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

To: BigKNY3 who wrote (4642)	1/16/1998 12:32:00 AM
From: Zebra 365	Read Replies (1) \| Respond to of 23519

To All: First, BigKNY3, the law suit is not news, it has been in every 10Q since 1996. The magnitude of the settlement is news. In fact I was pleased (if you can call it that) that they recognized this large loss in 1997 Q4 so it is over and done. But they had to use up the remainder of their tax loss carry-forward to balance this in the income statement. This means higher tax rates in the future, the price of success. <<<During the quarter, the Company recorded the settlement of a lawsuit with a former consultant. Payment of the $5.1 million settlement was made on January 5, 1998. Because of the lower fourth quarter product sales and the settlement of the lawsuit, the Company revised its estimated 1997 effective tax rate to 8 percent from 18 percent, resulting in a fourth quarter tax benefit of $3.5 million.>>> By using up previously acquired tax benefits and therefor lowering their 1997 tax rate they were able to "wash" the hit that otherwise would occur with such an event. Those tax benefits are an off-balance sheet asset but they are a real asset. If you see someone buy a company with a zero or negative book value it is usuallly to acquire these tax benefits. About the February "Approval" confusion: In mid-February they will give their final (hopefully) documented response to the MCA regarding any questions resulting from inspection. Then regulatory approval may come after evaluation of their (VVUS) responses. This would be expected in March (we hope). (From the CC): In mid-February they will also be inspected by the FDA. (From Zebra's brain about the process): Then the FDA will offer an initial review and Vivus will give a documented reponse. After evaluating the response and any follow-up corrections required, the FDA will approve. IMHO this will NOT be in the 1st QTR. BUT Big POINT from the questions, sorry if you didn't hear it, I planted this question myself because I knew the answer was important to us and Lee never would have mentioned it. The new factory is now in production. Product from the new facility (one line, half the capacity of the old plant) may go through QA, and be stored until MCA approval, then immediately shipped to the UK / Astra. This means that up to a million units could suddenly be added to Q1 product revenues in March. This is potentially a big earnings blowout in the making. I don't care what they say about the end user sales. We can argue that to death. Regardless, they now have to start filling that wholesale channel in the UK. They will have to ship (sell) hundreds of thousands of units even if not a single one were to get in the hands of a patient. Margins will be lower on the UK sales and if they cannot ship product in March from the new plant I think we'll see Q1 earnings in the teens again. But if they can ship new facility product in March after MCA approval, even with the lower margins, we will see earnings North of 0.40 per share. No matter what PFE is doing at that time, if VVUS comes out with earnings like that all will be forgiven by the institutional analysts. Zebra P.S. If you were wondering, the balance sheets show they (VVUS) bought back 145,000 shares in the 4th qtr at about $24 a share.

To: BigKNY3 who wrote (4642)	1/16/1998 12:43:00 AM
From: Gene Voss	Respond to of 23519

I know the detail of the case and Vivus did the right thing.5MM is a lot but the potential problem was too distracting.The claim as I saw it was a small but important technicality as patents go.Vivus's error was early in the game and understandable in retrospect.The case was not based on some dramatic ,deviant calculation by Vivus but a common technical issue in patent law.A mistake was made and the penalty was much more extreme than the infraction.They handeld it appropriatly. GV