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Biotech / Medical : VVUS: VIVUS INC. (NASDAQ)
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To: John M. Gelnieau who wrote (17936)1/19/1999 7:48:00 PM
From: VLAD  Read Replies (2) of 23519
 
To anybody who understands accounting proceedures:

Last quarter Vivus wrote off $16M of raw materials which were not really lost but were going to have to be stored into deep freeze. Vivus had contractual obligations to buy raw product from its suppliers regardless of the fact that demand fell sharply over Q2 and Q3. As I understand it, Vivus will now be able to take this material which was written off and use it for future product but it now will not be counted as "cost of goods" since it has been written off in Q3. If this is so, future margins should rise sharply as Vivus is not showing any costs of the $16M of materials which have been written off. This should create a significant improvement on the earnings front in future quarters. I don't know if it will be applied to Q4 but at the very least it should make 1999 earnings look much better than if the material was not written off in Q3 1998. Anybody understand this book keeping on this material write off better than I do?
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