License, Commercialization and Supply Agreements	12 Months Ended
Dec. 31, 2013
License, Commercialization and Supply Agreements
License, Commercialization and Supply Agreements	Note 11. Collaboration Agreements Menarini Group On July 5, 2013, the Company entered into a License and Commercialization Agreement, or the Menarini License Agreement, with Menarini Group through its subsidiary Berlin-Chemie AG, or Menarini, to commercialize and promote SPEDRA for the treatment of ED in over 40 European countries, including the EU, plus Australia and New Zealand. VIVUS and Menarini also entered into a Commercial Supply Agreement, or the Menarini Supply Agreement, whereby VIVUS will supply Menarini with SPEDRA drug product. The Company agreed to transfer to Menarini ownership of the European Union marketing authorization for SPEDRA for the treatment of erectile dysfunction, which was granted by the European Commission in June 2013. Each party agreed not to develop, commercialize, or in-license any other product that operates as phosphodiesterase type-5 inhibitor for the treatment of erectile dysfunction for a limited time period, subject to certain exceptions. Under the Menarini License Agreement, the Company is entitled to receive upfront payments, and various approval and sales milestones, plus royalties on SPEDRA sales. Menarini will also reimburse the Company for payments made to cover various obligations to MTPC during the term of the Menarini License Agreement. The Menarini License Agreement will terminate on a country-by-country basis in the relevant territories upon the latest to occur of the following: (i) the expiration of the last-to-expire valid VIVUS patent covering SPEDRA; (ii) the expiration of data protection covering SPEDRA; or (iii) ten (10) years after the SPEDRA product launch. In addition, Menarini may terminate the Menarini License Agreement if certain additional regulatory obligations are imposed on SPEDRA, and the Company may terminate the Menarini License Agreement if Menarini challenges VIVUS's patents covering SPEDRA or if Menarini commits certain legal violations. Either party may terminate the Menarini License Agreement for the other party's uncured material breach or bankruptcy. Under the terms of the Menarini Supply Agreement, the Company will supply Menarini with STENDRA drug product until December 31, 2018, at the latest. Menarini also has the right to manufacture STENDRA independently, provided that it continues to satisfy certain minimum purchase obligations to VIVUS. Following the expiration of the Menarini Supply Agreement, Menarini will be responsible for its own supply of STENDRA. Either party may terminate the Menarini Supply Agreement for the other party's uncured material breach or bankruptcy, or upon the termination of the Menarini License Agreement. Upon the signing of the Menarini License Agreement, the Company received a payment of €6.7 million, (€8 million, net of approximately 16% reimbursable withholding tax), for the non-refundable, non-creditable license fee, as well as a payment of €6.7 million, (€8 million, net of approximately 16% reimbursable withholding tax), for a regulatory milestone payment, related to the approval of the SPEDRA marketing authorization by the European Commission. Although this payment was described in the Menarini License Agreement as a regulatory milestone payment for obtaining marketing authorization in the EU, it is essentially an additional license fee because the approval by the European Commission was obtained prior to the final execution of the Menarini License Agreement. In addition, in October 2013, VIVUS received another payment of €6.7 million, (€8 million, net of approximately 16% reimbursable withholding tax), as a prepayment for future royalties on sales of SPEDRA. This prepayment amount of €8 million, or $10.6 million, has been recorded as deferred revenue as of December 31, 2013, and will be recognized as royalty income when earned. For the year ended December 31, 2013, VIVUS recognized €16.0 million, or $21.0 million, as license revenue, as the Company determined that revenue was earned upon the delivery of the license rights and related know-how. Under the Menarini Supply Agreement, VIVUS will supply the SPEDRA drug product to Menarini on a cost-plus basis. In accordance with ASC 605-25, VIVUS identified the license and related know-how and supply services as separate deliverables under the agreements. The Company determined that the license and related know-how and supply services individually represent separate units of accounting because each deliverable has stand-alone value. The Company determined that the license and related know-how have stand-alone value based on various facts and circumstances in the arrangement, including Menarini's option to sublicense. Although Menarini is precluded from reselling the license, Menarini's ability to use the delivered license and related know-how for its intended purpose without the receipt of the remaining deliverable indicated that the license and related know-how have stand-alone value. VIVUS determined that the supply services have stand-alone value because: (i) the manufacturing process is not proprietary to the Company; (ii) a third-party manufacturer produces the product, and (iii) Menarini may at any time with notice to the Company elect to accept assignment of VIVUS's agreements with the third-party manufacturer, or manufacture the licensed product itself or contract with a third-party manufacturer to produce it. The Company allocated the non-contingent consideration relating to the stand-alone, non-contingent