Why Vivus Is Feeling Its Oats

This obscure fledgling has yet to make a penny. But it's getting plenty of notice on the Street: Shares are moving higher--from 11 in May to 24 lately. What's going on?

VIVUS (VVUS) aims to be No.1 in treating male impotence--and is developing therapies for erectile dysfunction (BW--Oct. 30). To some pros, VIVUS is still modestly priced. "Few biopharmaceutical companies have near-term revenue and cash-flow opportunities like VIVUS," argues Wole Fayemi a money manager at San Francisco's Genesis Merchant Group.

Fayemi figures the stock could hit 35 in six months, after VIVUS has applied for Food & Drug Administration approval of its first product--Medical Urethral System for Erection (MUSE)-Alprostadil. He thinks there's a 90% chance of approval.

VIVUS won plaudits from analysts after its third round of clinical tests in October. For MUSE, an applicator like a straw is inserted into the urethra to deliver Alprostadil in a pellet form that dissolves in seconds. Alprostadil relaxes the cavernous and arteriolar smooth muscle while restricting venous outflow. After 5 to 10 minutes, says Fayemi, the drug produces an erection that lasts for 30 to 60 minutes.

In recent tests, 996 men with severe impotence used MUSE, and about 65% ended up having intercourse at least once during the study, compared with 16% of those on a placebo. More than 60% of patients who used the product, says Fayemi, were able to achieve orgasm. Upjohn has a similar, FDA-approved product, Caverject, which is injected into a man's organ. "MUSE will have a significant marketing advantage because of a perception about the pain involved," notes Fayemi. Moreover, data from several hundred patients show "95% to 100% evaluate MUSE as extremely easy to use, he adds, although there is initial pain involved as well.

Fayemi says 1 million to 2 million men every year seek impotence treatment. If the product gets approval in 1996, he expects revenues of $37.5 million in 1997 and $184 million in 1998, when he figures VIVUS will start making money. Among major institutional investors as of June 30: General Electric Investments, BEA Associates, and J.P. Morgan.

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