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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-23490
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VIVUS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 94-3136179
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification Number)
545 MIDDLEFIELD ROAD, SUITE 200 MENLO PARK, CA 94025
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(Address of Principal Executive Offices) (Zip Code)
(415) 325-5511
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(Registrant's Telephone Number, Including Area Code
N/A
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [ X ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
At August 8, 1996, 16,162,434 shares of common stock were outstanding.
Exhibit index on page 28
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VIVUS, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
ASSETS
JUNE 30, DECEMBER 31,
1996 1995
---------- ---------
(unaudited)
Current assets:
Cash and cash equivalents $ 796 $ 973
Available-for-sale securities 53,105 21,136
Interest and other receivables 618 449
Prepaid expenses and other 352 141
--------- ---------
Total current assets 54,871 22,699
Property, net 4,675 3,888
Available-for-sale securities, non-current 31,862 17,415
Other -- 47
--------- ---------
Total Assets $ 91,408 $ 44,049
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 716 $ 353
Accrued and other liabilities 3,269 2,515
--------- ---------
Total current liabilities 3,985 2,868
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Stockholders' equity:
Preferred stock; no par value; shares authorized -
5,000,000 at June 30, 1996 and December 31, 1995;
shares outstanding - none at June 30, 1996 and
December 31, 1995 -- --
Common stock; $.001 par value; shares authorized -
30,000,000 at June 30, 1996 and December 31, 1995;
shares outstanding - June 30, 1996, 15,820,664;
December 31, 1995, 13,475,570 16 13
Paid in capital 147,686 91,472
Unrealized gain (loss) on securities (103) 114
Deferred compensation (570) (791)
Accumulated deficit (59,606) (49,627)
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Total stockholders' equity 87,423 41,181
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Total Liabilities and Stockholders' Equity $ 91,408 $ 44,049
========= =========
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VIVUS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)
PERIOD FROM
APRIL 16, 1991
(INCEPTION) THREE MONTHS ENDED SIX MONTHS ENDED
THROUGH JUNE 30, JUNE 30,
JUNE 30, ------------------------ ------------------------
1996 1996 1995 1996 1995
-------- -------- -------- -------- --------
Revenue $ 10,000 $ 10,000 $ -- $ 10,000 $ --
Operating expenses:
Research and development 63,030 12,187 6,103 17,545 11,216
General and administrative 12,658 2,004 1,029 3,383 1,926
-------- -------- -------- -------- --------
Total operating expenses 75,688 14,191 7,132 20,928 13,142
-------- -------- -------- -------- --------
Loss from operations (65,688) (4,191) (7,132) (10,928) (13,142)
Interest income 6,082 446 719 949 1,272
-------- -------- -------- -------- --------
Net Loss $(59,606) $ (3,745) $ (6,413) $ (9,979) $(11,870)
======== ======== ======== ======== ========
Net loss per common and
equivalent share $ (0.26) $ (0.47) $ (0.71) $ (0.92)
======== ======== ======== ========
Shares used in the computation of
net loss per share 14,224 13,529 14,100 12,925
======== ======== ======== ========
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VIVUS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
PERIOD FROM
APRIL 16, 1991
(INCEPTION) THREE MONTHS ENDED SIX MONTHS ENDED
THROUGH JUNE 30, JUNE 30,
JUNE 30, ---------------------- -----------------------
1996 1996 1995 1996 1995
--------- --------- --------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (59,606) $ (3,745) $ (6,413) $ (9,979) $ (11,870)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 1,627 239 130 477 249
Amortization of deferred compensation 1,205 111 111 221 222
Issuance of common stock for patent rights 6,683 5,821 -- 5,821 --
Issuance of preferred stock for services 150 -- -- -- --
Changes in assets and liabilities:
Interest and other receivables (618) (102) (148) (169) (226)
Prepaid expenses and other (352) (131) (50) (211) (82)
Accounts payable 716 368 8 363 (464)
Accrued and other liabilities 3,269 118 (952) 754 659
--------- --------- --------- --------- ---------
Net cash used for operating activities (46,926) 2,679 (7,314) (2,723) (11,512)
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property purchases (6,299) (765) (976) (1,264) (1,950)
Securities purchases (370,539) (64,424) (34,885) (69,402) (70,227)
Proceeds from sale/maturity of securities 285,469 12,247 22,104 22,769 62,682
Other assets -- -- (1) 47 (5)
--------- --------- --------- --------- ---------
Net cash used for investing activities (91,369) (52,942) (13,758) (47,850) (9,500)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of preferred stock 34,252 -- -- -- --
Sale of common stock 103,862 49,798 22,377 49,798 22,377
Exercise of common stock options 652 231 3 494 51
Purchase of common stock through employee
stock purchase plan 326 104 80 104 80
Repurchase of common stock (1) -- -- -- --
--------- --------- --------- --------- ---------
Net cash provided by financing activities 139,091 50,133 22,460 50,396 22,508
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 796 (130) 1,388 (177) 1,496
CASH AND CASH EQUIVALENTS:
Beginning of period -- 926 2,145 973 2,037
--------- --------- --------- --------- ---------
End of period $ 796 $ 796 $ 3,533 $ 796 $ 3,533
========= ========= ========= ========= =========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Deferred compensation recorded relating to
stock option grants $ 1,774 $ -- $ -- $ -- $ --
Unrealized gain (loss) on securities (103) (56) 352 (217) 610
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VIVUS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Rule 10 of Regulations S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and six month
periods ended June 30, 1996 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1996. For further information,
refer to the financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
2. NET LOSS PER SHARE
Net loss per common and equivalent share is based on the weighted
average number of common and equivalent shares outstanding during the period.
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No. 83,
common equivalent shares include all common shares issued and options and
warrants to purchase shares of common stock granted by the Company at a price
less than the initial public offering price during the period January 1, 1993
through the initial public offering date (using the treasury stock method for
options and warrants and based on the public offering price of $14.00 per share)
as if they were outstanding for all periods presented prior to the initial
public offering. Options granted by the Company prior to January 1, 1993 have
been excluded in the calculation of common and common equivalent shares
outstanding since they would serve to reduce the net loss per share.