deliverables on the basis of relative selling price, which is BESP because VSOE or TPE are unavailable for these deliverables. The objective of BESP is to determine the price at which the Company would transact a sale if the product or service were sold on a stand-alone basis. BESP for the license is based on discounted future projected cash flows relating to the licensed territories. Revenue related to the license was recognized in 2013 when the license and all related knowledge and data had been transferred. BESP for the supply services is based on third-party costs to manufacture the licensed product, plus a mark-up consistent with similar agreements. Revenues allocated to the supply services will be recognized when the product has met all required specifications and the related title and risk of loss and damages have been transferred to Menarini. The Company has determined that achievement of any and all of the milestones is dependent solely upon the results of Menarini and therefore none of the milestones are deemed to be substantive. Royalties to be received from Menarini will be recognized by the Company based upon the net sales of the product by Menarini. As of December 31, 2013, $5.1 million in revenue from the initial product delivered in 2013 under the Menarini Supply Agreement has been deferred until the product has met all required specifications and the related title and risk of loss and damages have been transferred. Auxilium Pharmaceuticals, Inc. On October 10, 2013, the Company entered into a license and commercialization agreement, or the Auxilium License Agreement, and a commercial supply agreement, or the Auxilium Supply Agreement, whereby VIVUS will supply Auxilium with STENDRA drug product. Under the terms of the Auxilium License Agreement, Auxilium received an exclusive license to commercialize and promote VIVUS's drug STENDRA (avanafil) for the treatment of erectile dysfunction in the United States and Canada and their respective territories, or the Auxilium Territory. Each party agreed not to develop, commercialize, or in-license any other product that operates as a PDE5 inhibitor for the treatment of erectile dysfunction in the Territory for a limited time period, subject to certain exceptions. A PDE5 inhibitor means any product that operates as a phosphodiesterase type 5 inhibitor. Auxilium received an exclusive license, with a right to sublicense, subject to certain limitations, under certain of VIVUS's trademarks, including STENDRA, to market, sell and distribute STENDRA for the treatment of erectile dysfunction in the Auxilium Territory. In addition, Auxilium received an exclusive license, with a right to sublicense, subject to certain limitations, under certain of VIVUS's patents and know-how (i) to use, distribute, import, promote, market, sell, offer for sale and otherwise commercialize STENDRA for the treatment of erectile dysfunction in the Auxilium Territory; (ii) to make and have made STENDRA anywhere in the world, with certain exceptions, where STENDRA is solely for use or sale for the treatment of erectile dysfunction in the Auxilium Territory; and (iii) to conduct certain development activities on STENDRA for the treatment of erectile dysfunction in support of obtaining regulatory approval in the Auxilium Territory. Auxilium will obtain STENDRA exclusively from VIVUS for a mutually agreed term pursuant to the Auxilium Supply Agreement, as further described below. Auxilium may elect to transfer the control of the supply chain for STENDRA for the Territory to itself or its designee by assigning to Auxilium VIVUS's agreements with the contract manufacturer, which is referred to below as the Supply Chain Transfer. At VIVUS's sole cost and expense, VIVUS shall be responsible for preparing and filing with the FDA the appropriate documents to obtain a label expansion for STENDRA referencing a specific time of onset claim. VIVUS shall use commercially reasonable efforts to obtain approval of such label expansion filing. Further, VIVUS shall be responsible for conducting any post-regulatory studies of STENDRA that are required by the FDA in the Territory. Such costs will be split equally between the parties up to a specified amount and then, once the specified amount is reached, VIVUS shall be solely responsible for the remainder of the costs. The Auxilium License Agreement will terminate on a country-by-country basis upon the later to occur of the following: (a) ten (10) years after the STENDRA product launch in such country; or (b) the expiration of the last-to-expire patents within the VIVUS patents covering STENDRA in such country. In addition, Auxilium may terminate the Auxilium License Agreement (i) for any reason following the one (1) year anniversary of the STENDRA launch in the U.S upon one hundred eighty (180) days written notice; and (ii) upon the entry of a generic avanafil product into the market upon thirty (30) days written notice. VIVUS may terminate the Auxilium License Agreement (i) immediately upon written notice to Auxilium if Auxilium is excluded from participation in the U.S. federal healthcare programs and fails to cure such exclusion within one hundred twenty (120) days; and (ii) if Auxilium challenges the VIVUS patents covering STENDRA upon written notice to Auxilium. Either party may terminate the Auxilium License Agreement for the other party's uncured material breach or bankruptcy. Under the terms of the Auxilium Supply Agreement, VIVUS will supply Auxilium with STENDRA drug product until December 31, 2018, at the latest. For 2015 and each subsequent year during the