(VVUS) Vivus First Quarter 2011 Loss Narrower than Expected

Vivus Inc.’s (VVUS) first quarter 2011 loss of 12 cents per share was narrower than the Zacks Consensus loss Estimate by 3 cents and the year-ago loss (from continuing operations) by 9 cents. The narrower loss in the reported quarter was attributable to a decline in operating costs.

Vivus did not generate any revenues in the reported quarter as in the previous year. Operating expenses at Orexigen declined 35.6% to approximately $9.9 million. Research & development (R&D) expenses plummeted 56% to $4.5 million. General and administrative (G&A) expenses increased marginally to $5.4 million in the reported quarter.

The significant reduction in R&D expenses was primarily attributable to the lower spend on clinical development of obesity candidate Qnexa and erectile dysfunction (ED) candidate, avanafil as both of them are nearing approval.

Qnexa update

Apart from releasing its final results, Vivus also provided an update on Qnexa. Vivus had an end-of-review meeting with the US Food and Drug Administration (FDA) on April 14, 2011, in response to the complete response letter (CRL) issued by the agency, in October 2010.

At the meeting, the company discussed its plans to potentially resubmit the new drug application (NDA) for Qnexa for a limited indication, including only men and women of non-child bearing potential. Vivus may resubmit the NDA by the end of 2011. The FDA has agreed to treat Vivus’ response to the CRL as a class II resubmission which implies a six-month review period.

However, the final patient population and the timing of the resubmission of the application will depend on the outcome of the retrospective observational study. Vivus and the agency have agreed on the design, goals and eligibility criteria of the study. The study (FORTRESS) will evaluate birth defects in children whose mothers were exposed to topiramate during pregnancy.

We note that Qnexa is not the only obesity candidate to be rejected by the FDA in the present form. The FDA has also refused to approve obesity candidates of Arena Pharmaceuticals Inc. (ARNA) and Orexigen Therapeutics Inc. (OREX). Both companies have been issued CRLs.

The company also filed a Marketing Authorization Application (MAA) with the European Medicines Agency (EMA) for Qnexa in December 2010. A smooth review process could result in Qnexa receiving EU approval in late 2011.  On approval Qnexa will target a highly lucrative obesity market.

Neutral on Vivus

We currently have a Neutral recommendation on Vivus, which is supported by a Zacks #3 Rank (short-term Hold rating). We expect investor focus to remain on Qnexa’s approval and Vivus’ future course of action for avanafil.

ARENA PHARMA (ARNA): Free Stock Analysis Report

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