3. DELAWARE REINCORPORATION
The Company was incorporated on April 16, 1991 in California and
reincorporated in Delaware on May 24, 1996. The classification of the capital
accounts reflects the effect of the reincorporation for all periods presented.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DESCRIPTION OF BUSINESS
Since its inception in April 1991, VIVUS, Inc. (the "Company"), a
development stage company, has focused on the design and development of products
for the treatment of erectile dysfunction. The Company has devoted substantially
all its efforts to research and development conducted on its behalf and through
collaboration with clinical institutions. The Company's primary product, MUSE(R)
(alprostadil), has moved from preclinical development to regulatory application
phase over the last three years. The Company has generated a cumulative net loss
of $59,606,000 for the period from its inception through June 30, 1996. The
ability of the Company to successfully develop, obtain regulatory approval for,
manufacture, and market MUSE (alprostadil) is dependent on many factors. The
Company is subject to a number of risks including the approval of its product,
its ability to scale-up its manufacturing capabilities and secure adequate
supply of raw materials, its ability to successfully market, distribute and sell
its product, and intense competition. Accordingly, there can be no assurance of
the Company's future success.
Spending increased from 1993 through the period ended June 30, 1996
largely as a result of expanded operational activities related to the Company's
Phase II and III clinical trials, preparing the MUSE (alprostadil) New Drug
Application ("NDA") for the FDA and expansion of its manufacturing capabilities.
Spending levels will continue to increase during 1996 as the Company further
develops its commercial manufacturing, marketing and sales capabilities.
In May 1996, the Company issued 200,000 shares of common stock to Alza
in order for the Company to maintain exclusive rights to certain patents and
patent applications beyond 1998. In connection with this issuance, the Company
recorded a charge of approximately $5,900,000 to the consolidated statement of
operations.
To date, the Company has received no revenue from product sales. In May
1996, the Company completed a marketing agreement with Astra AB ("Astra") to
purchase the Company's products for resale in Europe, South America, Central
America, Australia and New Zealand. As consideration for execution of the
marketing agreement, Astra paid the Company $10 million in June 1996. The
Company will be paid up to an additional $20 million in the event it achieves
certain milestones. The Company does not anticipate significant revenue from
operations for at least two years. The Company does not have any experience in
manufacturing or selling MUSE (alprostadil) in commercial quantities. Whether
the Company can successfully manage the transition to a large scale commercial
enterprise will depend upon the successful further development of its
manufacturing capability and its distribution network and attainment of domestic
and foreign regulatory approvals for MUSE
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(alprostadil) and other potential products. Failure to make such a transition
successfully would have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company anticipates that it will continue to incur losses over at
least the next twelve months as it expands its operations, prepares for the
anticipated commercial introduction of MUSE (alprostadil) and expands its
research and development activities with regard to other products. To achieve
profitability, the Company must obtain the necessary regulatory approvals and
successfully manufacture, introduce and market MUSE (alprostadil). The time
required to reach profitability is highly uncertain and there can be no
assurance that the Company will be able to obtain profitability on a sustained
basis, if at all.
The Company currently relies on a single therapeutic approach to treat
erectile dysfunction, the transurethral system for erection. The Company
recently completed Phase III clinical trials and submitted an NDA to the FDA for
its anticipated first product, MUSE (alprostadil). While the Company's NDA was
accepted for priority review by the FDA, there can be no assurance that FDA
approval will be granted on a timely basis, if at all, or if granted, that such
approval will not contain significant limitations in the form of warnings,
precautions or contraindications with respect to condition of use. Failure to
obtain approval of the Company's NDA for MUSE (alprostadil) on a timely basis,
if at all, or if granted, the failure to successfully commercialize MUSE
(alprostadil) would have a material adverse effect on the Company.
In April 1994, the Company successfully completed an initial public
offering of 2,473,000 shares of common stock, with net proceeds to the Company
of $31,578,000.
The Company completed a secondary public offering of 1,800,000 shares
of common stock in April 1995. Of the total number of shares offered, 1,670,000
shares were sold by the Company and 130,000 shares were sold by a current
stockholder. Net proceeds to the Company were $22,483,000.
The Company completed a third public offering of 2,000,000 shares of
common stock in June 1996. Net proceeds to the Company were approximately
$49,800,000. In July 1996, the underwriters for this offering exercised their
option to purchase an additional 300,000 shares to cover over-allotments. The
Company received approximately $7,500,000 in net proceeds for these shares.
The second, fourth, fifth and sixth, paragraphs of this Description of
Business section contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1993, as amended, and Section 21E of the
Securities and Exchange Act of 1934, as amended. Actual results could differ
materially from those projected in the forward-looking statements as a result of
the factors set forth in the above mentioned paragraphs and the
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factors set forth in the Risk Factors section of this quarterly report.
RESULTS OF OPERATIONS
Three months Ended June 30, 1996 and 1995, and Six Months Ended June
30, 1996 and 1995
No revenues from product sales have been recorded from inception to
June 30, 1996. As consideration for execution of the Astra marketing agreement,
Astra paid the Company $10 million in June 1996, which the Company recorded as
milestone revenue in the consolidated statement of operations.
For the three months ended June 30, 1996, research and development
expenses were $12,187,000 compared with $6,103,000 for the three months ended
June 30, 1995, an increase of 100%. For the six months ended June 30, 1996,
research and development expenses were $17,545,000 compared with $11,216,000 for
the six months ended June 30, 1995, an increase of 56%. The increase in both
periods was due primarily to the Company issuing 200,000 shares of common stock
to Alza in May 1996 in order for the Company to maintain exclusive rights to
certain patents and patent applications beyond 1998. In connection with this
issuance, the Company recorded a charge of approximately $5,900,000 to the
consolidated statement of operations. The increases were also a result of higher
pre-launch manufacturing and quality assurance expenses. These were partially
offset by lower clinical costs resulting from the completion of the Phase II and
III clinical trials in 1995.
General and administrative expenses for the three months ended June 30,
1996 were $2,004,000 compared with $1,029,000 for the three months ended June
30, 1995, an increase of 95%. General and administrative expenses for the six
months ended June 30, 1996 were $3,383,000 compared with $1,926,000 for the six
months ended June 30, 1995, an increase of 76%. These increases resulted
primarily from hiring additional personnel to support the growth of the
Company's operations, and higher marketing and legal expenses.
Spending levels will continue to increase during 1996 as the Company
further develops its commercial manufacturing, marketing and sales capabilities.
Interest income for the three months ended June 30, 1996 was $446,000
compared with $719,000 for the three months ended June 30, 1995. Interest income
for the six months ended June 30, 1996 was $949,000 compared with $1,272,000 for
the six months ended June 30, 1995. The decreases were primarily the result of
lower average invested cash balances.
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LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed operations primarily from the
sale of preferred and common stock. Through June 30, 1996, VIVUS has raised
$144,912,000. Cash, cash equivalents and securities available-for-sale totaled
$85,763,000 at June 30, 1996 compared with $39,524,000 at December 31, 1995. The
Company maintains its current excess cash balances in a variety of interest
bearing investment-grade financial investments such as U.S. government
securities, corporate debt and certificates of deposit. Principal preservation,
liquidity and safety are the primary investment objectives.