term of the Auxilium Supply Agreement, if Auxilium fails to purchase an agreed minimum purchase amount of STENDRA from VIVUS, it will reimburse VIVUS for the shortfall as it relates to VIVUS's out-of-pocket costs to acquire certain raw materials needed to manufacture STENDRA. Either party may terminate the Auxilium Supply Agreement for the other party's uncured material breach or bankruptcy, or upon the termination of the Auxilium License Agreement. The Auxilium Supply Agreement will automatically terminate upon completion of the Supply Chain Transfer, as described above. Under the terms of the Auxilium License Agreement, VIVUS received an upfront license fee of $30.0 million. The Company is eligible to receive a regulatory milestone payment of $15.0 million upon approval by the FDA of a specific time of onset claim for STENDRA in the Auxilium Territory. In addition, the Company is eligible to receive up to an aggregate of $255.0 million in potential milestone payments based on certain net sales targets by Auxilium. Further, the Company will receive royalty payments based on tiered percentages of the aggregate annual net sales of STENDRA in the Auxilium Territory on a quarterly basis. The percentage of Auxilium's aggregate annual net sales to be paid to the Company increases in accordance with the achievement of specific thresholds of aggregate annual net sales of STENDRA in the Auxilium Territory. If Auxilium's net sales of STENDRA in a country are reduced by certain amounts following the entry of a generic product to the market, royalty payments will be reduced by certain percentages based on such reductions. Auxilium will also reimburse the Company for payments made to cover various obligations to MTPC during the term of the Auxilium License Agreement. For the year ended December 31, 2013, VIVUS recognized $30.4 million as license revenue, as the Company determined that revenue was earned upon the delivery of the license rights and related know-how. Under the Auxilium Supply Agreement, VIVUS supplies the STENDRA drug product to Auxilium on a cost-plus basis. In accordance with ASC 605-25, VIVUS identified the license and related know-how and supply services as separate deliverables under the agreements. The Company determined that the license and related know-how and supply services individually represent separate units of accounting because each deliverable has stand-alone value. The Company determined that the license and related know-how have stand-alone value based on various facts and circumstances in the arrangement, including Auxilium's option to sublicense. Although Auxilium is precluded from reselling the license, Auxilium's ability to use the delivered license and related know-how for its intended purpose without the receipt of the remaining deliverable indicated that the license and related know-how have stand-alone value. VIVUS determined that the supply services have stand-alone value because: (i) the manufacturing process is not proprietary to the Company; (ii) a third-party manufacturer produces the product, and (iii) Auxilium may at any time with notice to the Company elect to accept assignment of VIVUS's agreements with the third-party manufacturer, or manufacture the licensed product itself or contract with a third-party manufacturer to produce it. The Company allocated the non-contingent consideration relating to the stand-alone non-contingent deliverables on the basis of relative selling price, which is BESP because VSOE or TPE are unavailable for these deliverables. The objective of BESP is to determine the price at which the Company would transact a sale if the product or service were sold on a stand-alone basis. BESP for the license is based on discounted future projected cash flows relating to the licensed territories. Revenue related to the license was recognized in the fourth quarter of 2013, when the license and all related knowledge and data had been transferred. BESP for the supply services is based on third-party costs to manufacture the licensed product, plus a mark-up consistent with similar agreements. Revenues allocated to the supply services will be recognized when the product has met all required specifications and the related title and risk of loss and damages have been transferred to Auxilium. The Company has determined that the achievement of the regulatory milestone payment of $15.0 million upon approval by the FDA of a specific time of onset claim for STENDRA is contingent upon both the Company's completion of the study reports and upon FDA approval of the label expansion filing, resulting from the Company's efforts. At the time of the agreement, there was substantive uncertainty that the time of onset claim and label expansion filing would be approved, which are required for the additional milestone payment. In addition, the Company has determined that achievement of any and all of the potential net sales milestones is dependent solely upon the results of Auxilium and therefore none of the net sales milestones are deemed to be substantive. Royalties to be received from Auxilium will be recognized by the Company based upon the net sales of the product by Auxilium. For the year ended December 31, 2013, $1.1 million in net product revenue was recognized from initial product delivered under the Auxilium Supply Agreement. Sanofi On December 11, 2013, the Company entered into a license and commercialization agreement, or the Sanofi License Agreement, with Sanofi. Effective as of December 11, 2013, the Company entered into a supply agreement, or the Sanofi Supply Agreement, with Sanofi Winthrop