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Vivus Inc. (NASDAQ:VVUS)

Roth 25th Annual Conference Call

March 19, 2013 4:00 PM ET

Executives

Dana Shinbaum – Director of IR

Analysts

Bert Hazlett – Roth Capital Partners

Bert Hazlett

Terrific. Thanks. The next presentation is Vivus. Vivus is having a very exciting time these days. They are in the midst of the launch of their obesity therapy Qsymia. They are also benefiting hopefully over time from their PDE5 inhibitor for erectile dysfunction called Stendra. Presenting Vivus will be Dana Shinbaum and unfortunately you won’t be able to take any questions. So we’ll put that upfront. Dana, thank you very much.

Dana Shinbaum

Thanks very much Bert. Good afternoon and thank you for being here. I also want to thank Roth for inviting us to present at what is an exciting and pivotal time at Vivus. We have the rare and unique opportunity to make a successful transition from being clinical stage organization to a commercial stage organization with all the upside benefits and some of the challenges that entails.

I will be making some forward-looking statements today. I’d encourage you to visit vivus.com, look at our SEC filings which will guide and inform your investment decision and the risks associated with our business.

So today, Vivus is sitting with two recently FDA approved products in very different markets. Qsymia for chronic weight management and Stendra in a more mature market for erectile dysfunction. We will talk about each of these in detail. I’ll spend more of our time today talking about Qsymia.

So this slide presents our prescribing information summary of the indication as well as some of the important safety information. But the interesting thing here within the category it will be class labeling indicated as an adjunct to reduce calorie diet and increased physical activity for chronic weight management which is an important word in adults with an initial BMI of 30 KG or above or obese or 27 KG or above with cardiovascular related co-morbidity.

So we step back for a minute and we think about what the opportunity represents here. And this is really thinking about transforming the obesity market. Building a market that doesn’t currently exist in the form in which we’d like to see it over the future.

Historically, as you are aware, the obesity category could have been very easily painted with this cosmetic diet pill sort of imprimatur. A lot of folks looked at over-the-counter medication, some prescription medications as being this short-term quick fix magic bullet, I get on and it’s going to work and it’s a diet pill and it’s beautiful.

We think about the future today and going forward as treating chronic obesity as a medical condition and trying to transform and change the way the medical community, the reimbursing community, patients and advocates et cetera think about this disease, think about how we need to intervene for folks who are suffering from a chronic indication for which they really until now has been no good solution.

As you know, historically, folks have thought about obesity meds in terms of short-term therapy. We think about it as folks needing to be on therapy for as long as it requires to reach their own treatment goals, working with their doctors and being on until they reach that body weight that they are aiming for.

And finally from the perspective of reimbursement and access to drugs. So, the federal government, most insurance plans, think about obesity, the way they may have thought about smoking cessation a number of years ago, we are not covering that. And what Vivus is trying to do is change that mindset and aiming at the reimbursing community to have these drugs including Qsymia specifically reimbursed as a matter of course.

So it might be counterintuitive to think about, well, why do we need to build a franchise in a market that is so large, so enormous and so prevalent. But there are no getting around the fact with any drug launch, certain key steps are required in order to build the franchise and build acceptance for your agent.

So, Vivus currently with our commercial team and all of our advisors and consultants are in the process of educating our core prescribing audience getting to the key opinion leaders who based on their clinical program, their clinical profile, their prescribing profile can should ought to be interested in prescribing for a new obesity medication.

And this is our core 25,000 or so key opinion leading physicians who are out there in the community treating obesity and are looking for better results and they’ve been able to achieve currently.

The next step of course is to aim at the reimbursing audience that we have talked about, broadening reimbursement and changing the mindset and this takes time visiting with the pharmacy and therapeutics on decision-makers with the major plans, PBNs, employer health groups, sharing with them our clinical data, our pharmacoeconomic data and having them make the right decision to be thinking about how are they going to treat obesity in the future. How are they going to think about perhaps reimbursing for this drug as a matter of course?

As you may be aware, we are currently under relatively restricted REMS which requires us to be distributing Qsymia only by a mail order, certified mail order network that we’ve built. We are aiming to expand and modify that program with the potential approval by FDA to allow for distribution via retail channel. We are going to talk a little bit about that.

And then finally, once all of these pieces are in place and we have established our franchise, then we believe it will be time to reach out and touch potential patients in the direct way in the direct-to-consumer campaign. The nature of which we will talk about in a second and also expand our commercial footprint.

There are number of key metrics that we have shared with the community over time. The most recent four-week rolling prescriptions that were dispensed for the period ending February 15 of this year was about 17400. We talked about this during our year end call. We’ve seen steady growth in building this franchise and we look to be accelerating this in the future.

