Vivus - Mild Drama Continues

| About: Vivus, Inc. (VVUS)

It is no secret that about a year ago Vivus (NASDAQ:VVUS) was expected to deliver a blockbuster anti-obesity drug, Qsymia, to the market. It is no secret that there are many, including some large institutions that invested into Vivus at levels substantially higher than the equity trades at today. Adding to the list, it is no secret that the launch of Qsymia last September was not at all what investors were looking for. Taking things a step further, it is no secret that even after six months the sales of Qsymia are far from a point where thinking about blockbuster status ($1 billion of sales in a year) is even realistic.

In response to many of these factors, a 10% stakeholder in Vivus, First Manhattan, has been highly critical of current management, has been vocal and public with its opinion, and has nominated a new slate of Board Members for investors to consider.

In response, current management and the current board seem to be taking steps to initiate changes. The latest step has been the addition of two new Board members (bringing the total to 9) as well as a letter to shareholders outlining what the company is doing to make Vivus a success. Ironically, many of the items current management is now promising are the types of things First Manhattan has been seeking. Essentially the shareholder vote on the Board of Directors will be a decision of whether investors trust current management to take the right path or whether a Board hand picked by First Manhattan would be a better steward.

For the average investor, the make-up of the Board may not seem to matter. However, it is important, and current Vivus management seems to be taking a path of correcting the mistakes and re-launching the anti-obesity drug, perhaps with the help of a potential partner. It is of extreme importance for Qsymia to gain traction and bring in revenue. Vivus has several studies to conduct and these studies are quite expensive.

There are many interesting points in the letter shareholders recently received. Read the letter below and note some of the actions, stances, and language used:

Dear Fellow Stockholder:

I am writing to update you regarding our recent accomplishments. Since Qsymia(R) (phentermine and topiramate extended-release) capsules CIV was approved last year, our strategic objectives have been to raise awareness of its benefits among healthcare providers specializing in metabolic disease and to remove barriers to patient access while maintaining full control of this highly valuable asset. We believe that our recent progress has greatly improved our options for maximizing stockholder value and we remain open to considering a broad range of opportunities to achieve this important goal. To this end, we have begun discussions with large pharmaceutical companies to explore how we can work together to increase reach to prescribing physicians and the public. We believe this is critical to maximizing the value of Qsymia.

Over the past seven months since the launch of Qsymia, VIVUS has successfully built the commercial foundation for the medical obesity treatment category and the Qsymia brand. Prior to the Qsymia launch, obesity was not recognized by providers as a medical condition that warranted treatment. Just this month, the American Association of Clinical Endocrinologists (AACE) published treatment algorithms which include the use of pharmacotherapy as a first-line management for overweight and obese patients with prediabetes, diabetes, and other obesity-related co-morbidities. Before we entered the market, reimbursement for branded medication in this category was nonexistent. Because of our extensive effort with payors, we have attained access to Qsymia for 34% of commercial lives in the U.S., and the Veterans Administration (NASDAQ:VA) has recently added Qsymia to its national formulary. This is the fundamental work that needed to be accomplished in order to build a new medical treatment category, and we have made great progress through these efforts.

In mid-April, VIVUS successfully achieved another major milestone in our ongoing commercialization efforts with FDA approval of our Risk Evaluation and Mitigation Strategy (REMS) modification for Qsymia. This approval will allow patients to access Qsymia at certified retail pharmacies nationwide. Since the approval, we have been busy executing the implementation plan to ensure certified retail pharmacy availability of Qsymia by mid-July 2013.

VIVUS has built sustainable momentum with cardiometabolic specialists and accomplished several key milestones that set the foundation for the medical obesity treatment category. One of our most important goals for 2013 is the expansion of both access and reimbursement for Qsymia, the only FDA-approved oral medication shown to achieve more than 10% average weight loss in obese patients.


In 2012, despite a difficult FDA environment, we successfully developed and achieved FDA approvals for Qsymia and STENDRA(TM) (avanafil).

In the case of Qsymia, the approval came with a REMS and Elements To Assure Safe Use including allowing distribution only by certified mail order pharmacies. The recent FDA approval of our amendment and modification to the REMS for Qsymia is an important accomplishment in our ongoing commercialization strategy. This critical milestone indicates broader and improved patient access to Qsymia through thousands of certified retail pharmacies, and significantly simplifies the prescribing and dispensing process for healthcare providers.

Both Qsymia and STENDRA were internally developed and VIVUS has maintained full ownership of these assets, providing us with the flexibility to pursue a full range of options to maximize stockholder value.