Industrie, a wholly owned subsidiary of Sanofi. Under the terms of the Sanofi License Agreement, Sanofi received an exclusive license to commercialize and promote VIVUS's drug avanafil for therapeutic use in humans in Africa, the Middle East—Turkey and Eurasia, or the Sanofi Territory. During the term of the License Agreement, each party agreed not to develop, commercialize, or in-license any other product that operates as a phosphodiesterase type-5 inhibitor for therapeutic use in humans in the Sanofi Territory for a limited time period, subject to certain exceptions. In December 2013, the Company received an upfront license fee of $5.0 million and a $1.5 million manufacturing milestone payment. The Company is also eligible to receive up to an additional $3.5 million in manufacturing milestone payments, up to $6.0 million in regulatory milestone payments, and up to $45.0 million in sales milestone payments, plus royalties on avanafil sales based on tiered percentages of the aggregate annual net sales in the Sanofi Territory. Sanofi will also reimburse the Company for a portion of any sales milestone paid by VIVUS to MTPC based on the share of Sanofi's net sales in the total worldwide net sales amount triggering the payment of such sales milestone. Royalty payment obligations under the Sanofi License Agreement will be payable for avanafil in each country in the Sanofi Territory until the later to occur of (i) the expiration of the last-to-expire valid claim within the VIVUS patents that, absent the licenses granted to Sanofi under the Sanofi License Agreement, would be infringed by the sale of avanafil in such country; and (ii) December 11, 2029, or the Sanofi Royalty Payment Term. The Sanofi License Agreement will terminate as follows: (i) as to avanafil in each country in the Sanofi Territory, upon the expiration of the Sanofi Royalty Payment Term with respect to avanafil in such country, provided however, that Sanofi's obligation to reimburse VIVUS for Sanofi's pro-rata share of any sales milestone paid by the Company to MTPC will survive if such sales milestone has not yet come due; and (ii) in its entirety, upon the expiration of all royalty payment obligations arising under the Sanofi License Agreement in all countries in the Sanofi Territory. In addition, the Company may terminate the Sanofi License Agreement immediately upon written notice to Sanofi on a country-by-country basis if Sanofi becomes subject to certain regulatory actions or legal restrictions. The Company may also terminate the Sanofi License Agreement in its entirety upon written notice to Sanofi if Sanofi or any affiliate commences any action or proceeding that challenges the validity, enforceability or scope of any VIVUS patent in the Sanofi Territory or any country outside of the Sanofi Territory, or if a similar action is instituted by a sublicensee and Sanofi does not terminate the sublicense after being aware of such action for a specified period. Further, Sanofi may terminate the Sanofi License Agreement in whole or on a country-by-country basis for convenience at any time upon advance notice to the Company. Either party may terminate the Sanofi License Agreement for the other party's uncured material breach, or bankruptcy or related actions or proceedings. In the event of an uncured material breach by the Company, Sanofi may, in lieu of terminating the Sanofi License Agreement in its entirety, elect to continue the Sanofi License Agreement in full force and effect except (i) the Company will have no further rights to receive certain commercialization reports, and (ii) Sanofi may set off any payments or amounts due by Sanofi but not yet paid to the Company against all direct and undisputed damages suffered by Sanofi as a result of the breach. Under the terms of the Sanofi Supply Agreement, the Company will supply Sanofi Winthrop Industrie with avanafil tablets until June 30, 2015, or in the event the obligations of MTPC to supply avanafil tablets to us are amended to extend beyond June 30, 2015, then until the expiration of the MTPC supply obligations as amended. Either party may terminate the Sanofi Supply Agreement for (i) the other party's uncured material breach, or (ii) bankruptcy, insolvency, liquidation or certain receivership proceedings, or certain proceedings for reorganization under bankruptcy or comparable laws. In addition, the Sanofi Supply Agreement will automatically terminate upon the termination of the Sanofi License Agreement. For the year ended December 31, 2013, VIVUS recognized $4.4 million in license revenue, as the Company determined that revenue was earned upon the delivery of the license rights and related know-how. Under the Sanofi Supply Agreement, VIVUS supplies the SPEDRA drug product to Sanofi on a cost-plus basis. For the year ended December 31, 2013, $446,000 in net product revenue was recognized from initial product delivered under the Sanofi Supply Agreement. As of December 31, 2013, the Company deferred $1.6 million of the manufacturing milestone payment received in 2013 from Sanofi, allocable to non-contingent product deliverables based on relative estimated selling prices, which were later supplied in the first quarter of 2014. In accordance with ASC 605-25, VIVUS identified the license and related know-how and supply services as separate deliverables under the agreements. The Company determined that the license and related know-how and supply services individually represent separate units of accounting because each deliverable has stand-alone value. The Company determined that the license and related know-how have stand-alone