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



) -- When is a $110 million loan not considered debt? When it's struggling obesity pill marketer



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.

Stepping back from the positives and negatives of the loan, the fact that Vivus needs more money now reeks of desperation. The company ended 2012 with $214 million in cash and marketable securities. Taking on another $50 million in debt now -- plus $60 million later this year -- is a signal that current Qsymia marketing efforts are not gaining traction with doctors or obese Americans. Management expects to spend a lot more money -- and lose a lot more money -- into the foreseeable future.

At least Vivus has a weight-loss pill to sell.

Arena Pharmaceuticals

(ARNA) - Get Free Report

can't seem to get its drug Belviq out of the starting gate.

And then there's Stendra. Forgotten about Vivus' erectile dysfunction drug? You're not alone. FDA approved Stendra last April -- almost one year ago -- but the drug remains on the shelf because Vivus has been unable to find any company willing to buy it.

Shares of Vivus were down 3.6% to $10.54 in Tuesday trading.

-- Reported by Adam Feuerstein in Boston.

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Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;

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