Moving Beyond Obesity, Vivus Strikes $135M Deal for Digestive Drug

Xconomy San Francisco — 

Sales of weight loss drugs have been light, and the Vivus drug Qsymia is no exception. Facing declining revenue as well as a looming mountain of debt, Vivus has been casting about for a new strategy. It looks like it’s found one.

Campbell, CA-based Vivus (NASDAQ: VVUS) has agreed to pay $135 million for the rights to sell a digestion drug, pancrelipase (Pancreaze), in the U.S. and Canada. The treatment is currently marketed by Janssen Pharmaceuticals. In a related deal, Vivus is raising cash by issuing more debt. The company will sell up to $110 million in secured notes to Athyrium Capital Management once the deal for the Janssen drug closes. Under that deal, Vivus can raise another $10 million if it meets certain financial targets in the coming year, according to a news release issued Tuesday.

Vivus’s weight loss drug, a combination of phentermine and topiramate, won FDA approval in 2012. Since peaking in 2015 with $54.6 million in revenue, its sales have been on a steady decline, Vivus financial reports show. Last year, the drug accounted for $44.9 million in revenue, down 8 percent from the previous year. The declining sales pose a problem for Vivus’s ability to manage its debt. The $250 million in convertible notes it had sold are due in 2020.

Other companies marketing weight loss drugs have faced similar challenges. San Diego-based Arena Pharmaceuticals (NASDAQ: ARNA) received FDA approval for its weight loss drug lorcaserin hydrochloride (Belviq) in 2012. But the pill failed to live up to expectations that it would become a blockbuster seller. Last year, Arena sold its weight loss drug to Eisai for more than $100 million, part of a strategy to remake itself.

Another San Diego biotech, Orexigen Therapeutics (NASDAQ: OREX), won FDA approval for its drug, a bupropion and naltrexone (Contrave) combination, in 2014. The drug went on to surpass the Vivus drug in sales, becoming the most widely prescribed weight loss treatment in the U.S. But despite reaching $98 million in fiscal 2017 sales, the Orexigen drug could not generate enough cash to pay back noteholders who are owed $165 million. In March, Orexigen filed for Chapter 11 bankruptcy protection.

Just as Arena did, Vivus is now trying to expand its scope beyond obesity. Janssen’s pancrelipase was developed for patients who can’t digest food properly because they lack enzymes produced by the pancreas. Those affected by this deficiency include some patients who have cystic fibrosis. The Janssen drug is made in part from an extract derived from the pancreatic glands of pigs.

Vivus is betting that the deal for the Janssen drug, combined with the new debt financing, will buy it more time to diversify its portfolio and bolster its balance sheet. In the news release, the company said the Janssen drug is the first of what it expects will be a series of several product acquisitions. Vivus expects to close the deal for the drug later in the second quarter.

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