value based on various facts and circumstances in the arrangement, including Sanofi's option to sublicense. Although Sanofi is precluded from reselling the license, Sanofi's ability to use the delivered license and related know-how for its intended purpose without the receipt of the remaining deliverable indicated that the license and related know-how have stand-alone value. The Company determined that the supply services have stand-alone value because: (i) the manufacturing process is not proprietary to the Company; (ii) a third-party manufacturer produces the product, and (iii) Sanofi may at any time with notice to the Company elect to accept assignment of the Company's agreements with the third-party manufacturer (including agreements with Sanofi subsidiaries), or manufacture the licensed product itself, or contract with a third-party manufacturer to produce it. The Company allocated the non-contingent consideration relating to the stand-alone non-contingent deliverables on the basis of relative selling price, which is BESP because VSOE or TPE are unavailable for these deliverables. The objective of BESP is to determine the price at which the Company would transact a sale if the product or service were sold on a stand-alone basis. BESP for the license is based on discounted future projected cash flows relating to the licensed territories. Revenue related to the license was recognized in the fourth quarter of 2013, when the license and all related knowledge and data had been transferred. BESP for the supply services is based on third-party costs to manufacture the licensed product, plus a mark-up consistent with similar agreements. Revenues allocated to the supply services will be recognized when the product has met all required specifications and the related title and risk of loss and damages have been transferred to Sanofi. The Company has determined that achievement of any and all of the milestones is dependent solely upon the results of Sanofi and therefore none of the milestones are deemed to be substantive. Royalties to be received from Sanofi will be recognized by the Company based upon the net sales of the product by Sanofi. On July 31, 2013, VIVUS entered into a Commercial Supply Agreement with Sanofi Chimie, a wholly owned subsidiary of Sanofi, or the Sanofi Chimie Supply Agreement, pursuant to which Sanofi Chimie will manufacture and supply the active pharmaceutical ingredient for VIVUS's drug avanafil. Under the terms of the Sanofi Chimie Supply Agreement, Sanofi Chimie will manufacture and supply the active pharmaceutical ingredient, or API, for VIVUS's drug avanafil on an exclusive basis in the United States and other territories and on a semi-exclusive basis in Europe, including the EU, and Latin America. Each year, VIVUS must purchase a minimum quantity of API from Sanofi Chimie. The Sanofi Chimie Supply Agreement has an initial five year term commencing on January 1, 2014 and will auto-renew for additional two-year periods unless either party makes a timely election not to renew. Either party may terminate the Sanofi Chimie Supply Agreement for the other party's uncured material breach or bankruptcy or in the event of a persistent force majeure event. On November 18, 2013, the Company entered into a Manufacturing and Supply Agreement, effective as of September 1, 2013, with Sanofi Winthrop Industrie, or Sanofi Winthrop, a wholly owned subsidiary of Sanofi, or the Sanofi Winthrop Supply Agreement. Under the terms of the Sanofi Winthrop Supply Agreement, Sanofi Winthrop will manufacture and supply the tablets for VIVUS's drug avanafil on an exclusive basis in the United States and other territories and on a semi-exclusive basis in Europe, including the EU, Latin America and other territories. Beginning in 2015, VIVUS must purchase a minimum quantity of tablets each year for its drug avanafil from Sanofi Winthrop. The Sanofi Winthrop Supply Agreement has an initial term commencing on September 1, 2013 and continuing for a period of five years after the date of the first commercial sale, and will auto-renew for additional two-year periods unless either party makes a timely election not to renew. Either party may terminate the Sanofi Winthrop Supply Agreement for the other party's uncured material breach or bankruptcy or in the event of a persistent force majeure event. In addition, the parties may mutually agree to terminate the Sanofi Winthrop Supply Agreement if (i) Sanofi Winthrop is unable to manufacture and deliver the required number of validation batches meeting the specifications within the time period specified in the technology transfer master plan, or (ii) registration of Sanofi Winthrop as the manufacturer and supplier for the tablets for VIVUS's drug avanafil fails. Mitsubishi Tanabe Pharma Corporation In January 2001, the Company entered into an exclusive development, license and clinical trial and commercial supply agreement with MTPC for the development and commercialization of avanafil, a PDE5 inhibitor compound for the oral and local treatment of male and female sexual dysfunction. Under the terms of the agreement, MTPC agreed to grant an exclusive license to us for products containing avanafil outside of Japan, North Korea, South Korea, China, Taiwan, Singapore, Indonesia, Malaysia, Thailand, Vietnam and the Philippines. The Company agreed to grant MTPC an exclusive, royalty-free license within those countries for oral products that it develops containing avanafil. In addition, the Company agreed to grant MTPC an exclusive option to obtain an exclusive, royalty-bearing license within those countries for non-oral products that it develops containing avanafil. MTPC agreed to manufacture and supply VIVUS with avanafil for use in clinical trials, which were the Company's primary responsibility. The MTPC agreement contains a number of milestone payments to be made by the Company based on various triggering events. Through December 31, 2013, under the terms of the MTPC agreement, the Company has paid a total of $15.0 million in milestone payments to MTPC, including $2.0 million in 2013 upon approval of SPEDRA (avanafil) in the EU and $3.0 million in 2012 upon FDA approval of STENDRA (avanafil) in the U.S. In addition, during 2013 and 2012, the Company purchased $9.9 million and $7.4 million, respectively, of product from MTPC under the supply portion of the Agreement in preparation for the commercial launch in the U.S., the EU and certain other territories that use the U.S. and EU approvals. The Company expects to make other substantial payments to MTPC in accordance with the MTPC agreement as VIVUS and its sublicensees continue to commercialize avanafil for the oral treatment of male sexual dysfunction in its territories. Potential future milestone payments include $6.0 million upon the achievement of $250.0 million or more in worldwide net sales during any calendar year. The term of the MTPC agreement is based on a country-by-country and on a product-by-product basis. The term shall continue until the later of (i) 10 years after the date of the first sale for a particular product, or (ii) the expiration of the last-to-expire patents within the MTPC patents covering such product in such country. In the event that VIVUS's product is deemed to be (i) insufficiently effective or insufficiently safe relative to other PDE5 inhibitor compounds based on published information, or (ii) not economically feasible to develop due to unforeseen regulatory hurdles or costs as measured by standards common in the pharmaceutical industry for this type of product, the Company has the right to terminate the agreement with MTPC with respect to such product. In August 2012, the Company entered into an amendment to its agreement with MTPC that permits VIVUS to manufacture the API and tablets for STENDRA itself or through third parties. According to the amendment, the transition of manufacturing from MTPC must occur on or before June 30, 2015. On July 31, 2013, as mentioned above, VIVUS entered into a Commercial Supply Agreement with Sanofi Chimie to manufacture and supply the API for avanafil on an exclusive basis in the United States and other territories and on a semi-exclusive basis in Europe, including the EU, Latin America and other territories. Further, as mentioned above, on November 18, 2013, the Company entered into a Manufacturing and Supply Agreement with Sanofi Winthrop Industrie to manufacture and supply the avanafil tablets on an exclusive basis in the United States and other territories and on a semi-exclusive basis in Europe, including the EU, Latin America and other territories. The Company intends to submit an amendment to the NDA for avanafil to the FDA, and the marketing authorization, or MA, for avanafil to the EMA, to include Sanofi Chimie as a qualified supplier of the avanafil API and Sanofi Winthrop Industrie as a qualified supplier of the avanafil tablets. On February 21, 2013, the Company entered into the third amendment to its agreement with MTPC which, among other things, expands VIVUS's rights, or those of VIVUS's sublicensees, to enforce the patents licensed under the MTPC agreement against alleged infringement, and clarifies the rights and duties of the parties and VIVUS's sublicensees upon termination of the MTPC agreement. In addition, the Company was obligated to use its best commercial efforts to market STENDRA in the U.S. by December 31, 2013, which was achieved by its commercialization partner, Auxilium. On July 23, 2013, the Company entered into the fourth amendment to its agreement with MTPC which, among other things, changes the definition of net sales used to calculate royalties owed by the Company to MTPC. Other In October 2001, the Company entered into an assignment agreement, or the Assignment Agreement, with Thomas Najarian, M.D., for a combination of pharmaceutical agents for the treatment of obesity and other disorders, or the Combination Therapy, that has since been the focus of the Company's investigational drug candidate development program for Qsymia for the treatment of obesity, obstructive sleep apnea and diabetes. The Combination Therapy and all related patent applications, or the Patents, were transferred to VIVUS with worldwide rights to develop and commercialize the Combination Therapy and exploit the Patents. Pursuant to the Assignment Agreement, through December 31, 2013, the Company has paid a total of $1.2 million and has issued fully vested and exercisable options to purchase 60,000 shares of VIVUS's common stock to Dr. Najarian. In addition, the Assignment Agreement requires the Company to pay royalties on worldwide net sales of a product for the treatment of obesity that is based upon the Combination Therapy and Patents until the last-to-expire of the assigned Patents. To the extent that the Company decides not to commercially exploit the Patents, the Assignment Agreement will terminate and the Combination Therapy and Patents will be assigned back to Dr. Najarian. In 2006, Dr. Najarian joined the Company as a part-time employee and served as a Principal Scientist. In November 2013, Dr. Najarian's employment with the Company ended although he continues to work for VIVUS on a consulting basis.

Note 11. Collaboration Agreements

Menarini Group

On July 5, 2013, the Company entered into a License and Commercialization Agreement, or the Menarini License Agreement, with Menarini Group through its subsidiary Berlin-Chemie AG, or Menarini, to commercialize and promote SPEDRA for the treatment of ED in over 40 European countries, including the EU, plus Australia and New Zealand. VIVUS and Menarini also entered into a Commercial Supply Agreement, or the Menarini Supply Agreement, whereby VIVUS will supply Menarini with SPEDRA drug product.

The Company agreed to transfer to Menarini ownership of the European Union marketing authorization for SPEDRA for the treatment of erectile dysfunction, which was granted by the European Commission in June 2013. Each party agreed not to develop, commercialize, or in-license any other product that operates as phosphodiesterase type-5 inhibitor for the treatment of erectile dysfunction for a limited time period, subject to certain exceptions.

Under the Menarini License Agreement, the Company is entitled to receive upfront payments, and various approval and sales milestones, plus royalties on SPEDRA sales. Menarini will also reimburse the Company for payments made to cover various obligations to MTPC during the term of the Menarini License Agreement. The Menarini License Agreement will terminate on a country-by-country basis in the relevant territories upon the latest to occur of the following: (i) the expiration of the last-to-expire valid VIVUS patent covering SPEDRA; (ii) the expiration of data protection covering SPEDRA; or (iii) ten (10) years after the SPEDRA product launch. In addition, Menarini may terminate the Menarini License Agreement if certain additional regulatory obligations are imposed on SPEDRA, and the Company may terminate the Menarini License Agreement if Menarini challenges VIVUS's patents covering SPEDRA or if Menarini commits certain legal violations. Either party may terminate the Menarini License Agreement for the other party's uncured material breach or bankruptcy.

Under the terms of the Menarini Supply Agreement, the Company will supply Menarini with STENDRA drug product until December 31, 2018, at the latest. Menarini also has the right to manufacture STENDRA independently, provided that it continues to satisfy certain minimum purchase obligations to VIVUS. Following the expiration of the Menarini Supply Agreement, Menarini will be responsible for its own supply of STENDRA. Either party may terminate the Menarini Supply Agreement for the other party's uncured material breach or bankruptcy, or upon the termination of the Menarini License Agreement.

Upon the signing of the Menarini License Agreement, the Company received a payment of €6.7 million, (€8 million, net of approximately 16% reimbursable withholding tax), for the non-refundable, non-creditable license fee, as well as a payment of €6.7 million, (€8 million, net of approximately 16% reimbursable withholding tax), for a regulatory milestone payment, related to the approval of the SPEDRA marketing authorization by the European Commission. Although this payment was described in the Menarini License Agreement as a regulatory milestone payment for obtaining marketing authorization in the EU, it is essentially an additional license fee because the approval by the European Commission was obtained prior to the final execution of the Menarini License Agreement. In addition, in October 2013, VIVUS received another payment of €6.7 million, (€8 million, net of approximately 16% reimbursable withholding tax), as a prepayment for future royalties on sales of SPEDRA. This prepayment amount of €8 million, or $10.6 million, has been recorded as deferred revenue as of December 31, 2013, and will be recognized as royalty income when earned.

For the year ended December 31, 2013, VIVUS recognized €16.0 million, or $21.0 million, as license revenue, as the Company determined that revenue was earned upon the delivery of the license rights and related know-how. Under the Menarini Supply Agreement, VIVUS will supply the SPEDRA drug product to Menarini on a cost-plus basis.

In accordance with ASC 605-25, VIVUS identified the license and related know-how and supply services as separate deliverables under the agreements. The Company determined that the license and related know-how and supply services individually represent separate units of accounting because each deliverable has stand-alone value. The Company determined that the license and related know-how have stand-alone value based on various facts and circumstances in the arrangement, including Menarini's option to sublicense. Although Menarini is precluded from reselling the license, Menarini's ability to use the delivered license and related know-how for its intended purpose without the receipt of the remaining deliverable indicated that the license and related know-how have stand-alone value.

VIVUS determined that the supply services have stand-alone value because: (i) the manufacturing process is not proprietary to the Company; (ii) a third-party manufacturer produces the product, and (iii) Menarini may at any time with notice to the Company elect to accept assignment of VIVUS's agreements with the third-party manufacturer, or manufacture the licensed product itself or contract with a third-party manufacturer to produce it.

The Company allocated the non-contingent consideration relating to the stand-alone, non-contingent deliverables on the basis of relative selling price, which is BESP because VSOE or TPE are unavailable for these deliverables. The objective of BESP is to determine the price at which the Company would transact a sale if the product or service were sold on a stand-alone basis. BESP for the license is based on discounted future projected cash flows relating to the licensed territories. Revenue related to the license was recognized in 2013 when the license and all related knowledge and data had been transferred. BESP for the supply services is based on third-party costs to manufacture the licensed product, plus a mark-up consistent with similar agreements. Revenues allocated to the supply services will be recognized when the product has met all required specifications and the related title and risk of loss and damages have been transferred to Menarini. The Company has determined that achievement of any and all of the milestones is dependent solely upon the results of Menarini and therefore none of the milestones are deemed to be substantive. Royalties to be received from Menarini will be recognized by the Company based upon the net sales of the product by Menarini. As of December 31, 2013, $5.1 million in revenue from the initial product delivered in 2013 under the Menarini Supply Agreement has been deferred until the product has met all required specifications and the related title and risk of loss and damages have been transferred.

Auxilium Pharmaceuticals, Inc.