Cash used in operations in the three months ended June 30, 1996 was
$3,142,000 compared with $7,314,000 in the three months ended June 30, 1995. The
decreased use of cash was primarily due to a net loss of $3,745,000 in the three
months ended June 30, 1996 compared with a net loss of $6,413,000 for the same
period in 1995. Cash used in operations in the six months ended June 30, 1996
was $8,544,000 compared with $11,512,000 in the six months ended June 30, 1995.
The decreased use of cash was primarily due to a net loss of $9,979,000 in the
six months ended June 30, 1996 compared with a net loss of $11,870,000 for the
same period in 1995. Cash used for operations is expected to increase in 1996 as
the Company further develops its commercial manufacturing, marketing and sales
capabilities.
Prepaid and other current assets at June 30, 1996 were $970,000
compared with $590,000 at December 31, 1995, an increase of $380,000. This
increase resulted primarily from an increase in interest receivables related to
the Company's investment portfolio and prepaid insurance.
Current liabilities were $3,985,000 at June 30, 1996 compared with
$2,868,000 at December 31, 1995. This increase was primarily due to an increase
in alprostadil purchases in 1996.
Capital expenditures in the three months ended June 30, 1996 were
$765,000 compared with $976,000 for the same period ended June 30, 1995. Capital
expenditures in the six months ended June 30, 1996 were $1,264,000 compared with
$1,950,000 for the same period ended June 30, 1995. Capital expenditures during
the period in 1996 and 1995 consisted primarily of manufacturing and quality
control equipment. Capital expenditures were higher in 1995 due to the
construction of the Company's dedicated manufacturing and testing space within
the Paco Pharmaceutical Services, Inc. ("Paco") facility in Lakewood, New
Jersey. Major capital expenditures over the next two years are likely to
increase as they are expected to include a Company-owned manufacturing facility
in Europe, expansion of its current facility in the United States and
establishing a research and quality control laboratory.
In 1995, the Company implemented an international product distribution
strategy for VIVUS products. Implementation included
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the transfer of international product marketing rights to VIVUS International
Limited in a taxable transaction. The transfer of rights and related allocation
of research and development costs resulted in the current utilization of
$29,467,000 of the Company's net operating loss carryforward.
The Company expects to incur substantial additional costs, including
expenses related to its marketing and sales organization, a second manufacturing
plant and expansion of the Company's existing plant, new product preclinical and
clinical costs, ongoing research and development activities, and general
corporate purposes. The Company anticipates that its existing capital resources
will be sufficient to support the Company's operations through commercial
introduction of MUSE (alprostadil) in the United States and Europe, but may not
be sufficient for the introduction of any additional future products. While the
Company believes its NDA filing was substantially complete, the Company may have
to conduct additional studies or clinical trials in order to obtain regulatory
approval of MUSE (alprostadil). Accordingly, the Company anticipates that it may
be required to issue additional equity or debt securities and may use other
financing sources including, but not limited to, corporate alliances and lease
financings to fund the future development and possible commercial launch of its
products. The sale of additional equity securities can be expected to result in
additional dilution to the Company's stockholders. There can be no assurance
that such funds will be available on terms satisfactory to the Company, or at
all. Failure to obtain adequate funding could cause a delay or cessation of the
Company's product development and marketing efforts and would have a material
adverse effect upon the Company's business, financial condition and results of
operations. The Company's working capital and additional funding requirements
will depend upon numerous factors, including: (i) the ability to obtain and
timing and costs of obtaining regulatory approvals; (ii) the level of resources
that the Company devotes to sales and marketing capabilities; (iii) the level of
resources that the Company devotes to expanding manufacturing capacity; (iv) the
activities of competitors; (v) the progress of the Company's research and
development programs; (vi) the timing and results of preclinical testing and
clinical trials; and (vii) technological advances.
The second, fifth, and seventh paragraphs of this Liquidity and Capital
Resources section contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1993, as amended, and Section 21E of the
Securities and Exchange Act of 1934, as amended. Actual results could differ
materially from those projected in the forward-looking statements as a result of
the factors set forth in this Liquidity and Capital Resources section, the Risk
Factors section and the Description of Business section. The discussion of those
factors is incorporated herein by this reference as if said discussion was fully
set forth at this point.
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RISK FACTORS
This quarterly report on Form 10-Q contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ from
those set forth in such forward-looking statements as a result of certain
factors, including those set forth in this Risk Factors section.
DEPENDENCE ON THE COMPANY'S TRANSURETHRAL SYSTEM FOR ERECTION
The Company currently relies upon a single therapeutic approach to
treat erectile dysfunction, its transurethral system for erection. No assurance
can be given that the Company's therapeutic approach, or its proposed
pharmacologic formulations, will be shown to be safe and effective or ultimately
be approved by appropriate regulatory agencies. Certain side effects have been
found to occur with the use of MUSE (alprostadil). Mild to moderate transient
penile/perineal pain was suffered by 21% to 42% of patients (depending on
dosage) treated with MUSE (alprostadil) in the Company's Phase II/III Dose
Ranging study. Moderate to severe (i.e., syncope) decreases in blood pressure
was experienced by 1% to 4% of patients (depending on dosage) treated with MUSE
(alprostadil) in such study. The existence of side effects or dissatisfaction
with product results may impact a patient's decision to use or continue to use,
or a physician's decision to recommend, MUSE (alprostadil) as a therapy for the
treatment of erectile dysfunction thereby affecting the commercial viability of
MUSE (alprostadil). The Company has never commercially introduced a product and
no assurance can be given that any of the transurethral products, if approved,
will be successfully introduced. In addition, technological changes or medical
advancements could diminish or eliminate the commercial viability of the
Company's products. As a result of the Company's single therapeutic approach and
its current focus on MUSE (alprostadil), the failure to obtain an approval of
its NDA for MUSE (alprostadil) on a timely basis, if at all, or to successfully
commercialize such product would have an adverse effect on the Company and could
threaten the Company's ability to continue as a viable entity.
GOVERNMENT REGULATION AND UNCERTAINTY OF PRODUCT APPROVALS
The Company's research, preclinical development, clinical trials,
manufacturing and marketing of its products are subject to extensive regulation
by numerous governmental authorities in the United States and other countries.
Clinical trials, manufacturing and marketing of the Company's products will be
subject to the rigorous testing and approval processes of the FDA and equivalent
foreign regulatory agencies. The process of obtaining FDA and other required
regulatory approvals is lengthy and expensive. The time required for FDA
approvals is uncertain, and typically takes a
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number of years, depending on the type, complexity and novelty of the product.