We’ve also seen a steady growth in the number of patients. One of the advantages of our REMS system is that we do have the ability to track specific patients over time. We have confirmed that we have cumulative number of patients approaching 27,000 through that rolling four week period ending February 15. So these are folks for whom Qsymia has to be prescribed to-date.

And again we look to be accelerating this as well. We talk a lot about the reimbursers and the decision-makers at the P&T committees. Some of the major decision-makers that drive the leading-edge as found in this category are the pharmacy benefit management companies.

And as you know, back in December we announced that Express Scripts had made the decision to add Qsymia to its National Formulary as a standard benefit. As you know, ESI covers approximately 26.3 million lives in the United States. Qsymia is currently on the National Formulary at a tier-3 with a prior authorization.

So essentially, physicians will be required to document that a patients has failed intensive lifestyle modification diet and exercise intervention and a short course of center mean. With this coverage, a covered life will be out-of-pocket approximately $50 to $60 per month as a standard co-pay.

So this was an important transition. At the time prior to the acceptance on to this formulary, there wasn’t a reimbursement. Plans were not really looking at this and now they are really starting to. We are currently sitting with no fewer than 25 requests for our AMCP.CA that depicts and presents our pharmacoeconomic and our clinical data in the manner in which P&T committees want to see these numbers to figure out what’s the impact going to be on the lives that we are covering in our plan.

We are all familiar with the statistics around this market. The epidemic and the staggering costs of obesity in the United States, the increases in all-cause mortality, the association with mortality related cardiovascular disease, cancer, diabetes and alike. The increase in fatal heart disease events and again, it’s staggering and mind-boggling to think about the magnitude of this challenge that’s facing our healthcare system.

We are in upwards of two-thirds to the CDC, two-thirds of adults age 20 and above are categorized as either overweight or obese. And of course a highly prevalent condition in Europe as well. And again, we talk about the costs and it just boggles the mind what’s being spent.

This slide presents our clinical data in the EQUIP and CONQUER studies day one and two which are in our label that formed the basis of our approval.

You’ve seen these data in the past and I do want to focus very specifically for a second on the challenge that we are undertaking currently. So on the left hand side of each of these curves, we are trying to do currently is engineer successful patient trial. Because what you can see is that very early on, patients are starting to see changes in their physiology.

And if you look at the left hand side that within eight weeks on therapy folks are able to see in fact remarkable changes. So, on the left in the EQUIP study, our Qsymia low dose was actually able to deliver nearly 7% loss in body weight translating into approximately 18 pounds in the completed analysis. Ramping up on the top dose to an excess of 14% body weight for 2.45 and translating to 37 pounds.

On the right, the CONQUER study, looking at a recommended dose, delivering nearly 10% weight loss and on top dose, in excess of 12% weight loss over 56 weeks. This is the kind of magnitude of effect that prescribers are looking for. This hits the sweet spot. There was nothing out there prior to Qsymia that could deliver double-digit weight loss without resorting kind of radical intervention that may have been currently thought about in terms of surgery, bariatric surgery lap banding, things of this nature.

So finally we have an agent that can deliver double-digit weight loss and a tolerable regimen that never been able been done before. So the other piece that we are going to return to is this theme of consistency effect not just magnitude of effect on this slide EQUIP and CONQUER, but consistency of the spec within our label.

There is a very specific treatment algorithm. The label states move patients from starting dose at14 days to recommended dose 12 weeks. The patient has not achieved at least 3% loss in body weight, prescriber can either make a decision to discontinue therapy or titrate up to top dose. Titrating up to top dose means, keeping them on for a total to eight weeks and if they haven’t experienced 5% or greater body weight loss, they are probably a non-respondent and should discontinue therapy.

So a reimburser, the decision-maker on a P&T committee is going to say what kind of success rate can I expect within my patient population. These data show – our clinical data show that at the 3% threshold they can expect to see nearly 84% success and at the 5% threshold after 28 weeks nearly 90% success which is remarkable and it’s powerful and it’s compelling.

And the feedback that we’ve received from P&T committees is, okay we get it. We understand. So we return to the theme of building the franchise and where are we? We look at broadening reimbursement. We look at expanding to retail pharmacies to a potential modification of our REMS program to allow distribution at retail.

And then again as we say, ultimately we want to expand our commercial footprint to widely audience or prescribers to additional primary care physicians and also reach out and touch in a direct-to-consumer fashion those consumers that are looking for and waiting for a medication of this type. These are folks for whom nothing has worked. They’ve tried diet and exercise, they’ve tried short-term therapy, they tried all kinds of programs, nothing works and it’s time for a change.

We believe that this is an efficacy-driven mark we’ve seen time and time again. At the end of the day, we can deliver a tolerable profile, a tolerable regimen, you have to deliver the punch on efficacy and we believe Qsymia does that.

