A VVUSer Board Challenge
BigKNY3 <<I challenge each Board poster and lurker to post a list of facts, opinions, and assumed market and company conditions and actions that will positively and negatively impact the price of VVUS.>>
Here's my own entry:
I. Positive actions, opinions and conditions that could drive the price of VVUS higher.
A. VVUS is a biotech company built on the unique therapeutic platform of transurethral delivery
MUSE is one of only four major pharmaceutical products approved for the treatment of the erectile dysfunction. After leading the market and attaining product sales of $130 million in 1997, MUSE sales for YTD June 1998 were $40.5 million.
B. VVUS is undervalued in comparison with prices during the last year
The current price of VVUS (6 1/32) is near its 52 week low ( 5 3/4 to 41 7/8). dailystocks.net
C. The Erectile Dysfunction Market is Rapidly Expanding
Due to the introduction of Viagra in April, more patients sought treatment for ED in that month than all of 1997. Given that Viagra is not effective for all patients and concerns about safety, MUSE may eventually benefit from Viagra's very big coattails. Moreover, if Viagra was removed from the market by the FDA, MUSE would once again have the non-invasive ED market to itself . It is estimated that the ED market in the US is from 5 to 20 million men.
D. MUSE's Specification is forming a base.
The average total weekly Rxs for MUSE is holding steady around 4,200
E. International MUSE Sales are Increasing
International MUSE second quarter sales increased increased to $9.8 million from $2.0 million in the first quarter.
F. VVUS has working relationships with three Big Pharma companies who could be potential future partners or owners of VVUS
Alza: In 1991, Alza passed on the opportunity to develop transurethral delievery leading to the founding of VVUS. In July, 1998, Alza hired VVUS' 75 urology representatives and the Innovex PCP contract.
Johnson & Johnson: Sold VVUS a separate patent on transurethral delivery and is a licensee of VVUS with marketing rights in selected parts of the world.
Astra: Licensee of VVUS in UK and other countries
G. VVUS has taken steps to reduce costs in staff and production
VVUS has moved its sales force to Alza and reduced personnel in "administration, R &D, and marketing". Moreover, the new NJ plant could reduce manufacturing costs by 50% over time
H. New products are in development
A new product Alibra may offer efficacy and toleration advantages.
I. Two Analysts Have VVUS as a Strong Buy
Charles Osziewski (PaineWebber) 7/7/98 VVUS@ 6 7/8:" Turn in Rxs, new manufacturing facility, and restructuring plan". Target :$20- 12 month price target.
Wole Fayemi (Cruttenden Roth) 4/23/98 VVUS@ 8 1/8 " VVUS well positioned to capitalize on significant # of patients who will fail on Viagra." Target: $23 for year end price
II. Negative actions, opinions and conditions that could drive the price of VVUS lower.
A. New Competition has Resulted in Declining Specification and Sales
Since the introduction of Viagra, MUSE has lost 74% of its specification. Current average total Rxs of 4,200 are down from the 1997 weekly average of 15,800. To return to 1997 levels, current Rxs must increase by 148%.
Total YTD June, sales of $40.5 million represent a 34% decline over YTD, 1997. Moreover, specification is shifting from urologists to primary care requiring increased resources. ims-america.com
B. No Coattail Effect and Patient Perception of MUSE
With the expansion of the ED market by over 16 times, it was anticipated that MUSE would benefit from those ED patients who could not be effectively or safely treated with Viagra. However, since April there has been no coattail effect on MUSE's specification. The patient reception to transurethral delivery and associated penile pain apparently continue to limit usage.
C. Dependence on Transurethral Delivery and VVUS Management
MUSE is VVUS and VVUS is MUSE. VVUS' major new product Alibra is a transurethral variation of MUSE. Interviewed in the January, 1998 issue of Script, Leland Wilson was quoted: "the product is our life. We either fail greatly or we make a lot of money." The application of transurethral delivery to anything other than ED is questionable.
Along the way, VVUS management has made many costly mistakes in marketing , production, and treatment of their shareholders.
D. Big Pharma's Interest in MUSE and VVUS is limited
J &J and Alza have already passed on transurethral delivery technology in the early 1990s. In July 1998, Alza was primarily interested in the VVUS field force and has relegated the former VVUS representatives to "spending a small portion of their time " detailing MUSE until the end of 1998.
Alza Press Release 7/9/98 "Under terms of the agreement with VIVUS, the urology representatives joining ALZA from VIVUS will, until the end of this calendar year, spend a small proportion of their time detailing MUSE(R)(alprostadil), a treatment for erectile dysfunction."
Moreover, finding a Big Pharma PCP partner for such a relatively small product in an evolving complex market will be extremely difficult. A specialty pharmaceutical company is a more likely candidate. The resulting lack of MUSE field time during this period of time will also put added pressure on specification.
E. The Price Trend is Down
Although VVUS has already shown a sharp decline and is near its low, declining stocks historically tend to continue to go lower. The anti-Newton Law does not apply to stocks. "What goes down, must go up."
F. FDA Position on Viagra and PFE
The FDA has supported the current labeling and safety of Viagra. Based on the experience with over 4,00 patients in clinical trials and usage in over 3.5 million patients since its approval, the probability that Viagra will be taken off the market or have a significant labeling change is remote.
PFE is also considered the premier marketing company in the pharmaceutical industry.
G. Key Management is Leaving
Two key members of VVUS' management team have left in July...not a positive sign; Mary Bordeaux (National Accounts Director) and John Richard (VP, Corporate Development). Mr Richard was responsible for handling VVUS business development and was probably the VVUS dealmaker. On the VVUS website, he is still listed as one of the top 10 VVUS managers.
www3.techstocks.com
vivus.com
H International Sales May Be Vulnerable
Although international sales are growing, profit margins are lower as compared to the US . Moreover, it is expected that Viagra will be available in over 50 countries by the end of 1998. By the year 2000, additional ED products will be on the markets.
I. Analysts Ties to Investment Banking
The only two analysts with VVUS strong buys have been associated with the investment banking functions of VVUS. In 1996, PaineWebber raised funding for VVUS with Genesis Merchant Group. Wole Fayemi was previously an analyst for Genesis when on 10/11/97 he had a VVUS price target of 75.
Bottom Line: For VVUS to move up....something big has to happen ...very soon.
I currently do not have a VVUS position and only take long positions in stocks. Stock research is obviously one of my hobbies. The ED field is of particularly interest due to my PFE investment.
Hopefully this post will provide information and insight into your investment.
Good luck!!!
BigKNY3 |
