Replies to post #137750 on Biotech Values

[biomaven0]

much of the value of FDA approval may be baked in

How can this possibly be correct? I lose all respect for an analyst when they make statements like this - just run some pessimistic numbers and see what I mean.

Peter

[mcbio]

Matt Herper’s (cautious) take on VVUS:

www.forbes.com/sites/matthewherper/2012/02/23/use-caution-after-vivus-victory
Quote:
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One other factor should make investors nervous: much of the value of FDA approval may be baked in. It’s not impossible, in the wake of a short squeeze, that Vivus stock is closing in on what will be its peak. FDA approvals, though great news, make bad stock catalysts because they are often widely expected. Approval results in a gradual rise in a share price, rejection a sharp drop. I’m not saying to short Vivus, but I do hope fans of the company are taking some profits today.

I'm inclined to respectfully disagree that much of the value of FDA approval may be baked in. Given how big this market is and the fact that VVUS owns all rights to Qnexa, I'm inclined to agree with Peter that the stock is probably cheap provided one is confident of Qnexa approval and a reasonable REMS. The fact that their ED drug won't face a generic market anytime soon adds another realistic shot on goal I think.

All this said, I'll probably just keep an eye on the stock for now given that I'm sure VVUS will take advantage of the pop with an offering and there's likely to be some profit taking anyways. A position in VVUS would violate my core biotech investing principles as well (buying out-of-favor biotechs where I think there is a chance for a rebound over time as opposed to chasing biotechs hitting new highs in the face of big binary events in the nearer-term). Risk-reward does seem interesting to me now, though.