So day-to-day, what are the challenges? What is our task? What is our job? We are, from a tactical perspective to our high quality commercial team we have accomplished a number of key milestones here. We have delivered to approximately 9400 participants of full on CME program which is balanced information, again, changing the thought process on how we approach chronic obesity.

Our commercial team through our 150 sales representatives have delivered in excess of 83,000 details on our core prescribing audience to-date. We have actually – we talk about engineering successful trial and having folks experience that early change, the early to tiny changes in appetite and a reduction in cravings for food.

So we are trying to make sure that folks had easy – as easy as possible access. One of the key challenges early on has been the out-of-pocket cost. So, we initiated the Get Started Program back in November which provides 14 days for free to get folks on to medication.

We recently in the last several weeks introduced the Qsymia Save Now program, which caps the first 30-days out-of-pocket of recommended dose of $75.

But once again, Vivus is putting its money where its noticed. We are trying to engineer successful patient trial, because we believe once we get folks on therapy, they are going to experience the early satiety they are going to see changes in their physiology. They are going to start seeing early success which will build upon itself and we will have folks adhering to their therapy.

Positive feedback to the prescribing office will be a very good thing. And ultimately of course, as you see here, we’d like to expand to additional pharmacy benefit managers, additional insurance plans calling on employer health groups to have them think about in a large factory setting for example, where there is lot of repetitive motion work, lot of chronic joint pain due to overweight and obese, a medication that can reduce absenteeism and lower healthcare cost for that plan.

They are not doing it for their own altruistic reasons they are doing it because it’s going to save the money elsewhere in their system. And again, based on the pharmacoeconomic data and our clinical program, we believe we can deliver that for them.

As I mentioned, we submitted back in October to FDA per their request for modification to our REMS that will allow us to expand and distribute to a greater range our pharmacies. I will talk about that in just one second. We also currently have the direct-to-patient campaign in doctors’ offices which consists of a loss deck and some additional patient education materials encouraging patients to initiate a discussion with their doctor with the theme ask your physician what 10% weight loss can do for you.

And lot of times this can ease that initial reluctance that a physician might have in bringing up the subject of weight loss with their patients. So in our label, as you know, FDA had communicated back to us some very specific – we request you submit a REMS modification that will facilitate dispensing with your broader range of pharmacies as in our approval letter.

We submitted a set of plans and programs that will allow the same risk information to be communicated via pharmacies to the patient, this means that, with every prescription, there will be also contained a medication guided patient brochure and at the pharmacy they will capture the prescribing information, report it back to Vivus, so that we can get messages out to physicians with whom we have not had a prior relationship. They haven’t been visited by a sales representative. We want to deliver to them appropriate clinical and risk information.

We also have a voluntary online program for doctors to certify themselves and be educated about Qsymia. And again, what FDA wants to be convinced of is that we have the ability to trace track, dispense properly, provide appropriate information to all patients and capture prescribing information.

Typically, this requires approximately a six months review at FDA. This is typical historically they like to get these programs reviewed inside of that timeframe. Again, our goal, the REMS is not going to go away, as you know. The REMS requirement will remain in place, but the goal of the program is to be able at least initially to dispense Qsymia at retail through CVS, Walgreens and Wal-Mart stores.

The certification that will be required at the pharmacy level will happen through the corporate channels, the headquarters of CVS, Walgreens and Wal-Mart and they will be responsible for disseminating that throughout their pharmacy system. What’s required of course is that each pharmacy location is in fact certified and understands how to work with Qsymia.

We believe we can get this done and we do expect to hear from FDA sometime in April in the April timeframe. We speak about expanding the prescriber base. We know that this number has grown. We are currently approaching 12,000 unique prescribers within our database. This again is a credit to our commercial team and they’ve done a very good job.

So what’s our vision? Our vision for the brand is that obesity treatment becomes mainstream that of course is going to be reimbursed. That’s widely accepted by primary care physicians and that there will be substantial buzz out in the marketplace among consumers.

We believe we have the product of choice due to double-digit efficacy and the tolerability profile and the improvements in co-morbidities.

With that I want to turn very briefly to our other asset which is Stendra. This is an asset that we will be monetizing. It’s a PDE5 well differentiated in terms of onset of action. This is an asset that we will be monetizing through a series of partnerships territorially around the world. It’s approved in the US last year. We are anticipating a second quarter 2013 decision from CHMP and partnering discussions are underway currently.

So the investment thesis of course, we have two FDA approved products. We are making significant progress building the Qsymia franchise and the brand. We are educating our core prescribing audience for expanding reimbursement. We look to the improving access for patients through REMS modification and we look forward to growing Qsymia prescriptions and keeping you all updated on our progress. So, stay tuned. Good things to come and thank you for listening. I appreciate it.

Bert Hazlett

Thank you.

Question-and-Answer Session

[No Q&A session for this event]

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