Since the Company's products involve transurethral delivery, a new therapeutic
approach, regulatory approvals may be obtained more slowly than for products
produced using more conventional delivery systems. The Company completed pivotal
clinical trials in 1995 and submitted an NDA for its anticipated first product,
MUSE (alprostadil), to the FDA in March 1996. While the Company believes its NDA
filing was substantially complete, there can be no assurance that the Company
will not be required to conduct additional research or clinical trials. Although
the Company's NDA was accepted for priority review by the FDA, there can be no
assurance that FDA approval will be granted on a timely basis, if at all, or if
granted, that such approval will not contain significant limitations in the form
of warnings, precautions or contraindications with respect to condition of use.
Any delay in obtaining, or failure to obtain, such approval would adversely
affect the Company's ability to generate product revenue.
The Company's clinical trials for future products will seek safety data
as well as efficacy data and will require substantial time and significant
funding. There is no assurance that clinical trials related to future products
will be completed successfully within any specified time period, if at all.
Furthermore, the FDA may suspend clinical trials at any time if it is believed
that the subjects participating in such trials are being exposed to unacceptable
health risks. There can be no assurance that FDA or other regulatory approvals
for any products developed by the Company will be granted on a timely basis, if
at all, or if granted, that such approval will not contain significant
limitations in the form of warnings, precautions or contraindications with
respect to conditions of use. Any delay in obtaining, or failure to obtain, such
approvals would adversely affect the Company's ability to generate product
revenue. Failure to comply with the applicable regulatory requirements can,
among other things, result in fines, suspensions of regulatory approvals,
product recalls, operating restrictions and criminal prosecution. In addition,
the marketing and manufacturing of pharmaceutical products are subject to
continuing FDA review, and later discovery of previously unknown problems with a
product, manufacturer or facility may result in the FDA requiring further
clinical research or restrictions on the product or the manufacturer, including
withdrawal of the product from the market. The restriction, suspension or
revocation of regulatory approvals or any other failure to comply with
regulatory requirements would have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company obtains the necessary raw materials and components for the
manufacture of MUSE (alprostadil) from third parties. The Company currently
contracts with contract manufacturing organizations that are required to comply
with strict standards established by the Company. Contract manufacturers are
required by the Federal Food, Drug, and Cosmetic Act, as amended, and by FDA
regulations to follow Good Manufacturing Practice ("GMP"). The
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Company is required to identify its suppliers to the FDA and is dependent upon
its contract manufacturers and its suppliers to comply with the Company's
specifications and, as required, GMP or similar standards imposed by foreign
regulators. There can be no assurance that the FDA, or a state, local or foreign
regulator will not take action against a contract manufacturer or supplier found
to be violating applicable regulations. Such an action could have a material
adverse effect on the Company's business, financial condition and results of
operations.
LIMITED MANUFACTURING EXPERIENCE AND DEPENDENCE ON SOLE CONTRACT MANUFACTURER
The Company has only limited experience in manufacturing MUSE
(alprostadil) and has not yet manufactured it in commercial quantities. As a
result, the Company has no experience manufacturing its product in volumes
necessary for the Company to achieve significant commercial sales, and there can
be no assurance that reliable high volume manufacturing can be achieved at
commercially reasonable cost. If the Company encounters any manufacturing
difficulties, including problems involving production yields, quality control
and assurance, supplies of components or raw materials or shortages of qualified
personnel, it could have a material adverse effect on the Company's business,
financial condition and results of operations.
The formulation, filling, packaging and testing of MUSE (alprostadil)
is performed by Paco Pharmaceutical Services, Inc. ("Paco"), a wholly owned
subsidiary of The West Company, at its facility in Lakewood, New Jersey. In June
1995, the Company completed construction of its approximately 6,000 square feet
of dedicated manufacturing and testing space within Paco's facility. The Company
will be required to expand its manufacturing and testing space at Paco or to
find additional facilities, if regulatory approval is obtained and MUSE
(alprostadil) is successfully introduced. The Company also intends to establish
a Company owned and operated manufacturing facility in Europe. Until the Company
develops an in-house manufacturing capability or is able to identify and qualify
alternative contract manufacturers, it will be entirely dependent upon Paco for
the manufacture of its products. As part of the approval process for the
Company's NDA, Paco will be subject to audit by the FDA as part of its GMP
inspection. There can be no assurance that the facility will receive the
necessary GMP approval. There can be no assurance that the Company's reliance on
Paco or others for the manufacture of its products will not result in problems
with product supply, and there can be no assurance that the Company will be able
to establish a second manufacturing facility or expand its existing facility at
Paco. Interruptions in the availability of products could delay or prevent the
development and commercial marketing of MUSE (alprostadil) and other potential
products and would have a material adverse effect on the Company's business,
financial condition and results of operations.
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LIMITED SALES AND MARKETING EXPERIENCE
The Company has no experience in the sale, marketing and distribution
of pharmaceutical products. If required approvals are received, the Company
intends to market and sell its products initially through a direct sales force
in the United States. In order to market its products directly, the Company must
develop a sales force with proper technical expertise. There can be no assurance
that the Company will be able to build a sales force or that the Company's
domestic sales and marketing efforts will be successful.
In February 1996, the Company entered into a distribution agreement
with a wholly owned subsidiary of Cardinal Health, Inc. ("Cardinal"). Under this
agreement, Cardinal will warehouse the Company's finished goods, take customer
orders, pick, pack and ship its product, invoice customers and collect related
receivables. The Company will also have access to Cardinal's information systems
that support these functions. As a result of this distribution agreement with
Cardinal, the Company is heavily dependent on Cardinal's efforts to fulfill
orders and warehouse its products effectively. There can be no assurance such
efforts will be successful.
In May 1996, the Company completed a marketing agreement with Astra AB
("Astra") to purchase the Company's products for resale in Europe, South
America, Central America, Australia and New Zealand. As consideration for
execution of the marketing agreement, Astra paid the Company $10 million in June
1996. The Company will be paid up to an additional $20 million in the event it
achieves certain milestones. The marketing agreement does not have minimum
purchase commitments, and Astra may take up to twelve months to introduce a
product in a given country following regulatory approval in such country. As a
result of this marketing agreement with Astra, the Company is dependent on
Astra's efforts to market, distribute and sell the Company's products
effectively in the above mentioned markets. There can be no assurance that such
efforts will be successful.
