This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Vivus Piles New Debt On Top Of Excuses (Updated)

Updated with new information on the amount of money Vivus must repay on its loan.

MOUNTAIN VIEW, Calif. (TheStreet) -- When is a $110 million loan not considered debt? When it's struggling obesity pill marketer Vivus (VVUS) that's doing the borrowing.

Vivus can call Tuesday's deal whatever it wants -- a "synthetic capped royalty financing" or a "non-dilutive capital" raise that is "innovative" and "structured to allow maximum flexibility." Whatever. Just don't be fooled. Vivus took out a loan for $110 million and the creditor -- Pharmakon Advisors -- expects to be repaid. You might be shocked at how much Pharmakon will receive back from Vivus.

Under terms of the loan (let's call it what it really is, please), Vivus will borrow $50 million immediately and can elect to borrow another $60 million before the end of the year. In return, Vivus is required to pay back the loan in quarterly installments starting in the second quarter of 2014, with the final amount of the scheduled payments tied to net sales of the weight-loss pill Qsymia.

Vivus doesn't make it easy to find the loan repayment schedule, it's stashed inside an exhibit to an 8-K filed today. But for the $48.9 million in net cash (minus fees) that Vivus receives from the first tranche of the loan, the company will be repay a minimum of $70.7 million to Pharmakon. The final amount could be higher if Qsymia doesn't reach specific sales targets.

Sounds like a lot of money for Vivus to repay, and it is. The implied interest rate on the loan is more than 13%, I'm told, not exactly usurious but well above the mid-single digit interest rates of other corporate debt. On the other hand, i'm also told that Vivus alternative financing option -- raising more money through the sale of stock -- would have been very dilutive and even more expensive as measured by the company's cost of capital.

To secure the debt, Vivus granted Pharmakon Advisors "patents, trademarks, copyrights and regulatory filings related to the Product." The "Product" is Qsymia. So, if Vivus defaults, Pharmakon gets basically everything of value.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,979.13 +59.54 0.35%
S&P 500 1,986.51 +4.91 0.25%
NASDAQ 4,526.4820 -1.0320 -0.02%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs