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. Under the terms of the royalty and funding agreement, Deerfield will 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 will make a $2 million upfront payment to Deerfield which will be credited to the purchase price if Vivus exercises its purchase option.
In 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.
Leland Wilson, president and CEO of Vivus, said: “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.”