As mentioned in a recent post, VIVUS, Inc. (NASDAQ:VVUS) is an emerging pharmaceutical company dedicated to the development and commercialization of novel therapeutics to restore sexual function in women and men. The Company’s current product pipeline includes four investigational products in late stage clinical development — each of which targets an estimated existing or potential market in excess of $1 billion annually:
1) Menopausal Vasomotor Symptoms – Evamist
Vasomotor symptoms such as hot flashes and vaginal atrophy are reported to be among the most common medical complaints of women going through menopause. Each year an estimated 1.5 million women in the United States enter menopause. The cause of vasomotor symptoms is related to a decrease in estrogen production by the ovaries that accompanies menopause. As a result, temperature regulation is altered, resulting in increased vasodilatation of skin blood vessels and feelings of hot flashes and sweating.
When lifestyle changes and nonprescription approaches do not provide the desired relief, prescription options are available. Hormonal approaches, primarily systemic estrogen therapy and estradiol products are generally considered to be highly effective treatments for menopausal vasomotor symptoms. The current U.S. market for estrogen products is estimated to be approximately $1.4 billion in annual sales and the European market is estimated to be equally substantial.
Premarin, an oral preparation of conjugated estrogens (made from pregnant mares’ urine), is the most widely prescribed estrogen therapy in the United States. In 2004, the National Institutes of Health terminated a long-term, large-scale study that evaluated the effects of Premarin. This study, called the Women’s Health Initiative [WHI], demonstrated an increase in the number of strokes and deep vein thromboses in women receiving Premarin as compared to placebo. This controversial finding may be explained by previously published studies, which showed that when given orally, conjugated equine estrogens are associated with potentially deleterious changes in triglycerides, inflammatory mediators, and certain clotting factors. Some researchers believe that these changes may be the result of the liver’s metabolism of oral conjugated equine estrogens. [ed note. The main problem with the WHI, skeptics say, was that the average age of hormone trial participants was about 63. By that time, critics argue, atherosclerosis has too big of a head start on estrogen.]
In contrast to orally administered conjugated estrogens, the use of transdermal estradiol, which avoids hepatic metabolism, has been shown in studies to result in little or no significant changes in triglycerides, inflammatory mediators or clotting factors. Therefore, VIVUS believes transdermal estradiol may offer a safer means of treating vasomotor symptoms associated with menopause.
Evamist is VIVUS' patented estradiol spray being developed for the treatment of vasomotor symptoms associated with menopause. Evamist uses a proprietary, metered-dose transdermal spray, or MDTS, applicator that delivers a precise amount of estradiol to the skin. VIVUS believes that the MDTS technology has significant advantages over patches, creams and gels (such as Estraderm, Vivelle, Alora, and Climara patches; Estrace and Premarin creams; Estrogel and Bio-E-Gel). The applied dose dries in approximately 60 seconds. It is not messy. It is easy to apply and becomes invisible.
In December 2004, VIVUS initiated its Phase 3 study of Evamist in the United States to evaluate its safety and efficacy in menopausal women suffering from vasomotor symptoms. The Company received a Special Protocol Assessment (NYSE:SPA) from the FDA, which is an official agreement that documents the agreed upon terms and conditions under which VIVUS will conduct and analyze the data from its Phase 3 trial. The primary endpoint is to assess the decrease in the frequency and severity of hot flashes at 4 and 12 weeks of treatment. In September 2005, the Company completed enrollment for this trial. Results from this study are expected in the second quarter of 2006. Assuming favorable study results, corporate anticipates submitting the New Drug Application (NDA) for Evamist mid year 2006.
2) Female Sexual Arousal Disorder – ALISTA
FSAD is defined as the persistent or recurrent inability to attain or maintain sufficient sexual excitement, resulting in personal distress. A survey conducted by the American Medical Association in 1999 indicated that sexual dysfunction affects approximately 43% of women in the United States. Age may not be a significant factor, as women under 20 and over 50 experience problems with arousal, orgasm, and satisfaction. However, there is evidence that the majority of female sexual dysfunction happens after menopause, when hormone production drops and vascular conditions are more common.