Since the approval of Qsymia, our team has hit the ground running. Under the oversight of our Board, VIVUS management has implemented a clear, consistent and ongoing strategy to build a successful Qsymia franchise. We have proactively educated healthcare providers (specifically, cardiometabolic specialists and other key opinion leaders) about obesity as a chronic medical condition requiring treatment and educated these thought leaders about Qsymia's favorable efficacy and safety profile. As of March 31, 2013, we have made nearly 90,000 calls on 25,000 targeted healthcare providers, and since launch we have trained more than 300 physician speakers who have conducted approximately 800 peer-to-peer programs for more than 9,300 participating attendee physicians. We also have conducted continuing medical education programs for over 13,000 healthcare providers. Additionally, as of March 31, 2013, more than 39,500 unique patients have been dispensed a prescription for Qsymia since launch.


Providing retail access to Qsymia through certified pharmacies, the next step in our commercialization strategy, is well underway and is expected to be introduced by mid-July 2013. This phase of our strategy includes the certification of thousands of retail pharmacies, stocking of Qsymia in the distribution system and the continued notification of the product's availability to prescribers and patients. Once completed, healthcare providers will be able to send patients directly to certified pharmacies to fill their Qsymia prescriptions, which will significantly reduce time between provider-patient discussions and initiation of therapy. We believe that the proven clinical efficacy and broader access for patients through certified retail pharmacies will result in significant prescription growth, and will help Qsymia realize its potential to become a top-selling drug.

We have made significant progress in our reimbursement efforts. Qsymia is currently available on the Express Scripts national formulary, and in April 2013, we successfully entered into an agreement with Medco Health Solutions (Medco) whereby Qsymia has been added to the Medco national formulary. Under the agreement, patients covered by Medco will have a co-payment of approximately $50.00 to $60.00 for a monthly prescription of Qsymia. These formulary agreements with the largest Pharmacy Benefit Managers (NYSEMKT:PBM) in the U.S. should significantly reduce out-of-pocket costs for many patients who are prescribed Qsymia and should support continued patient and clinician adoption. The Veterans Administration National PBM recently published a Criteria for Use for Qsymia. Now veterans whose body mass index (BMI) and other health criteria fall within the Qsymia label can access Qsymia for a co-pay of $9.00. Clearly, decision makers at Medco, Express Scripts and the VA have taken significant steps to address medical obesity within their membership.

We also were pleased to see published in Health Economics Review (Feb-2013) a study demonstrating that effective medical treatment providing 10% to 15% weight loss can lead to significant reductions in Medicare spending by reversing or mitigating health consequences such as type 2 diabetes, hypertension and dyslipidemia in obese or overweight patients. These types of data are critical to potential payors and public policy makers as they demonstrate the positive impact that an effective weight loss therapeutic drug can have on healthcare costs. We believe that the medical obesity category is emerging and the drug treatment rate for this indication will increase. For example, the American Association of Clinical Endocrinologists has incorporated obesity management and FDA-approved anti-obesity medications - along with lifestyle modifications - into a new comprehensive treatment algorithm for individuals with prediabetes, diabetes, dyslipidemia and hypertension.


As evidenced by the recent withdrawal of a competitive product's marketing authorization application (MAA) from the centralized procedure in Europe, the regulatory environment in Europe remains challenging for new obesity therapies. For us, Europe remains an important opportunity. We are currently working with our European team of clinical, legal, and regulatory advisors to evaluate and confirm our regulatory strategy in Europe, which may include a near-term filing of an MAA under the decentralized procedure in selected countries. Longer-term, we may utilize interim data from our Cardiovascular Outcomes Trial (CVOT) to file in the remainder of the countries.


VIVUS recently announced that the European Medicines Agency's Committee for Medicinal Products for Human Use (OTCQB:CHMP) adopted a positive opinion recommending the granting of a marketing authorization in the European Union for SPEDRA(TM) (avanafil), for the treatment of erectile dysfunction. This positive opinion is another important milestone in the VIVUS regulatory track record and positions us to participate in a large opportunity in the European market. We remain focused on monetizing the value of the STENDRA asset for stockholders, and we are engaged in partnership talks with several companies for commercialization in the U.S. and international markets.


The VIVUS Board of Directors has played a critical role in our recent progress and in positioning VIVUS with the flexibility to maintain a full range of options to opportunistically maximize value for all of our stockholders. The Board is comprised of proven business leaders who possess a broad range of management, financial, clinical and operational experience, as well as expertise in the biopharmaceutical industry and other areas important to VIVUS. To further accelerate execution of the VIVUS strategy, the Board recently appointed three new highly-qualified independent directors: Robert N. Wilson, chairman of Mevion Medical Systems and former vice chairman of the Board of Directors of Johnson & Johnson; J. Martin Carroll, former senior executive at Boehringer Ingelheim; and Jorge Plutzky, M.D., a leading clinician, researcher and scientist. The VIVUS Board consists of nine highly-qualified directors, seven of whom are independent and four of whom were appointed within the last thirteen months.

