Is a VIVUS Buyout Still on the Table? And if So, by Whom?

The pieces of the puzzle are starting to fall into place for VIVUS (NASDAQ: VVUS) and its potential blockbuster anti-obesity drug, Qsymia.

The drug, which was approved by the Food and Drug Administration in July just weeks after Arena Pharmaceuticals' (NASDAQ: ARNA) Belviq, demonstrated higher efficacy in terms of weight loss relative to Belviq in late-stage trials and beat Belviq to pharmacy shelves, giving it first-in-class status. It also has very little worry about regarding Orexigen Therapeutics(NASDAQ: OREX), whose anti-obesity candidate Contrave is still a minimum of two, perhaps three, years away from hitting the market, assuming FDA approval.

The distribution channel is also beginning to fall into place with VIVUS this week signing a distribution deal with Express Scripts(NASDAQ: ESRX). This adds to deals already in place with CVS Caremark and Walgreen, which allow the drug to be ordered by mail.

However, VIVUS isn't a lock for success. The usually more accommodating European Medicines Agency seems unlikely to approve Qsymia in the EU. This isn't a major blow to VIVUS as the majority of its target population is located in the United States, but it's nonetheless another missed opportunity. It's also worth noting that unlike Arena, which has partnered up with Eisai to help it market Belviq, VIVUS is going it alone.

So the question beckons: Is VIVUS still a buyout candidate?

I'd say the potential for a deal is still definitely on the table, but it's nowhere near a sure thing with European approval no longer in the cards. Since VIVUS has no marketing deals in place, a buying company wouldn't have to worry about the messy situation of splitting royalties with another interested party, so that's a plus.

Another factor that may play into this is how VIVUS handles a launch by itself. A poor launch could indicate a sense of urgency by VIVUS to seek a marketing partner, or potentially a buyout, which could bring the asking price down and increase outside interest in the company. Conversely, a successful independent launch would probably nullify the idea of a buyout unless there was a hefty premium involved.

That leads me to my next question: Which company would be the buyer?

In February, an article by Bloomberg insinuated that Johnson & Johnson, Merck, and Bristol-Myers Squibb(NYSE: BMY) represented the three big pharmaceutical companies most likely to purchase VIVUS. Since then, Johnson & Johnson completed a $19.7 billion acquisition of medical device maker Synthes, which advances the company's focus on medical devices. Merck has about 11% of its sales stream at risk from the loss of asthma drug Singulair, but relative to its peers, Merck's pipeline is still healthy.

It's actually Bristol-Myers Squibb that appears to me to be the logical buyer. Bristol's venture into the hepatitis-C space by attempting to create its own HCV-focused drugs and through acquiring Inhibitex both ended in failure. Focusing on its "string of pearls" business plan, which involves focusing on acquiring game-changing drugs to fuel its pipeline, a VIVUS purchase could make sense.

Let's not forget that Bristol-Myers and AstraZenecateamed up three months ago to purchase Amylin Pharmaceuticals for $7 billion, including debt, in order to get a hold of Amylin's pipeline of diabetes drugs that also have a positive side effect in most cases of weight loss. Bristol-Myers is desperately struggling to acquire drugs with blockbuster potential, and purchasing Qsymia could be a win-win for both parties.

What's your take on the potential for a VIVUS buyout? Weigh in with your thoughts in the comments section below.

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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Express Scripts and Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Express Scripts and Johnson & Johnson, as well as creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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