In July 1996, the Company entered into a distribution agreement with
Alternate Site Distributors, Inc. ("ASD"), a subsidiary of Bergen Brunswig
Corporation. ASD will provide "direct-to-physician" distribution, telemarketing
and customer service capabilities in support of the U.S. marketing and sales
efforts. Pursuant to the terms of this agreement, ASD will develop a customer
service organization to respond to all Vivus sales representative and physician
inquiries. A central feature of this customer service will be a dedicated Vivus
owned 1-800 number with an automated response menu covering various options. As
a result of this distribution agreement with ASD, the Company is dependent on
ASD's efforts to distribute, telemarket and provide customer service
effectively. There can be no assurance that such efforts will be successful.
The Company intends to market and sell its products in other foreign
markets through distribution, co-promotion or license agreements with corporate
partners. To the extent that the Company enters into distribution, co-promotion
or license agreements for the sale of its products, the Company will be
dependent upon the efforts of third parties. These third parties may have other
commitments, and there can be no assurance that they will commit the necessary
resources to effectively market, distribute and sell
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the Company's product.
INTENSE COMPETITION
Competition in the pharmaceutical and medical products industries is
intense and is characterized by extensive research efforts and rapid
technological progress. Certain treatments for erectile dysfunction exist, such
as needle injection therapy, vacuum constriction devices, penile implants and
oral medications, and the manufacturers of these products will continue to
improve these therapies. In July 1995, the FDA approved the use of alprostadil
in The Upjohn Company's needle injection therapy product for erectile
dysfunction. Previously, Upjohn had obtained approval in a number of European
countries. Additional competitive therapies under development include an oral
medication by Pfizer, Inc., which is currently in Phase III clinical trials.
Other large pharmaceutical companies are also actively engaged in the
development of therapies for the treatment of erectile dysfunction. These
companies have substantially greater research and development capabilities as
well as substantially greater marketing, financial and human resources than the
Company. In addition, these companies have significantly greater experience than
the Company in undertaking preclinical testing, human clinical trials and other
regulatory approval procedures. There are also small companies, academic
institutions, governmental agencies and other research organizations that are
conducting research in the area of erectile dysfunction. For instance, Zonagen,
Inc. and Pentech Pharmaceutical, Inc. have oral medications under development.
These entities may also market commercial products either on their own or
through collaborative efforts. The Company's competitors may develop
technologies and products that are available for sale prior to the Company's
products or that are more effective than those being developed by the Company.
Such developments would render the Company's products less competitive or
possibly obsolete. If the Company is permitted to commence commercial sales of
products, it will also be competing with respect to marketing capabilities and
manufacturing efficiency, areas in which it has limited experience.
PROPRIETARY RIGHTS AND RISK OF LITIGATION
The Company's success will depend, in large part, on the strength of
its current and future patent position relating to the transurethral delivery of
pharmacologic agents for the treatment of erectile dysfunction. The Company's
patent position, like that of other pharmaceutical companies, is highly
uncertain and involves complex legal and factual questions. Claims made under
patent applications may be denied or significantly narrowed and issued patents
may not provide significant commercial protection to the Company. The Company
could incur substantial costs in proceedings before the United States Patent
Office, including interference proceedings. These proceedings could also result
in adverse decisions as to the priority of the Company's licensed or assigned
inventions. There is no assurance that the Company's patents will not be
challenged or designed around by others. The Company is
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16
aware of a patent application involving the transurethral application of
prostaglandin E2. The corresponding application in Europe has been abandoned.
Failure of the Company's licensed patents to block issuance of such patent could
have a material adverse effect on the Company's business, financial condition
and results of operations.
There can be no assurance that the Company's products do not or will
not infringe on the patent or proprietary rights of others. A patent opposition
to the Company's exclusively licensed European patents has been filed with the
European Patent Office. The Company is vigorously defending the patents, however
an adverse decision could affect the Company's ability, based on its patent
rights, to limit potential competition in Europe. The Company may be required to
obtain additional licenses to the patents, patent applications or other
proprietary rights of others. There can be no assurance that any such licenses
would be made available on terms acceptable to the Company, if at all. If the
Company does not obtain such licenses, it could encounter delays in product
introductions while it attempts to design around such patents, or the
development, manufacture or sale of products requiring such licenses could be
precluded. The Company believes there will continue to be significant litigation
in the pharmaceutical industry regarding patent and other intellectual property
rights.
A former consultant to the Company has claimed that he is the inventor
of certain technology disclosed in two of the Company's patents. The former
consultant further claims that the Company defrauded him by allegedly failing to
inform him that it intended to use and patent this technology and by failing to
compensate him for the technology in the manner allegedly promised. On May 28,
1996, the Company filed a complaint for declaratory judgment against the former
consultant in the United States District Court for the Northern District of
California, which seeks a declaration from the court that the former consultant
is not an inventor of any of the technology disclosed in the patent. On July 17,
1996, the former consultant filed a lawsuit which seeks to have two of the
Company's patents declared invalid on the grounds that they fail to list him as
an inventor. In a separate matter, on April 10, 1996, the licensors in an
agreement by which the Company acquired a patent license filed a lawsuit in a
Texas State court that alleges that they were defrauded in connection with the
renegotiation of the license agreement between the Company and the licensors. On
May 8, 1996, the action was removed to the United States District Court for the
Western District of Texas. In addition to monetary damages, the licensors seek
to return to the terms of the original license agreement. The Company has
conducted a review of the circumstances surrounding these two matters and
believes that the allegations are without merit. Although the Company believes
that it should prevail, the uncertainties inherent in litigation prevent the
Company from giving any assurances about the outcome of such litigation.
The Company also relies on trade secrets and other unpatented
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proprietary technology. No assurance can be given that the Company can
meaningfully protect its rights in such unpatented proprietary technology or
that others will not independently develop substantially equivalent proprietary
products and processes or otherwise gain access to the Company's proprietary
technology. The Company seeks to protect its trade secrets and proprietary
know-how, in part, with confidentiality agreements with employees and
consultants. There can be no assurance that these agreements will not be
breached, that the Company will have adequate remedies for any breach or that
the Company's trade secrets will not otherwise become known or be independently
developed by competitors. In addition, protracted and costly litigation may be
necessary to enforce and determine the scope and validity of the Company's
proprietary rights.
DEPENDENCE ON DUAL SOURCE OF SUPPLY
To date, the Company has obtained its supply of alprostadil from two
sources. The first is Spolana Chemical Works AS ("Spolana") pursuant to a supply
agreement that expires at the end of 1996. In January 1996, the Company
completed a long-term alprostadil supply agreement with CHINOIN Pharmaceutical
and Chemical Works Co., Ltd. ("Chinoin"). Chinoin is the Hungarian subsidiary of
the French pharmaceutical company Sanofi Winthrop. The Company's sources of
supply will be subject to GMP requirements of the FDA. There can be no assurance
FDA approval will be received. Alprostadil, a generic drug, is extremely
difficult to manufacture and is only available to the Company from a limited
number of other suppliers, none of which currently produce it in commercial
quantities. While the Company is seeking additional sources, there can be no
assurance that it will be able to identify and qualify such sources. The Company
is required to identify its suppliers to the FDA and the FDA may require
additional clinical trials or other studies prior to accepting a new supplier.
