Keep a Close Eye on VIVUS
Jordo is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I always find it interesting to look at what the billionaires are buying. After all, they got rich by making some good choices in their life. George Soros is one investor to peek at to see what he’s investing in. Back in 1992, he made a billion dollars by shorting sterling. Since that time, he has become one of the world’s best-known investors. As of March 31, 2012, his portfolio was valued at $6.8 billion.
One of his latest holdings includes VIVUS (NASDAQ: VVUS). VIVUS has a few investors excited. VIVUS is a biopharmaceutical company developing therapies for obesity, sleep apnea, diabetes and sexual health. Qnexa, an anti-obesity drug, is very close to getting FDA approval. The drug received a 20-2 favorable nod from the FDA, though the final decision is in three months.
Qnexa most likely will be competing with Arena (ARNA) Pharmaceuticals’ lorcaserin. If both drugs receive final approval, they will release within roughly the same time frame. It will be intriguing to watch and see whether Qnexa’s limited indication but better efficacy outsells lorcaserin, which has a cardiovascular risk. Orexigen (OREX) is also working on an obesity drug. Even with a three-way competition, there are enough obese people for everyone concerned to make good money.
Preliminary trials show that Qnexa has an average 10% sustained weight loss compared to 1.8% in the placebo control group. The FDA has only approved one drug, Xenical, marketed by Roche Holding AG (RHHBY.PK) for long-term weight loss in the last several years. The market is primed for a new alternative. The current global market for anti-obesity drugs is about $1.5 billion and is set to rise to $3 billion by 2016.
Qnexa is a once-a-day oral drug targeting the appetite to help overweight people. With VIVUS’ focus on diabetics, this drug could be a huge success helping diabetics live a healthier lifestyle. The bigger picture is that this type of drug will enable the growing pool of at-risk obese patients to avoid becoming diabetic to begin with. The drug has the potential of tapping into a yet untouched, massive niche market of preventative diabetes care.
What is frightening is that people over 60 are more prone to develop diabetes. As baby boomers are retiring, and the average lifespan is increasing in developing countries, diabetes is on a course of possible acceleration. Health care professional have already begun to notice a trend of diabetes diagnosis’s in developing nations over the last several decades.
In a recent survey, Type 2 diabetes in China exploded by 30 percent over the short span of seven years. As the Chinese become more affluent, their waistlines are also ballooning. The average Chinese diet now includes considerably more saturated fat than just a few years ago. Lifestyles are also changing as Chinese move from rural areas into the urban cities and adapt to a more sedentary life.
As unfortunate as the trends may be, there is a huge opportunity for businesses to treat this growing problem. As millions around the world rise to the middle class, more diabetes diagnoses will occur and patients will need affordable treatments for the disease. For the investor it is important to find the right company to align with, that provides a unique diabetes drug and has the ability to dominate the market.
Companies such as Sanofi (NYSE: SNY) have been providing traditional products like Lantus (insulin shots) to help diabetics control their blood sugar. Sanofi reported a strong performance in the first quarter due in part to Lantus. This type of treatment will not go away. However, this type of market is saturated. It will take companies like VIVUS with unique treatments that are innovative and convenient, enabling diabetics to live fuller and healthier lives, to stir the market up and propel it forward. Preventative treatments will be in the forefront of this growing global multi-billion dollar market.
VIVUS is also releasing an erectile dysfunction drug. The Food and Drug Administration has already cleared this drug that markets under the name Stendra. The pill creates an erection within 15 minutes, about half the time of Pfizer’s (NYSE: PFE) Viagra. The drug's chemical name is avanafil. VIVUS is seeking a partner to sell the medicine in the United States. Pfizer’s Viagra drug racked up $2 billion in sales last year. Eli Lily’s (NYSE: LLY) Cialis is a similar drug. Cialis has been facing competition from Stendra and generics as they seem to work faster. VIVUS is hoping to tap into this growing and profitable market.
If avanafil meets expectations, VIVUS could see $68 million in sales next year. The erectile dysfunction drug however will soon face generic competition. Patents for Cialis and Levitra expire in 2016 and 2018. Levitra is a partnership between Bayer AG (BAYN.DE) and GlaxoSmithKline (GSK). A generic for Viagra is will hit the streets in 2019.
The National Institutes of Health estimates that 30 million men suffer from some form of erectile dysfunction in the United States. Even with generics entering the market there is still room for new comers with improvements. One in 10 men worldwide suffers from erectile dysfunction. Fifty percent of men with diabetes have erectile dysfunction. Age also plays a role. By age 40, 39% of men suffer from the affliction and 65% by the age of 65.
In the past men have been reluctant to discuss this topic. As doctors address the dysfunction more openly with patients more men are seeking treatment. Every new drug also increases awareness. As there is more openness about sexuality, female sexual dysfunction (FSD) is receiving more attention. Statistics suggest that about two-thirds of the female population may be affected. Pharmaceutical companies have identified FSD as the next big industry.
While VIVUS has no income and essentially no revenue, it does reflect a healthy market cap of almost $2 billion, about 14 times its book value, reflecting market optimism over the prospects for the drugs Qnexa and avanafil. This is definitely a stock to keep your eye on.
jordobivona has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.