Menarini Rides To Vivus's Aid

| About: Vivus, Inc. (VVUS)

At least First Manhattan cannot now accuse Vivus (NASDAQ:VVUS) of being incapable of doing partnering. The dissident investor is attempting to overthrow the California biotech’s management team, and could find today’s deal licensing avanafil to Menarini to be an annoying short-term distraction.

The alliance, with a low-profile private company, does not cover the U.S., and of course does not concern Vivus’ all-important obesity drug, Qsymia. But at least it will immediately remedy Vivus’ embarrassing non-launch of avanafil even if, for yet another PDE5 inhibitor in a market now with Viagra generics, the ship had sailed long ago.

Avanafil was approved as Stendra in the U.S. last April, and as Spedra in the EU 13 months ago, but given Vivus’ focus on Qsymia has still not been launched (Marqibo and Vascepa join Vitaros in biotech purgatory, November 15, 2012), this now looks like it might change at last.

Launch imminent?

Menarini picks up avanafil rights in the EU and Australasia, in return for €16m ($21m) up front – small change to Vivus, which had first-quarter cash of $150m. Additional milestones expected in the first year, presumably relating to initial launches, amount to €23m, and Menarini will also cover certain fees due to Mitsubishi-Tanabe, avanafil’s originator.

Menarini is apparently committing a 1,350-strong sales force to promote Spedra, though this will surely also detail other drugs in its specialty portfolio. Being a family-owned business Menarini remains somewhat secretive, but it did generate €3.2bn of revenue last year, including from drugs indicated for hypertension, angina, migraine, pain and shingles.

Last month, Menarini expanded an alliance with Gilead Sciences covering the antianginal Ranexa, and a year ago it licensed in Furiex Pharmaceuticals’ premature ejaculation treatment dapoxetine. The Vivus deal bears some resemblance to that covering dapoxetine, a sexual health drug that had sunk almost without trace after being approved, which was picked up for $15m up front plus $20m in regulatory and launch milestones.

For Vivus avanafil had initially served as an important back-up to Qsymia, but it now has limited relevance, being the fourth PDE5 inhibitor to be approved and lacking a distinct advantage; in contrast, Eli Lilly’s Cialis could at least claim a longer half-life than Pfizer’s Viagra, while Bayer’s Levitra had a fast onset.

Without a major advantage avanafil’s best bet might be to compete on price, although margins are already being squeezed in the EU by recent launches of generic versions of Viagra. EvaluatePharma consensus expectations for avanafil are for 2018 revenue in western markets of just $77m, two thirds of this being generated in the U.S., where Pfizer claims that its patent is valid until 2020.


None of this is likely to be of much relevance to First Manhattan, a 10% Vivus holder that is proposing its own slate of directors for election at an annual shareholder meeting on July 15.

First Manhattan’s main contention is that Vivus has still not partnered Qsymia – in contrast to both of its competitors, Arena Pharmaceuticals and Orexigen Therapeutics. This failing, it claims, demonstrates management’s lack of business savvy, and is reflected in the 43% decline in Vivus’s stock since Qsymia’s U.S. approval in April 2012 as the in-house launch flopped.

It looks increasingly as though fear of upsetting unrealistic market expectations had prevented Vivus from signing a deal that would look like undervaluing the asset. Likewise, Menarini’s dapoxetine deal suggests that the Italian company had been interested in avanafil for some time, but it was only with First Manhattan breathing down its neck that Vivus agreed.

As hostilities escalate in the run-up to next week’s crucial meeting, First Manhattan and its advisors will no doubt remind those Vivus investors still sitting on the fence of Qsymia. For Vivus, any deal on avanafil, however underwhelming its terms are, looks better than none.

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