Monday, March 7, 2011

VIVUS Inc (NASDAQ: VVUS) Q2 2011 Price Target

Recent price: 6.35$
P/E Ratio: -
3 Months Target Price: 9.00$

Company Description
VIVUS is a biopharmaceutical company developing innovative, next-generation therapies to address unmet needs in obesity, sleep apnea, diabetes and sexual health. The company's lead investigational product in clinical development, Qnexa®, has completed phase 3 clinical trials for the treatment of obesity and an NDA has been filed and accepted by the FDA, with an action date of October 28, 2010. Qnexa is also in phase 2 clinical development for the treatment of type 2 diabetes and obstructive sleep apnea. In the area of sexual health, VIVUS is in phase 3 development with avanafil, a PDE5 inhibitor for the treatment of erectile dysfunction. MUSE® (alprostadil), a first generation therapy for the treatment of ED, is already commercially available and generating revenue for VIVUS.

Confidence Margins
Strong resistance $11.48 (+81%)
Light resistance $9.05 (+43%)
Light support $6.08 (-4%)
Strong support $5.28 (-17%)

Coming from a press release dating back in February 21st 2011, this stock fell recently because of an end-of-review FDA meeting where the FDA asked the company for more birth defects data for its experimental obesity drug Qnexa. This will force VIVUS to resubmit for the approval their new investigational drug, QXENA NDA, for the treatment of obesity. This provides a great entry point for the coming quarter.

Entry strategy
For the cautious investor:
Buy the stock for 7.00$ or less.

For the risk-taking trader:
The June 2011 7$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 78$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 9$, or keep it until 11$ if you are more bullish in your own analysis. Keep the stock on watch if it crosses the support line.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 9$. This should provide a satisfactory return if the underlying reaches the target price as the contracts will get in the money.

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