Vivus, Inc. has entered into a $30 million funding collaboration with Deerfield Management for the phase III studies of Avanafil for erectile dysfunction (ED). Under the terms of the agreements, Deerfield would provide funds for the phase III programmes for avanafil, a fast-acting, highly selective, phosphodiesterase type 5 inhibitor (PDE5i) for the treatment of ED.

The $30 million in funding will be provided by Deerfield from two sources -$20 million under a royalty and funding agreement and $10 million from the sale of Vivus common stock. Vivus has granted Deerfield a royalty interest on sales of MUSE, a product currently marketed for the treatment of ED.

"The collaboration with Deerfield allows us to move avanafil into the phase III clinical trials on a timely basis. The funding collaboration provides us with financial flexibility and allows us to leverage the MUSE franchise for the benefit of avanafil development. Deerfield is a well-respected healthcare investment organization. Their interest in avanafil for ED and in becoming a shareholder of Vivus is significant," said Leland Wilson, president and chief executive officer, Vivus. "The market for ED therapies continues to grow. In 2007, sales of all PDE5i's exceeded $3 billion, an increase of 15 per cent over the previous year. Given the profile of avanafil and the results seen to date, we believe that if approved, avanafil could offer patients suffering from ED a satisfying treatment alternative."

Vivus previously reported the results of the phase II study of avanafil in men with erectile dysfunction (ED) were positive. The phase II study was a multicentre, double-blind, randomized, parallel-design study conducted to assess the safety and efficacy of different doses of avanafil for the treatment of ED. Patients were instructed to attempt sexual intercourse 30 minutes after taking avanafil, with no restrictions on food or alcohol consumption. Results showed that up to 84 per cent of avanafil doses resulted in erections sufficient for vaginal penetration, as compared to placebo (p less than 0.001). Following a four-week, non-treatment run-in period, 284 patients were treated for 12-weeks with placebo or avanafil at various doses. The primary endpoints used to assess treatment efficacy included the percentage of erections sufficient for vaginal penetration and the percentage of erections lasting long enough for successful intercourse.

Avanafil produced erections sufficient for vaginal penetration on 76, 79, 80 and 84 per cent of sexual attempts on the 50, 100, 200 and 300 mg doses, respectively (p less than 0.05). Erections lasting long enough for successful intercourse were achieved on 54, 59, 62 and 64 per cent of attempts, respectively (p less than 0.0001). Avanafil was well tolerated with headache being the most commonly recorded adverse event. No serious adverse events were reported during the study.

"Avanafil has a proven mechanism of action and a unique and attractive profile," said Howard Furst, M.D., a partner at Deerfield Management. "We are pleased to have entered into this collaboration with Vivus that provides full funding for phase 3 while avoiding significant shareholder dilution."

Under the terms of the royalty and funding agreement, Deerfield would provide Vivus $20 million of funding in the first 18 months of the collaboration. In consideration for the funding, Deerfield will receive a royalty on product sales of MUSE and if approved, product sales of avanafil. Vivus and Deerfield have also entered into an option and put agreement that allows Vivus to purchase the royalty stream from Deerfield and allows Deerfield, under certain conditions, to require Vivus to purchase the royalty stream from Deerfield.

Vivus, entirely at its discretion, can buy back the royalty stream at any time in the first three years of the collaboration for $25 million. In the fourth year, the purchase price increases to $28 million. For this purchase right, Vivus would make a $2 million upfront payment to Deerfield which will be credited to the purchase price if Vivus exercises its purchase option. Beginning the fourth year, Deerfield will have the right to sell its interests to Vivus for a minimum of $17 million. Under certain circumstances, including a change in control, the right to sell the interests back to Vivus held by Deerfield accelerates at amounts consistent with the Vivus purchase rights. Once the royalty stream has been acquired by Vivus, no additional royalty payments will be made to Deerfield.