Earlier this year, VIVUS (VVUS) announced that it reached an agreement with KV Pharma (KVA) to transfer the exclusive rights for EvaMist, an investigational estradiol spray that is absorbed through the skin for the treatment of menopause symptoms.VIVUS received an upfront $10 million payment at the closing of the deal, and will get an additional $140 million upon approval of the NDA for EvaMist, with subsequent milestone payments of up to $30 million based on sales objectives. The NDA is currently under review by the FDA with a decision and likely approval expected by July 29, 2007.
With a current market cap just under of $300 million, the EvaMist deal with KV Pharma and pending NDA is significant for VIVUS; as the company stands to gain $140 million upon approval for a drug with peak estimated sales of around $100 million. It appears likely that the FDA will approve EvaMist based on a similar topical estrogen-replacement therapy product approved earlier this year called Elestrin by Biosante (BPA). These transdermal estrogen replacement therapies are designed to expose women to the lowest possible dose of the hormone in order to relieve their symptoms such as hot flashes, while minimizing the risk of side effects such as blood clots.
However, the major potential for VIVUS lies in its experimental obesity drug Qnexa, which had positive phase two results released last year in small study with 200 patients. Qnexa is a combination of already-approved drugs topiramate (the generic name for Topamax) and phentermine. Investors should note that Qnexa also demonstrated benefits beyond weight loss in the Phase 2 results from last year, including a reduction in both blood pressure and cholesterol levels. Also, VIVUS has the benefit of a non-approval FDA panel recommendation and the subsequent withdrawal of the application by Sanofi-Aventis (SNY) for its potential blockbuster weight loss drug rimonabant, which is already approved in Europe.

At the end of June, the FDA reviewed the data package and clinical development plan for Qnexa and provided input on the company’s overall plans for Phase 3 studies and the plan to apply for a Special Protocol Assessment (SPA) to support the registration of Qnexa in the United States as a treatment for obesity. The Phase 3 program will be designed to dose 4,500 patients for a total of 56 weeks in the placebo-controlled pivotal studies, with enrollment planned to begin later this year in the fall. The company expects to study obese patients and obese patients with associated conditions such as type-2 diabetes, hypertension and high cholesterol. The major upside for VIVUS based on the potential for Qnexa could come in the form of a lucrative licensing deal, which the company can better negotiate with an extra $140 million in cash on its balance sheet if EvaMist is approved at the end of July.

Disclosure: The author owns shares of VIVUS.

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