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Even With a Pill That Works Faster Than Viagra, Vivus Isn't a Buy

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Development-stage drug maker says impotence pill takes only 15 minutes to do its job, but investors bid up the shares recently based on hope for a new diet pill.

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Faster than Viagra: That would be the selling point for an impotence drug that has yet to be approved in the US.

According to Vivus (VVUS), the company developing the latest wonder sex drug for men, its pill avanafil takes as little as 15 minutes to get a guy ready for action. Just-released study results confirmed the company's claim. Pfizer's (PFE) Viagra takes 30 to 60 minutes to work, according to the drug's website. (It can take even longer if you decide to chow down on a cheeseburger and fries just before attempting sex, Pfizer says.)

Avanafil has a decent shot at being approved in the US next spring, says Cowen and Co. analyst Simos Simeonidis.

"Avanafil's relatively differentiated profile, with its faster onset of action and its fairly clean safety profile, give it a better-than-average shot at being approved," Simeonidis says in a recent note.

The US Food and Drug Administration set a date of late April to decide on the impotence drug, and Simeonidis sees no hangups to getting the drug cleared for sale by then. He predicts avanafil can grab 8% of the market for erectile dysfunction drugs and the product may eventually churn out $300 million in annual sales.

But the analyst doesn't think that's enough to justify Vivus' lofty valuation, which rose in recent months on renewed hope for a diet pill that already was rejected by the FDA last year. Vivus saw its shares soar and later plummet on US rejection of Qnexa. But the stock found new life when the FDA said it would consider the drug again, giving investors hope that the Qnexa may be approved next year. (See Diet Pill Maker is Back in the Game.)

Vivus' stock is up 45% over the past three months, trading at $10.17 midday Monday. The market cap swelled to more than $900 million.

Simeonidis, who has a hold rating on Vivus' stock, says he thinks Qnexa should be approved but believes the FDA will reject the diet drug again and require the company to perform a very large human trial (probably around 10,000 patients) to study the cardiovascular risks of the pill. The FDA is very cautious about the safety of weight-loss treatments.

Two rivals, Orexigen Therapeutics (OREX) and Arena Pharmaceuticals (ARNA) also have experimental diet drugs that were rejected in a little more than a year. Vivus is the largest of the three diet pill developers.

Another rejection will tank Vivus' stock. As for the impotence drug, Simeonidis predicts the company will sell it to a larger pharmaceutical company for around $300 million. Pfizer dominates the market for erectile dysfunction and recently won a court battle upholding its market exclusivity through 2019. With its speedy claim, avanafil may find a niche, but it would compete in a crowded field that also includes Eli Lilly's (LLY) Cialis, Bayer's Levitra and Staxyn, a drug Bayer licenses to Merck (MRK) and GlaxoSmithKline (GSK).


Twitter: @brettchase

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No positions in stocks mentioned.
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