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Biotech / Medical : VVUS: VIVUS INC. (NASDAQ) -- Ignore unavailable to you. Want to Upgrade?

To: mc who wrote (3841)	12/26/1997 1:24:00 PM
From: mc	Read Replies (2) \| Respond to of 23519

Vivus for '98, some thoughts (warning - long) My opinions only, not facts: Quarter 4 Earnings: Vivus will come in below estimates for the quarter. I expect .12 - .16 per share in earnings. This will still give us an impressive $1 or so a share and make the P/E about 10 in an industry group that trades with P/Es of high 20s. Q4 earning will not be helped by share buybacks because the major decline in price occurred during December. It is my understanding that the company is not allowed to engage in trading their own stock that close to the end of a quarter (someone please tell me if I'm wrong) so I don't think they picked up many shares this quarter. Look for some in Q1 though. Q4 + Q1 balance sheets: Look for hits from taxes, costs for new plant & equipment, and higher payrolls to run the new lines at the end of Q1 despite temporary instability in demand. Cash & Cash Equivalents will decline to less than $70 million which will also reduce net interest which is currently a positive due to our lack of long-term debt. If, as Bradpalm1 said, the deal to purchase another company fell through, let's hope that management doesn't start to feel desperate to acquire and make an ill-fated decision to purchase a company who may be a bit further down their list of potentials just so they can have something to show for themselves. New plant/Q1 production: Q1 production in the old plant should be higher than Q4, but lower than Q3 `97. New plant production at this point is questionable and I think will definitely come in later than the projections given by management. I believe both MCA and FDA approval will be later than current timelines suggest. This will push back our expanded production to almost exactly coincide with the release of Viagra at the end of Q1/beginning of Q2. Q1 problems with commitments: Q1 revenue will be hurt by decreased margins. We are currently selling everything we produce. Without increased production throughout the quarter, everything we sell to our international partners will be money out of our pockets. We will be trading higher margin sales for lower margin sales Q2 + Q3, Initial impacts of Viagra: Pfizer will unload with both barrels in the marketing department. While this may prove to be good for Vivus in the long run, the near term horizon looks bad. I would guess that just about every MUSE user will opt for trying out a pill to see if it works for them, provided they are not hindered from doing so by drug interactions or other restrictions that we do not know about yet. This leaves us with increased capacity at a time of temporarily reduced demand. I think this effect could last as long as two quarters. I will estimate roughly that we'll see slightly positive earnings during these two quarters and very negative downward pressure on the stock. The market is hates uncertainty and there is no larger uncertainty for MUSE than Viagra. Q4: Vivus sales start to recover as those not helped by Viagra return and new patients were brought in by Pfizer's marketing try another alternative when Viagra does not work for them (how many? who knows). YTD '98: I expect a year over year earnings to decline. A one-year anomaly that will push us to about .75 per share for '98. Come year end, we will begin to see the true impact of Viagra and clear up some of the uncertainty about MUSE and Vivus' future. Conclusion: This stock is trading on news. For the first 2-3 quarters the potential seems to weigh heavily in favor of BAD news or, at best, news about the uncertainty of MUSE which may even be worse than bad news. Given that I believe long term 1999 and after will bring good fortune to VVUS and provided you agree with that assessment, the question really is: Is the opportunity cost for holding VVUS throughout '98 greater than the potential increase in VVUS given all the uncertainties inherent in owning this stock right now. If so, get out and buy something else. There are some good bargains out there waiting to be had. If you write calls, VVUS may work well for you in the coming year. If you buy and hold, I have no idea. Regardless of your strategy, be you long or short, good luck to everyone. Gary McBride - writing from his recovery bed, as his wife beat him repeatedly over the head after getting a margin call the day before Christmas Eve.