Unless the Company secures and qualifies additional sources of alprostadil, it
will be entirely dependent upon Spolana and Chinoin for the delivery of
alprostadil. If interruptions in the supply of alprostadil were to occur for any
reason, including a decision by Spolana and/or Chinoin to discontinue
manufacturing, political unrest, labor disputes or a failure of Spolana and/or
Chinoin to follow regulatory guidelines, the development and commercial
marketing of MUSE (alprostadil) and other potential products could be delayed or
prevented. An interruption in the Company's supply of alprostadil would have a
material adverse effect on the Company's business, financial condition and
results of operations.
HISTORY OF LOSSES AND LIMITED OPERATING HISTORY
The Company is a development stage company with a limited operating
history. The Company has not generated any product revenue since its inception
in April 1991. As consideration for execution of the Astra marketing agreement,
Astra paid the Company $10 million in June 1996, which the Company recorded as
milestone revenue in the consolidated statement of operations. At June 30,
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18
1996, the Company had an accumulated deficit of approximately $59.6 million. The
Company's losses will increase significantly over the next twelve months as it
incurs expenses related to its marketing and sales organization, constructing a
second manufacturing plant and expanding the Company's existing plant,
preclinical and clinical assessment of potential new products and ongoing
research and development activities. To achieve profitability, the Company must
successfully obtain required regulatory approvals, manufacture, introduce and
market MUSE (alprostadil) product. The time required to reach profitability is
highly uncertain and there is no assurance that the Company will be able to
achieve profitability on a sustained basis, if at all.
FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FINANCING
The Company expects to incur substantial additional costs, including
expenses related to its marketing and sales organization, a second manufacturing
plant and expansion of the Company's existing plant, new product preclinical and
clinical costs, ongoing research and development activities, and general
corporate purposes. The Company anticipates that its existing capital resources
will be sufficient to support the Company's operations through commercial
introduction of MUSE (alprostadil) in the United States and Europe but may not
be sufficient for the introduction of any additional future products. The
Company may have to conduct additional studies or clinical trials in order to
obtain regulatory approval of MUSE (alprostadil). Accordingly, the Company
anticipates that it may be required to issue additional equity or debt
securities and may use other financing sources including, but not limited to,
corporate alliances and lease financings to fund the future development and
possible commercial launch of its products. The sale of additional equity
securities can be expected to result in additional dilution to the Company's
stockholders. There can be no assurance that such funds will be available on
terms satisfactory to the Company, or al all. Failure to obtain adequate funding
could cause a delay or cessation of the Company's product development and
marketing efforts and would have a material adverse effect upon the Company's
business, financial condition and results of operations. The Company's working
capital and additional funding requirements will depend upon numerous factors,
including: (i) the ability to obtain and timing and costs of obtaining
regulatory approvals; (ii) the level of resources that the Company devotes to
sales and marketing capabilities; (iii) the level of resources that the Company
devotes to expanding manufacturing capacity; (iv) the activities of competitors;
(v) the progress of the Company's research and development programs; (vi) the
timing and results of preclinical testing and clinical trials; and (vii)
technological advances.
DEPENDENCE ON KEY PERSONNEL
The Company's progress to date has been highly dependent upon the
skills of a limited number of key management personnel. To reach its future
business objectives, the Company will need to hire
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numerous other qualified personnel in the areas of sales, manufacturing,
clinical trial management and preclinical testing. There can be no assurance
that the Company will be able to hire such personnel, as the Company must
compete with other companies, academic institutions, government entities and
other agencies. The loss of any of the Company's key personnel or the failure to
attract or retain necessary new employees could have an adverse effect on the
Company's research, product development and business operations.
RISKS RELATING TO INTERNATIONAL OPERATIONS
In the event the Company receives necessary foreign regulatory
approvals, the Company plans to market its products internationally. Changes in
overseas economic conditions, currency exchange rates, foreign tax laws or
tariffs or other trade regulations could have a material adverse effect on the
Company's business, financial condition and results of operations. The
anticipated international nature of the Company's business is also expected to
subject it and its representatives, agents and distributors to laws and
regulations of the foreign jurisdictions in which they operate or the Company's
products are sold. The regulation of drug therapies in a number of such
jurisdictions, particularly in the European Union, continues to develop, and
there can be no assurance that new laws or regulations will not have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, the laws of certain foreign countries do not protect
the Company's intellectual property rights to the same extent as do the laws of
the United States.
PRODUCT LIABILITY AND AVAILABILITY OF INSURANCE
The use of the Company's products in clinical trials may expose the
Company to product liability claims and possible adverse publicity. These risks
also exist with respect to the Company's products, if any, that receive
regulatory approval for commercial sale. The Company currently maintains
insurance coverage for the clinical use of its products, but does not have
insurance coverage for the commercial sale of its products. There can be no
assurance that the Company will be able to obtain product liability insurance.
There can be no assurance that the Company's present or future insurance will
provide adequate coverage or be available at a reasonable cost or that product
liability claims would not adversely affect the business or financial condition
of the Company.
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20
UNCERTAINTY OF PHARMACEUTICAL PRICING AND REIMBURSEMENT
In the United States and elsewhere, sales of pharmaceutical products
currently are dependent, in part, on the availability of reimbursement to the
consumer from third party payors, such as government and private insurance
plans. Third party payors are increasingly challenging the prices charged for
medical products and services. If the Company succeeds in bringing one or more
products to the market, there can be no assurance that these products will be
considered cost effective and that reimbursement to the consumer will be
available or sufficient to allow the Company to sell its products on a
competitive basis.
UNCERTAINTY AND POSSIBLE NEGATIVE EFFECTS OF HEALTHCARE REFORM
The healthcare industry is undergoing fundamental changes that are the
result of political, economic and regulatory influences. The levels of revenue
and profitability of pharmaceutical companies may be affected by the continuing
efforts of governmental and third party payors to contain or reduce healthcare
costs through various means. Reforms that have been and may be considered
include mandated basic healthcare benefits, controls on healthcare spending
through limitations on the increase in private health insurance premiums and
Medicare and Medicaid spending, the creation of large insurance purchasing
groups and fundamental changes to the healthcare delivery system. Due to
uncertainties regarding the outcome of healthcare reform initiatives and their
enactment and implementation, the Company cannot predict which, if any, of the
reform proposals will be adopted or the effect such adoption may have on the
Company. There can be no assurance that future healthcare legislation or other
changes in the administration or interpretation of government healthcare or
third-party reimbursement programs will not have a material adverse effect on
the Company. Healthcare reform is also under consideration in some other
countries.
