Vivus Opts for Royalty Financing


Vivus, Inc. (VVUS) recently announced that it has entered into an agreement with a Pharmakon Advisors managed investment fund for a $110 million non-equity financing. Vivus will initially draw $50 million for the commercialization of its obesity drug, Qsymia and other corporate activities.

As per the terms of the agreement, Vivus has an option to draw an additional $60 million by the end of 2013. Vivus will start repaying the debt from the second quarter of 2014 through second quarter of 2018. The quarterly payments will be based on a capped percentage on net sales of Qsymia subject to the maximum of a scheduled amount.

We note that Qsymia was approved by the US Food and Drug Administration (:FDA) in Jul 2012. The FDA cleared Qsymia as an adjunct to a healthy diet (low on calories) and increased physical activity for chronic weight management in obese (Body Mass Index, or BMI - 30 or more) or overweight (BMI - 27 or more) adults suffering from at least one weight-related co-morbid condition. However, the CHMP maintains a negative opinion on the marketing authorization application (MAA) for Qsymia.

Vivus is also evaluating Qsymia for the treatment of type II diabetes (phase II) and obstructive sleep apnea (phase II).

We remind investors that apart from Qsymia, another weight-loss drug, Arena Pharmaceuticals, Inc.’s (ARNA) Belviq, also received approval in the US last year. Orexigen Therapeutics, Inc. (OREX) is also developing a candidate, Contrave, targeting the lucrative obesity market.

Vivus, a biopharmaceutical company, currently carries a Zacks Rank #3 (Hold). Biopharma companies that currently look more attractive include Cytokinetics, Inc. (CYTK) with a Zacks Rank #1 (Strong Buy).

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