depending on royalty payments.

What Are the Charts Saying?

The latest technical chart for small cap VIVUS, Inc shows a pretty steady downtrend since last spring:

A long term performance chart shows small cap obesity stocks VIVUS, Inc, Arena Pharmaceuticals, Inc , EnteroMedics Inc and Orexigen Therapeutics, Inc generally causing investor portfolios to loose weight: 

However, technical charts for obesity stocks Arena Pharmaceuticals, Inc , EnteroMedics Inc and Orexigen Therapeutics, Inc do show signs of stabilization:

What Should Be Your Next Move?

Again, small cap obesity drug stocks like VIVUS, Inc have not exactly lived up to overweight expectations – meaning they are not a particularly good niche to invest in. However, the big gains from shorting VIVUS, Inc may have already been had by the shorts as shares have already slid from a $28.54 high in June 2012 all the way down to the $3 level.