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

To: BigKNY3 who wrote (5814)	3/4/1998 11:19:00 PM
From: Zebra 365	Read Replies (2) \| Respond to of 23519

To All: VVUS has a share buyback authorized (I recall they have bought about 600,000 shares out of authorized 2 million) but they will only comment about buyback activity after the fact and then only quarterly. I was pleased to see a more negative press release from the company. They are presenting worst-case scenario, and no one ever gets sued for doing better than bad projections. To those who would like the company to be more positive, I would propose the following opinion: On one side of the balance sheet are the companies assets. On the other side are two things, liabilities and equity. Assets are all the things of value that the company owns. Liabilities are the direct claims on those assets. Equity is what is left over after the direct claims on assets are satisfied. The common stock shares of a company represents direct claims on equity. The market price of a stock is based on the market's evaluation, on any given day, of what a unit claim on the equity of a company is worth. That market price is a combination of many things, the greatest of which is expectations of future growth in equity. These expectations makes a claim on that equity worth more, in some cases astronomically more, than its book value. (Let me forstall any arguments about "earnings growth" by stating that one must recall that all retained earnings from the P&L statement go straight to shareholders' equity on the next quarters balance sheet) If a company is growing it's equity without diluting the claims on it, the value of each claim (share) will go up. This is the way to increase shareholder value, and of course it is important. No company that does this consistently over time will disappoint its shareholders over time. Warren Buffet uses this strategy in his picks and one can hardly argue with his success. (Of course that is not his only strategy.) Of course there is much emotionality in the market, so the perceptions of the future will vary widely. And on new, small-mid cap companies, those perceptions may change with every PR release, and even for larger companies, quarterly earnings reports may move the stock price enormously, even moving the prices of other stocks in a sector. i.e. the INTC debacle unfolding now may bring about the start of the general correction that I am expecting within the next 60 days. So, while I think it is proper for a company to pursue the increase in shareholder value by growing equity (as I still believe VVUS has done and will do), I feel it is improper for a company to inflate the expectations of equity growth in order to increase the value of claims on that equity. That is what I call company hype. I am not shaken out of VVUS because the stock price has gone down. I understand the company and it's market and believe that the current negative expectations built into the stock are overblown. Notice how little effect this negative press release had on the stock price today. IMHO that is because the stock is so much in the hands of institutions now, and they have real analysts, not like brokerage houses who have "analysts" that are really retail salesmen for stocks. So I think those institutional analysts now are saying two things, "Can VVUS produce enough product to meet demand?" and "How much will Viagra affect VVUS demand", (OK there is a third about dropping gross margins, but that is a given with competition and lower overseas prices) Sometime in the next three months, the answer to the first question will be "yes" (with FDA approval of the new plant). The answer to the second question is that there will be a negative effect, in fact it is a negative effect now. PFE hired a marketing company with a $6 million contract back in November for Viagra. They are doing a good job. Not one official "ad" for Viagra has been presented but they have created great product awareness. In fact I would guess that, to date, PFE has spent as much on marketing Viagra as VVUS has spent on marketing MUSE. BigKNY3, I know your response but we are big boys here, let's be real. I'm holding VVUS stock and buying more here because I think I know what will happen for VVUS in the three to six months after the release of Viagra. And it will be great, IMHO. Zebra