Sexual arousal in females involves vasodilatation, or increased genital blood flow, which results in increased clitoral sensation and vaginal lubrication. Reduced vasodilatation and lubrication resulting from atherosclerosis, diabetes and advancing age as well as surgeries such as hysterectomies can deleteriously affect a woman’s ability to become sexually aroused.
ALISTA is a patented formulation of alprostadil that is intended for topical application to the female genitalia prior to sexual activity as an on-demand treatment for FSAD. ALISTA has been designed to increase blood flow in the genital region, allowing for greater sensitivity and sexual arousal. These positive effects have been observed as early as 5 to 15 minutes after application of ALISTA and may last up to two hours.
The active ingredient in ALISTA, alprostadil, is a synthetic version of a naturally occurring molecule found in humans. Alprostadil has been approved by the FDA for other indications, including erectile dysfunction in men. VIVUS believes the combination of alprostadil’s ability to achieve vasodilatation in genital tissues, its long-standing safety record, and short half-life makes it an ideal agent for the treatment of FSAD.
The Company has completed three double blind, randomized, placebo-controlled Phase 2 studies of ALISTA, all of which demonstrated statistically significant increases in arousal and/or satisfying sexual encounters in pre- and post-menopausal women with FSAD. In December 2005, VIVUS announced that the Company had completed enrollment in a multi-center, randomized, double blind, placebo-controlled Phase 2B study [Phase 2B implies a longer duration of dosing to obtain adequate safety data to embark on a Phase 3 study program.] Patients are expected to complete the trial late in 2006.
Albeit there are no FDA-approved medical treatments for FSAD, there is visible competition in the FDA pipeline for ALISTA, including two transdermal testosterone gel products being developing by Cellegy Pharm. (OTC:CLGY). The Company had previously announced results of an interim analysis of a Phase 2 study using Tostrelle (testosterone gel) for the treatment of female sexual dysfunction showing a favorable response rate of 71% versus a placebo response of 13 percent; and, NexMed, Inc. (NEXM) is developing Femprox, an alprostadil cream for the treatment of FSAD.
3) Hypoactive Sexual Desire Disorder – Testosterone MDTS
A diagnosis of Hypoactive Sexual Desire Disorder refers to the condition in which an individual has very low desire for sex although sexual performance may be adequate once the activity has been initiated. This disorder occurs in approximately 20% of the population and occurs in both sexes though more commonly in women.
The administration of testosterone has been associated with an increase in sexual desire in both pre- and post-menopausal women. In addition to the gradual decline in testosterone that accompanies aging and natural menopause, the surgical removal of a woman’s ovaries rapidly results in a decrease of approximately one half of the woman’s testosterone production capability. Hence, HSDD can occur much faster, and at a younger age, in women who have undergone this type of surgically induced menopause. Furthermore, HSDD has been observed in pre-menopausal women with naturally occurring low levels of testosterone.
Testosterone MDTS is Vivus’ patent protected, transdermal product for the treatment of HSDD in women. The active ingredient in Testosterone MDTS is the synthetic version of the testosterone that is present naturally in women and men.
Testosterone MDTS utilizes a proprietary, metered-dose transdermal spray, or MDTS, applicator that delivers a precise amount of testosterone to the skin. The metered spray enables patients to apply a precise dose of testosterone for transdermal delivery. The applied dose dries in approximately 60 seconds and becomes invisible. Studies have demonstrated that the Testosterone MDTS system delivers sustained levels of testosterone in women over a 24-hour period, achieves efficacy in increasing the number of satisfying sexual events, and results in substantially lower rates of application site skin irritation than reported in women using testosterone patches.
