Vivus gets ED drug approval, spurring fresh talk of a deal

The FDA issued word this afternoon that it had stamped its OK on Stendra (avanafil), an erectile dysfunction treatment designed to spur a quicker response for men. The drug will enter a crowded field of rival and better known treatments in a mass market, leaving some analysts to suggest that the Mountain View, CA-based biotech ($VVUS) would be better off making a deal on it as soon as possible with a Big Pharma company.

Like Viagra and Cialis, the treatment works by increasing blood flow. Its marketing edge is getting results for most men in only 15 minutes. But shares of Vivus barely budged on the unsurprising news, with investors less than enthusiastic about Stendra's short-term prospects.

"Does anyone really need another ED drug?" asks Simos Simeonidis, an analyst at Cowen, in a note to investors. "Probably not, but given the large market opportunity and the potentially differentiating faster onset of action, we believe that in the hands of big pharma Stendra is probably worth around $300 million. We remind investors that management's intent is to outlicense/divest Stendra."

Vivus faces a much more important July 17 deadline for an FDA response on Qnexa, which has a solid shot at becoming the first new obesity drug to get an OK in more than a decade. Once again, Vivus is looking at a drug aimed at a mass market; not the kind of field a small company can play in. If it does get an approval, analysts like Simeonidis wonder how they could ever market it successfully. And that makes the ideal outcome here a buyout, giving a Big Pharma company a chance to scoop up the entire company and its products.

Adds Simeonidis: "We believe that Qnexa is a drug with tangible blockbuster potential that should be in the hands of big pharma; with all its problems and issues, this is the one thing big pharma has always done better than anyone: get primary docs to prescribe its products. We believe that Vivus management, which is both competent and sophisticated, should pursue a sale of the company, and they're probably in the process of doing so." 

- here's the company's release
- here's the story from The Wall Street Journal