CONTROL BY EXISTING STOCKHOLDERS
As of June 25, 1996, the Company's officers, directors and principal
stockholders, and certain of their affiliates, beneficially owned 22.5% of the
Company's outstanding Common Stock. Such concentration of ownership may have the
effect of delaying, defining or preventing a change in control of the Company.
Additionally, these stockholders will have significant influence over the
election of directors of the Company. This concentration of ownership may allow
significant influence and control over Board decisions and corporate actions.
POTENTIAL VOLATILITY OF STOCK PRICE
The stock market has recently experienced significant price and volume
fluctuations unrelated to the operating performance of
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particular companies. In addition, the market price of the Company's Common
Stock, like the securities of other therapeutic companies without approved
products, has been highly volatile and is likely to continue to be so. Factors
such as variations in the Company's financial results, comments by security
analysts, the Company's ability to scale up its manufacturing capability to
commercial levels, the Company's ability to successfully sell its product in the
United States and Europe, any loss of key management, the results of the
Company's clinical trials or those of its competition, adverse regulatory
actions or decisions, announcements of technological innovations or new products
by the Company or its competition, changing governmental regulations and
developments with respect to FDA submissions, patents or other proprietary
rights, product or patent litigation or public concern as to the safety of
products developed by the Company, may have a significant effect on the market
price of the Company's Common Stock.
ANTI-TAKEOVER EFFECT OF SHAREHOLDER RIGHTS PLAN AND CERTAIN CHARTER AND BYLAW
PROVISIONS
In February 1996, the Company's Board of Directors authorized its
reincorporation in the State of Delaware (the "Reincorporation") and adopted a
Shareholder Rights Plan. The Shareholder Rights Plan provides for a dividend
distribution of one Preferred Shares Purchase Right (a "Right") on each
outstanding share of the Company's Common Stock. Each Right entitles
stockholders to buy 1/100th of a share of VIVUS Series A Participating Preferred
Stock at an exercise price of $100.00. The Rights will become exercisable
following the tenth day after a person or group announces acquisition of 20% or
more of the Company's Common Stock, or announces commencement of a tender offer,
the consummation of which would result in ownership by the person or group of
20% or more of the Company's Common Stock. The Company will be entitled to
redeem the Rights at $0.01 per Right at any time on or before the tenth day
following acquisition by a person or group of 20% of more of the Company's
Common Stock. The Company's reincorporation into the State of Delaware was
approved by its stockholders and effective in May 1996.
The Shareholder Rights Plan and certain provisions of the Company's
Certificate of Incorporation and Bylaws, as adopted in connection with the
reincorporation, may have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from attempting to acquire,
control of the Company. The Company's Certificate of Incorporation allows the
Company to issue Preferred Stock without any vote or further action by the
stockholders, and certain provisions of the Company's Certificate of
Incorporation and Bylaws eliminate the right of stockholders to act by written
consent without a meeting, specify procedures for director nominations by
stockholders and submission of other proposals for consideration at stockholder
meetings, and eliminate cumulative voting in the election of directors. Certain
provisions of Delaware law could also delay or make more difficult a merger,
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tender offer or proxy contest involving the Company, including Section 203,
which prohibits a Delaware corporation from engaging in any business combination
with any interested stockholder for a period of three years unless certain
conditions are met. The Shareholder Rights Plan, the possible issuance of
Preferred Stock, the procedures required for director nominations and
stockholder proposals and Delaware law could have the effect of delaying,
deferring or preventing a change in control of the Company, including without
limitation, discouraging a proxy contest or making more difficult the
acquisition of a substantial block of the Company's Common Stock. These
provisions could also limit the price that investors might be willing to pay in
the future for shares of the Company's Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock in the public
market following the third offering could have an adverse effect on the price of
the Company's Common Stock. Each of the Company's directors and executive
officers has agreed that for a period of 90 days following the date of this
offering, such stockholder will not, without the prior written consent of
PaineWebber Incorporated, directly or indirectly, offer to sell, sell or
otherwise dispose of shares of Common Stock or any securities convertible or
exchangeable for shares of Common Stock. Upon the expiration of these lock-up
agreements, approximately 2.8 million shares (including shares issuable upon the
exercise of outstanding vested options) will become eligible for sale.
ABSENCE OF DIVIDENDS
The Company has never paid dividends on its Common Stock and will not
pay dividends in the foreseeable future.
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings
A former consultant to the Company has claimed that he is the inventor
of certain technology disclosed in two of the Company's patents. The former
consultant further claims that the Company defrauded him by allegedly failing to
inform him that it intended to use and patent this technology and by failing to
compensate him for the technology in the manner allegedly promised. On May 28,
1996, the Company filed a complaint for declaratory judgment against the former
consultant in the United States District Court for the Northern District of
California, which seeks a declaration from the court that the former consultant
is not an inventor of any of the technology disclosed in the patent. On July 17,
1996, the former consultant filed a lawsuit which seeks to have two of the
Company's patents declared invalid on the grounds that they fail to list him as
an inventor. In a separate matter, on April 10, 1996, the licensors in an
agreement by which the Company acquired a patent license filed a lawsuit in a
Texas State court that alleges that they were defrauded in connection with the
renegotiation of the license agreement between the Company and the licensors. On
May 8, 1996, the action was removed to the United States District Court for the
Western District of Texas. In addition to monetary damages, the licensors seek
to return to the terms of the original license agreement. The Company has
conducted a review of the circumstances surrounding these two matters and
believes that the allegations are without merit. Although the Company believes
that it should prevail, the uncertainties inherent in litigation prevent the
Company from giving any assurances about the outcome of such litigation.
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of stockholders was held on May 16, 1996. Matters voted on at
that meeting were: (i) a proposal to amend the bylaws to provide for a variable
number of directors from five (5) to seven (7), with the number initially set at
six (6); (ii) the election of the Company's directors; (iii) a proposal to
approve the reincorporation of VIVUS, Inc. from California to Delaware, and (iv)
a proposal to confirm the appointment of Arthur Andersen LLP as the independent
public accountants of the Company for fiscal year 1996. Tabulation for each
proposal and individual director were as follows:
Proposal I To amend the bylaws to provide for a variable number of
directors from five (5) to seven (7), with the number to be
initially set at six (6).