Management believes that its Testosterone MDTS product has significant advantages over patches and other transdermal gels that are being developed for this indication. The Testosterone MDTS spray allows for discreet application, unlike patches that are visible and topical gels that are messy. Corporate believes, too, that the patented MDTS delivery technology will prevent others from commercializing competitive therapies utilizing a spray delivery technology.
VIVUS' specified business goal for Testosterone MDTS in 2006 is to continue to work with the FDA to define the Phase 3 protocol design and to request a Special Protocol Assessment from the FDA for the Phase 3 trials.
4) Male Sexual Health – Avanafil
As mentioned in our previous article, this second-generation Viagra is what ‘arouses’ us here at the 10Q Detective. Clinical data suggests that because avanafil is a more selective PDE-5 inhibitor than sildenafil (Viagra), vardenafil (Levitra) and tadalafil (Cialis), the drug may result in a more favorable side effect profile.
While PDE-5 inhibitors currently on the market are often effective in treating ED, newer drugs that possess better specificity for the PDE-5 enzyme may be safer. In addition to PDE-5, there are at least ten other types of PDE enzymes in the human body. Drugs that inhibit more than one of these enzymes can potentially cause significant adverse effects, depending on the enzymes that are affected. In an in vitro study comparing the activity of avanafil, sildenafil, tadalafil and vardenafil against all 11 of the known PDE enzymes, researchers found that avanafil demonstrated the best specificity for PDE-5, with little activity against the other enzymes.
Avanafil possesses a shorter plasma half-life than other PDE-5 inhibitors currently on the market. The plasma half-life of a drug is the amount of time required for 50% of the drug to be removed from the bloodstream. In general, the shorter the half-life, the less potential there is for the drug to interact with other drugs that may also be in the bloodstream. All approved PDE-5 inhibitors are required by the FDA to include warnings against taking nitrates after administration. For example, Cialis’ label warns patients not to take nitrates within 48 hours of administration. Approximately 5.5 million men take nitrates on a regular basis for angina pectoris and another half million annually will experience a heart attack and are potential candidates for emergency nitrate therapy. Sildenafil and vardenafil possess plasma half-lives of approximately four hours, and tadalafil has an extended half-life of 17 to 18 hours. The plasma half-life of avanafil, however, is approximately 90 minutes, which means that it is removed from the bloodstream faster than the other currently available PDE-5 inhibitors.
VIVUS believes that avanafil’s short half-life, high specificity and fast onset of action are ideal characteristics for an on-demand treatment for ED.
Management has set lofty goals for 2006: (1) Complete the remaining preclinical and metabolism studies prior to advancing the compound into Phase 3; (2) Request an SPA for the Phase 3 trial design; (3) Enter into a partnership to fund Phase 3 development.
VIVUS' balance sheet is sound. The Company has a total debt-to-equity ratio of 19.4% and more than $27 million in cash—enough to last the Company through FY 2006.
VIVUS is building a broad portfolio of medicines to restore sexual function in both men and women. The company also offers MUSE for the treatment of erectile dysfunction, which generated worldwide sales of $14.5 million in 2005.
Selling for $3.06 per share, Vivus has an enterprise value of only $114.7 million. This stock is cheap and does not reflect the future value potential of its proprietary drug portfolio— the four leadership products in development are each targeting markets with more than $1 billion in annual sales.
Given the competition the Company faces (in each of its key markets) by better-capitalized companies, we understand why it appears that VIVUS is an underappreciated stock. VIVUS is derived from its latin root, ‘vivo,’ which means “living.” And this stock — like its Latin name implies — is far from moribund.
At this stage, we are not comfortable attempting a valuation analysis. Suffice to say, with modest Street expectations for the Company, news of a partnership deal to fund the development of pivotal Phase 3 trials for avanafil will provide the validation needed to ‘arouse’ investor interest in the share price. We believe that for risk-tolerant, patient investors, VIVUS is an attractive SD-focused company.
[Full Disclosure: The 10Q Detective is a buyer of VIVUS at these prices for our own accounts.]