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(Graphic: Business Wire)

Stocks in this article: VVUS

First Manhattan Co. (“FMC”), an owner-managed and operated investment advisory firm and the owner of approximately 9.9 percent of the outstanding shares of VIVUS, Inc. (“Vivus”) (NASDAQ: VVUS), today urged Vivus shareholders to consider three key facts as they make the important choice that will determine the future of their investment in Vivus.

Fact I: The centralized procedure is the best pathway for Qsymia’s E.U. approval

Vivus originally attempted to gain E.U. approval through the centralized procedure, but it failed. The centralized procedure is currently the only pathway that large pharma uses for E.U. approval of blockbuster drugs according to FMC’s consultants. The primary reason for choosing the centralized procedure is the simultaneous granting of 10-year exclusivity in all 27 member states, as per E.U. Directive 2001/83, article 10. The decentralized procedure that Vivus’ management is now pursuing is generally the pathway for generic drugs and, FMC believes, is the path to nowhere. It appears that Vivus has written off Qsymia’s blockbuster potential in Europe.

Fact II: Vivus has an unsustainable expense structure with spiraling SG&A costs

The following graph of Revenue, Operating Expenses and Cash Burn trends speaks for itself:

It will be many years before the revenue and expense lines cross. Sales have been negligible while expenses and the cash burn rate have been growing at a rate that will lead to even more debt and shareholder dilution.

Fact III: Vivus’ Board and management demonstrated profound ignorance of consumer out-of-pocket price sensitivity during the launch of Qsymia

Vivus’ commercial strategy has included a succession of confusing discount and rebate plans for Qsymia. None of them has worked.

  • Plan A: No Discount offered. Consumers required to pay over $200 per month out-of-pocket. Result: No uptake.
  • Plan B: Two weeks free and then four weeks at $150 per month out-of-pocket. Result: No uptake.
  • Plan C: Two weeks free and then $75 per month cap for four weeks. Result: No uptake.
  • Plan D: ??????

“Insanity: Doing the same thing over and over and expecting a different result.” — Albert Einstein

Even if every retail drug store in the country were to start carrying Qsymia tomorrow, shareholders would still need a commercially competent CEO and management. The retail launch is the last chance to get it right for Qsymia, and only FMC’s nominees have a plan to do that.

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