FOR AGAINST ABSTAIN NON-VOTE
---------- ------- ------- --------
11,037,691 142,959 8,448 153,163
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24
Proposal II To elect six directors to serve until the next Annual Meeting
of Stockholders and until their successors are duly elected and
qualified
NOMINEE FOR WITHHELD
-------------------- ---------- --------
Richard L. Casey 11,296,383 45,878
Samuel D. Colella 11,296,833 45,428
Brian H. Dovey 11,296,433 45,828
Peter Barton Hutt 11,288,383 53,878
Virgil A. Place, M.D. 11,296,333 45,928
Leland F. Wilson 11,296,433 45,828
Proposal III To approve the reincorporation of VIVUS, Inc. from California
to Delaware.
FOR AGAINST ABSTAIN NON-VOTE
---------- ------- ------- ---------
8,342,424 409,544 27,843 2,562,450
Proposal IV To confirm the appointment of Arthur Andersen LLP
as the independent public accountants of the Company
for fiscal year 1996.
FOR AGAINST ABSTAIN NON-VOTE
---------- ------- ------- --------
11,323,502 11,487 7,272 0
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits (in accordance with Item 601 of Regulation S-K)
*+10.1 Assignment Agreement by and between Alza Corporation and
the Registrant dated December 31, 1993
*+10.2 Memorandum of Understanding by and between Ortho
Pharmaceutical Corporation and the Registrant dated
February 25, 1992
*10.3 Assignment Agreement by and between Ortho Pharmaceutical
Corporation and the Registrant dated June 9, 1992
*+10.4 License Agreement by and between Gene A. Voss, M.D., Allen
C. Eichler, M.D., and the Registrant dated December 28,
1992
*+10.5A License Agreement by and between Ortho Pharmaceutical
Corporation and Kjell Holmquist AB dated June 23, 1989
*+10.5B Amendment by and between Kjell Holmquist AB and the
Registrant dated July 3, 1992
*10.5C Amendment by and between Kjell Holmquist AB and the
Registrant dated April 22, 1992
*+10.5D Stock Purchase Agreement by and between Kjell Holmquist
AB and the Registrant dated April 22, 1992
*+10.6A License Agreement by and between Amsu, Ltd., and Ortho
Pharmaceutical Corporation dated June 23, 1989
*+10.6B Amendment by and between Amsu, Ltd., and the Registrant
dated July 3, 1992
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25
*10.6C Amendment by and between Amsu, Ltd., and the Registrant
dated April 22, 1992
*+10.6D Stock Purchase Agreement by and between Amsu, Ltd., and
the Registrant dated July 10, 1992
*10.7 Supply Agreement by and between Paco Pharmaceutical
Services, Inc., and the Registrant dated November 10, 1993
*+10.8 Agreement by and among Pharmatech, Inc., Spolana Chemical
Works AS, and the Registrant dated June 23, 1993
*10.9 Master Services Agreement by and between the Registrant
and Teknekron Pharmaceutical Systems dated August 9, 1993
*10.10 Lease by and between McCandless-Triad and the Registrant
dated November 23, 1992, as amended
***10.11 Form of Indemnification Agreements by and among the
Registrant and the Directors and Officers of the
Registrant
**10.12 1991 Incentive Stock Plan and Form of Agreement, as
amended
*10.13 1994 Director Option Plan and Form of Agreement
*10.14 Form of 1994 Employee Stock Purchase Plan and Form of
Subscription Agreement
*10.15 Stock Restriction Agreement between the Company and Virgil
A. Place, M.D. dated November 7, 1991
*10.16 Stock Purchase Agreement between the Company and Leland F.
Wilson dated June 26, 1991, as amended
*10.17 Letter Agreement between the Registrant and Leland F.
Wilson dated June 14, 1991 concerning severance pay
*10.18 Letter Agreement between the Registrant and Paul Doherty
dated January 26, 1994 concerning severance pay
**10.19 Guaranteed Maximum Price Contract by and between the
Registrant and Marshall Contractors, Inc. dated January
27, 1995
**10.20 Sub-lease by and among the Registrant, Argonaut
Technologies, Inc., ESCAgenetics Corp. and Tanklage
Construction Co. dated March 13, 1995
****+10.21 Distribution Services Agreement between the Registrant and
Synergy Logistics, Inc. (a wholly-owned subsidiary of
Cardinal Health, Inc.) dated February 9, 1996
****+10.22 Manufacturing Agreement between the Registrant and CHINOIN
Pharmaceutical and Chemical Works Co., Ltd. dated December
20, 1995
++ 10.23 Distribution and Services Agreement between the Registrant
and Alternate Site Distributors, Inc. dated July 17, 1996
*****+10.24 Distribution Agreement made as of May 29, 1996 between the
Registrant and Astra AB
11.1 Computation of net loss per share
27.1 Financial Data Schedule
25
26
- ---------
* Incorporated by reference to the same-numbered exhibit filed with the
Registrant's Registration Statement on Form S-1 No. 33-75698.
** Incorporated by reference to the same-numbered exhibit filed with the
Registrant's Registration Statement on Form S-1 No. 33-90390.
*** Incorporated by reference to the same-numbered exhibit filed with the
Registrant's Form 8-B filed with the Commission on June 24, 1996
**** Incorporated by reference to the same-numbered exhibit filed with the
Registrant's Quarterly Report on Form 10Q for the quarter ended March
31, 1996.
***** Incorporated by reference to the same numbered exhibit filed with the
Registrant's Current Report on Form 8-K/A filed with the Commission on
June 21, 1996.
+ Confidential treatment granted.
++ Confidential treatment requested.
(b) Reports on Form 8-K
The following reports on Form 8-K have been filed during the quarter
for which this report is filed:
(i) On May 31, 1996, the Company filed a Current Report on Form 8-K
("Form 8-K") to report that on May 29, 1996, VIVUS International Limited, a
wholly owned subsidiary of the Company, entered into a distribution agreement
(the "Distribution Agreement") with Astra AB. Simultaneously with the filing of
Form 8-K, the Company requested confidential treatment for the Distribution
Agreement.
(ii) On June 21, 1996, the Company filed Amendment No. 1 to Form
8-K/A solely for the purpose of filing a revised version of the Distribution
Agreement, which omitted only those portions for which confidential treatment
had been granted.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VIVUS, Inc.
Date: August 9, 1996 /s/ DAVID C. YNTEMA
--------------- ---------------------------
David C. Yntema
Chief Financial
Officer
/s/ LELAND F. WILSON
---------------------------
Leland F. Wilson
President and Chief
Executive Officer
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VIVUS, INC.
INDEX TO EXHIBITS
Exhibit Description
- ------- ---------------------------------------------------
10.23 Distribution and Services Agreement between the
Registrant and Alternate Site Distributors, Inc.
dated July 17, 1996
11.1 Computation of net loss per share
27.1 Financial Data Schedule
28