CS:
Assuming Coverage - Maintain Neutral
Koon Ching is assuming primary coverage of VIVUS (VVUS). We lower our target price to $5 (from $6), but retain our Neutral rating. We updated our model: Our FY'14, FY'15, and FY'16 EPS are ($0.97), ($1.74),
and ($2.46), respectively.
Qsymia adoption continues to face significant headwinds. We currently forecast WW sales of ~$800M (~$580M in US, ~$220M in EU) in 2020. Qsymia prescription growth has stalled at ~10K to ~11K Rx per week despite the initiation of the roll-out of Qsymia into retail pharmacies in July 2014. Discounting of Qsymia prescriptions is still high (~61% in Q2’14 vs. ~54% in Q1’14). Navigation of the reimbursement process by physicians remains very challenging. Treatment duration remains at ~4 months (vs. ~9 months from the clinical trial experience).
It is difficult to see further upside outside of a Qsymia partnership. We believe that a partnership is possible, certainly more likely than a sale. VVUS management continues to work on securing a partner. Bringing on a partner has its obvious advantages, namely marketing experienced and additional resources to adoption of Qsymia. However, any partnership will likely require that VVUS relinquish significant economics.
Catalysts: (1) Qsymia continued retail launch; (2) Potential Qsymia partnership agreement; (3) Stendra label update on Sep 20, 2014.
Valuation: Our $5 target price for VVUS is based on a standard DCF on Qsymia US and EU sales, Stendra/Spedra royalties, annual cash flows until 2026 with no terminal value, and 10% discount rate. |
