Re-Cap of Conference Call. Updated, corrected.
Please continue making suggestions.
PS Stock behaving well today.After a rash of sales at the open
it appears to have stabilized.Less volatility.We may finally be building a core of tight fisted Vivus share holders who will not part with the stock.Everybody else will need to buy at higher prices.With the Jan 31 st AT&T Pebble Beach Golf Tourney Ad-Campaign launch, interest in Vivus is likely to increase. Upside potential good, IMHO. I am holding, unlike previous 3 quarters when I sold at the open.
TA
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Colby, A VERY G O O D CC IMHO!!!!!
First, the CC can be listened to at 18006338284 until 1/29/98.
Second the positive items to be reviewed in this CC
GREATLY outweigh the negatives so that I think the term of "Accumulate" from hold is in order, (for me that is, NOT for others, gg ).
First the negatives:
-Approval by the FDA will be asked by mid Feb and then we have to wait. It may be Q2 before it is
inspected and approved.
-Out of 1.8 mill units shipped quarterly, more than the previous Q4 150000 units are going to be shipped to Astra, at lower margins, per previous agreement. (This is something they HAVE to do; when they signed with ASTRA 1 year ago I think that they never imagined it would take this long for FDA to approve).
-The above will lower margins.
-Greater advertising expenses.
-The decrease of Quarterly unit production from 2 mills to 1.8, due to the fact that some manpower and equipment had to be moved to new facility.
-The slight decreases in demand (which I interpret as backlog decrease rather than net decrease) because of lack of advertising and lack of product availability initially. This is relative however because refills are going up. So that in absolute numbers they are still running full steam; see in next section on positives).
The positives:
First Mr. Wilson CEO SOUNDED MUCH MORE POSITIVE AND AGRESSIVE!!!! AND FORWARD LOOKING!!.There was NO DEFENSIVE or UNCERTAIN undertones to his voice at all that I could note.
-He said at 130 mill $ sales in 97 this is one of the most successful Urology product launch ever. And this is with minimal advertising.
-They will concentrate in their GIANT Ad campaign to make this the No1
and 1st prescribed drug in ED!
-Giant Ad campaign to start Jan 31st with the AT&T Pebble Beach National Pro- Am Golf tournament
Then ads in Newsweek Time, magazines, ABC, CBS, Wall Street Journal and other major magazines and TVs. etc.
-Submit all paperwork for new factory to FDA by Feb 15 and ask them to inspect it and approve it.
-They have 75 sales reps, largest in Urology.
-The manufacturing problems in their new plant have been COMPLETELY
corrected.
-They settled their (hopefully) last lawsuit with a previous consultant, and did so to avoid prolonged litigation costs and to avoid going in front of a jury (same old reason.). The lawsuit was due apparently to
a small procedural error that Vivus committed early on in their filing of the patent but which ended up costing them a lot. NOTE: without the settlement they would have made 33-cents/ share.
-They have been accepted by all the Urologic and medical community
well and Managed care so that 70% of prescriptions are now covered compared to 60% in Q2-3.
Probably one of the MOST EXCITING items is that
-THEY ARE PRODUCING RIGHT N O W in the NEW PLANT, s i g n i f i c a n t amounts of product which they are STOCKPILING and which will be shipped IMMEDIATELY as soon as United Kingdom MCA approval comes along, which could be ANYTIME late Feb to early March. Also that " product at risk " will be available to be ROCKETED OUT THE DOOR, first to UK and then US as soon as approval is obtained. This could SIGNIFICANTLY IMPACT Q1 revenues if it is shipped in March to UK if MCA approves in March. Look for Q3 EPS in the 60-70-cents/share aerea, a Q 4 of .80 with a 1998 EPS of at least $ 2.
= MrWilson's EXACT quote (I wrote that down; everything else I am writing is out the top of my head):
" You will see SIGNIFICANTLY INCREASED product NOT TOO FAR
Down the road ".
-They aim to be the LEADER in ED, (not 2nd to PFE, my quote, gg).
He answered questions on effectiveness and demand:
-Demand and acceptance have increased steadily, according to REFILL
Prescription rate, which has steadily gone up, and as of Jan 3, a slow period, they are up 43% from before.
-The Asensio quoted Italian study, was not published and peer reviewed, was only a letter in the Lancet, was done on the worst ED patients, they were ALL on the needle; quality of these studies was low compared to the NEJM study and their end point was not done according to established Urologic literature methods, their patients were not educated in the use of MUSE as in the NEJM study. Same would apply to the J of Urology study (less educational quality standards, but even so, in their needle patients the response was 37%, better than the 5% Italian: how do you explain that?)
-The Lahey Clinic, world's most renowned diabetes center has a 50% success rate in 300 patients, same as the NEJM classic study with a 45% success rate. Lahey clinic has a much more sophisticated patient education program because they deal with diabetes.
On the issue of shares sold by insiders, Wilson said that they HAVE
To sell during fixed windows. That even though they sold 150000 shares in 1997, they also bought 130000.
A lot was options that they exercised.
As far as " share rebuying ", " and why not buy now that it's cheap ", he said that their policy is to answer that question the following quarter from the rebuy, i.e. Q2 forQ1 buys. As far as Q4 is concerned they bought ~ 300000 shares (~ $ 7.5 mill), so that they can buy 1.7 mill more that were authorized. IMHO, look for a big buy in Q1.
Somebody asked about rumors of Viagra being asked for more study data by the FDA: Wilson simply stated that he would not comment to rumors.
Also he did not at this cc mention of adding Viagra to MUSE like he did last time. He did not give aid and comfort to the competition guess he probably feels that Viagra must first prove itself in the medical literature and FDA before piggybacking it unto MUSE.He was also generous when the usual Zonagen question was asked: no comment (i.e. he was generous in not kicking Zonagen in the gutter where it is laying now.)
In my humble opinion this was a very good cc. It answered a lot of questions. Company management came out forcefully to dispel any rumors about....gg ? Vivus demise?
In Wilson's words,
" While we face short term challenges...we are ready to shoot out the door with 12 cylinders, very soon ".
In a developing luck luster 1998 Market, Vivus remains to be the company to closely follow: whether you buy/hold or buy/ trade,
At this point the downside is significantly less than the upside IMO.
We'll see tomorrow. On the upside, I am starting my own 1998 prediction for David's list: put me down for at least $2. You don't need fancy calculations here: Previous factory 9000 sq. feet; new factory 90000 sq. ft; giant AD campaign and ED demand: sales and EPS will easily double if not more.
All in my opinion only.
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