Mr. Wilson served in several key roles at Johnson & Johnson, including the Executive Committee from 1983 through 2003 and Vice Chairman of the Board of Directors from 1988 through 2003. Mr. Wilson played a key role in the rapid growth of the pharmaceutical, device and diagnostic businesses within Johnson & Johnson. He is a highly qualified and experienced professional with proven leadership in the healthcare industry and invaluable expertise in pharmaceutical development, brand building and operations.

Mr. Carroll served in a number of top roles at Boehringer Ingelheim including Head, Global Strategy and Development and Managing Director, President and Chief Executive Officer, U.S. from 2003 through 2011. During his tenure, Mr. Carroll was instrumental in guiding the launch of Spiriva and Pradaxa in the U.S. In addition, he was involved in the diabetes market through BI's partnership with Eli Lilly and the launch of Tradjenta, a novel option for treating type 2 diabetes. Mr. Carroll played a major role in working with the BI board of managing directors to develop strategic approaches for a number of BI businesses, focusing mainly on pharmaceuticals.

Dr. Plutzky is Director of the Vascular Disease Prevention Program, which includes the Lipid/Prevention Clinic, in the Cardiovascular Medicine Division at Brigham and Women's Hospital, a role he has held since 1996. He is internationally recognized as an expert in both the basic science and clinical issues related to lipid disorders and cardiometabolic disease. Dr. Plutzky is known particularly for his broad interdisciplinary background that spans endocrinology and cardiology, and for his extensive experience with biotechnology and pharmaceutical concerns, as well as regulatory affairs. He is a member of the scientific advisory boards of the Sarnoff Cardiovascular Research Foundation and Ember Therapeutics, and he has also been elected to the American Society for Clinical Investigation.

We look forward to their contributions as we continue to execute critical steps in our commercialization strategy.

We also recently announced that Richard Fante, former president U.S., CEO North America and regional vice president Americas at AstraZeneca, has agreed to provide advisory services to the Company. Mr. Fante's vast experience and unique perspectives building several primary care products into market-leading brands will be extremely valuable as we seek to expand Qsymia's primary care presence.

You should also be aware that a dissident stockholder, First Manhattan Co., hasnominated six of its own hand-picked representatives to replace existing members of your Company's Board of Directors and effectively seize control of your Company. We strongly believe that a near-complete turnover of the Board at this time would significantly jeopardize the progress we are making toward our strategic objectives and is not in the best interest of stockholders. We intend to vigorously oppose First Manhattan's hostile solicitation and urge you to DISREGARD ALL WHITE PROXY CARDS SENT TO YOU BY FIRST MANHATTAN. We expect to communicate more fully about this in the near future.


VIVUS is at a critical juncture in its development. We believe in the value of our franchises and our ability to successfully commercialize Qsymia.

In connection with the upcoming VIVUS 2013 Annual Meeting of Stockholders, you can expect to hear more from the VIVUS team about the progress we are making in commercializing and developing innovative, next-generation therapies to address unmet needs around the world and how we are driving value for all of our stockholders.

On behalf of the VIVUS Board of Directors and management team, I appreciate the continued interest and support of all of our stockholders.

Leland F. Wilson
Chief Executive Officer

The letter is very forward looking, and essentially is a sales pitch asking investors to place their trust in the current management structure. The company brings up Europe, and the fact that Arena (NASDAQ:ARNA) withdrew its application. Vivus states that it is still exploring possibilities in Europe. Essentially this letter outlines various courses of action, brings up the potential, and asks investors to side with management at the next shareholder meeting.

At this point the drama has been pretty mild and tempered. Should a sparring match develop things could get quite interesting. Right now investors have a very tough decision to make that could severely impact the potential of the company. Both parties seem to be promising good things. It is now a matter of trust and performance. Which side do you trust to deliver the performance desired.

Personally, I think that current management had some shortcomings through FDA approval, the launch, and some of the floundering that seemed to befall Qsymia for a few months. That being said, I do not know whether I am comfortable turning over the reigns to a Wall Street firm that may or may not carry my best interests in mind. The recent actions of current management have been on point. I am not fully convinced that they would remain on point if they are victorious at the Annual Meeting. We have a couple of months to watch both sides of this debate, and the added benefit of being able to see what transpires with Arena as it prepares to launch Belviq. Stay Tuned.

Disclosure: I am long ARNA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I have no position in Vivus