Vivus Stock Hinges on FDA Approval of 'Qnexa'; Barron’s (VVUS)

The stock of the biopharmaceutical company Vivus VVUS has been ear marked to be a big gainer or loser subject to the approval of its much anticipated blockbuster weight loss drug ‘Qnexa’. FDA’s Endocrinologic and Metabolic drugs advisory committee is expected to meet on July 15 and October 28 to decide on the approval of ‘Qnexa’. According to Barron’s, this meeting is expected to influence the stock and the options pricing of Vivus with some expecting the price of the stock to move about $7. Derivative strategists at J.P Morgan, Amyn Bharwani and Marko Kolanovic, see a 60% likelihood of the drug being approved at the FDA committee meeting and see the stock with a potential downside of 75% and upside of 100%. They have advised their clients to make the most of call options to mitigate any risk involved and suggested them to buy September expiring calls of Vivus at $12.50 and sell September expiring calls of Vivus at $20. Vivus is a trade which is highly risky, but highly rewarding if the drug has been approved by the regulators. Potential investors would have to consider the downside of the trade in the event of the drug not being approved during the regulatory review.