Vivus (VVUS): The stock is holding up!

By Timothy Lutts, Editor of Cabot Stock of the Month
From Cabot Wealth Advisory 6/4/12

The market today stinks.

If you’re a growth-oriented investor, cash is king.

But that doesn’t mean you should ignore the market. In fact, times like this provide an opportunity to discover potential leaders of the next big advance, mainly by noticing which stocks are still being supported—or even better, which stocks are breaking out to new highs.

(Mike Cintolo, editor of Cabot Market Letter, wrote a great piece on this topic in last week’s issue titled “Eggs and Tennis Balls.” For more, click here.)

On my own Watch List of still-strong stocks (which has been getting smaller and smaller), one standout is Vivus (VVUS), which I last mentioned here on March 1, when it was trading at 22. It’s now above 23, which is great, considering the rotten action of the broad market.

So what does Vivus have?

An anti-obesity pill!

It’s called Qnexa.

It’s designed to be taken once a day.

And it’s not on the market yet—but it might be soon.

Now, I’m the last guy on earth who thinks a pill is the answer to America’s obesity epidemic. I find it quite easy to say no to unhealthy food, and find it sad that so many people don’t. But I try to be a realist, and I know the profit motive means that an anti-obesity pill could be a huge moneymaker.

So I’m interested.

Admittedly, back in March, just after the stock had shot up from 12 to 24 after outside advisers voted 20-2 in favor of the FDA’s approving Qnexa, I recommended that you treat this stock cautiously, noting the following risks.

Vivus has been around for a decade, yet has never made a profit.

Half of Qnexa is phentermine, which gained notoriety as half of the Fen-Phen diet pill, which was pulled from the market because of its links to heart disease.

And VVUS (the stock) lacks deep institutional support, which means if FDA approval is not achieved, the stock could fall faster than an anvil following Wily Coyote off a cliff.

Yet the stock is still holding up! And I never argue with a stock.

Furthermore, this past week brought a news event that sheds a little more light on the determination of people in power to address the obesity epidemic—Mayor Bloomberg’s ban on the selling of large soft drinks in New York City restaurants, movie theaters, stadiums and street carts.

I’m not wild about the infringement (admittedly minor) of a personal freedom, but I do think Bloomberg’s action will help. Most important, it tells me how serious Bloomberg (and by extension others) is about this very costly public health problem. And I know the FDA people can’t be immune to those influences.

So I’m a little more interested in Vivus than previously.

For the record, the FDA is expected to vote on Qnexa on July 17. Interestingly, it will vote on a competing drug—Lorcaserin, developed by Arena (ARNA)—on June 27.

I’m going to keep watching; someday, you may even see Vivus in the newsletter I edit, Cabot Stock of the Month. For more information, click here now.