Consider This... Will VIVUS Raise New Capital Now? (VVUS)

VIVUS, Inc. (NASDAQ: VVUS) is not worth recovering the great news for the company in Qnexa treating obesity.  Shares have at one point doubled earlier today.  Just because an FDA panel recommends drug approval it is not an assurance that marketing approval will be given nor that the formal decision will not come with a “complete response” asking for more data.  Here is the big question to ask… Will VIVUS now go out and raise capital? 

The company has thousands of shareholders who have owned this stock at prices higher and lower and these shareholders were all made whole last night.  VIVUS has been at the approval process for Qnexa for about ten years and the company has spent probably hundreds of millions of dollars getting it to approval.

The company had just over $155 million in cash and short-term investments as of September 30, 2011.  The tangible assets in total were listed as $150.475 million and the company has no long-term debt.

Our take is that this drug’s attack against obesity is a very important and unmet target in the world of pharmaceuticals.  April 17, 2012 is the formal “approval decision date” and April expiration for stock options is April 20.  Having $150 million in liquidity may be enough to market the drug, but maybe the company wants a much better cushion and maybe it wants to expand its pipeline.  VIVUS will also likely need to fund a post-approval safety study if this is approved.  After all, it is not as though this one has not had side-effects.

Pretend you are a CEO or a CFO of a public company for a moment… If you have been at this for this long and spent countless dollars and your stock doubled to the point that no one who has bought your company stock going back to the 1990s was now up massively, wouldn’t you go raise capital?

Yahoo! Finance has a market capitalization rate of $1.76 billion with shares up 88% at $19.85 and the stock was up more than 100% earlier today.  VIVUS will have more loyalty to the shareholders who have owned the stock for every day up until today more than it will for the new shareholders who may be down a few percent if the company files to raise new capital.

Our take… Look for a filing to come any day.  It would only make sense.

The last S-3ASR prospectus statement was dated on September 16, 2009.

JON C. OGG