On October 10, 2013, the Company entered into a license and commercialization agreement, or the Auxilium License Agreement, and a commercial supply agreement, or the Auxilium Supply Agreement, whereby VIVUS will supply Auxilium with STENDRA drug product. Under the terms of the Auxilium License Agreement, Auxilium received an exclusive license to commercialize and promote VIVUS's drug STENDRA (avanafil) for the treatment of erectile dysfunction in the United States and Canada and their respective territories, or the Auxilium Territory.

Each party agreed not to develop, commercialize, or in-license any other product that operates as a PDE5 inhibitor for the treatment of erectile dysfunction in the Territory for a limited time period, subject to certain exceptions. A PDE5 inhibitor means any product that operates as a phosphodiesterase type 5 inhibitor.

Auxilium received an exclusive license, with a right to sublicense, subject to certain limitations, under certain of VIVUS's trademarks, including STENDRA, to market, sell and distribute STENDRA for the treatment of erectile dysfunction in the Auxilium Territory. In addition, Auxilium received an exclusive license, with a right to sublicense, subject to certain limitations, under certain of VIVUS's patents and know-how (i) to use, distribute, import, promote, market, sell, offer for sale and otherwise commercialize STENDRA for the treatment of erectile dysfunction in the Auxilium Territory; (ii) to make and have made STENDRA anywhere in the world, with certain exceptions, where STENDRA is solely for use or sale for the treatment of erectile dysfunction in the Auxilium Territory; and (iii) to conduct certain development activities on STENDRA for the treatment of erectile dysfunction in support of obtaining regulatory approval in the Auxilium Territory.

Auxilium will obtain STENDRA exclusively from VIVUS for a mutually agreed term pursuant to the Auxilium Supply Agreement, as further described below. Auxilium may elect to transfer the control of the supply chain for STENDRA for the Territory to itself or its designee by assigning to Auxilium VIVUS's agreements with the contract manufacturer, which is referred to below as the Supply Chain Transfer.

At VIVUS's sole cost and expense, VIVUS shall be responsible for preparing and filing with the FDA the appropriate documents to obtain a label expansion for STENDRA referencing a specific time of onset claim. VIVUS shall use commercially reasonable efforts to obtain approval of such label expansion filing. Further, VIVUS shall be responsible for conducting any post-regulatory studies of STENDRA that are required by the FDA in the Territory. Such costs will be split equally between the parties up to a specified amount and then, once the specified amount is reached, VIVUS shall be solely responsible for the remainder of the costs.

The Auxilium License Agreement will terminate on a country-by-country basis upon the later to occur of the following: (a) ten (10) years after the STENDRA product launch in such country; or (b) the expiration of the last-to-expire patents within the VIVUS patents covering STENDRA in such country. In addition, Auxilium may terminate the Auxilium License Agreement (i) for any reason following the one (1) year anniversary of the STENDRA launch in the U.S upon one hundred eighty (180) days written notice; and (ii) upon the entry of a generic avanafil product into the market upon thirty (30) days written notice. VIVUS may terminate the Auxilium License Agreement (i) immediately upon written notice to Auxilium if Auxilium is excluded from participation in the U.S. federal healthcare programs and fails to cure such exclusion within one hundred twenty (120) days; and (ii) if Auxilium challenges the VIVUS patents covering STENDRA upon written notice to Auxilium. Either party may terminate the Auxilium License Agreement for the other party's uncured material breach or bankruptcy.

Under the terms of the Auxilium Supply Agreement, VIVUS will supply Auxilium with STENDRA drug product until December 31, 2018, at the latest. For 2015 and each subsequent year during the term of the Auxilium Supply Agreement, if Auxilium fails to purchase an agreed minimum purchase amount of STENDRA from VIVUS, it will reimburse VIVUS for the shortfall as it relates to VIVUS's out-of-pocket costs to acquire certain raw materials needed to manufacture STENDRA. Either party may terminate the Auxilium Supply Agreement for the other party's uncured material breach or bankruptcy, or upon the termination of the Auxilium License Agreement. The Auxilium Supply Agreement will automatically terminate upon completion of the Supply Chain Transfer, as described above.

Under the terms of the Auxilium License Agreement, VIVUS received an upfront license fee of $30.0 million. The Company is eligible to receive a regulatory milestone payment of $15.0 million upon approval by the FDA of a specific time of onset claim for STENDRA in the Auxilium Territory. In addition, the Company is eligible to receive up to an aggregate of $255.0 million in potential milestone payments based on certain net sales targets by Auxilium. Further, the Company will receive royalty payments based on tiered percentages of the aggregate annual net sales of STENDRA in the Auxilium Territory on a quarterly basis. The percentage of Auxilium's aggregate annual net sales to be paid to the Company increases in accordance with the achievement of specific thresholds of aggregate annual net sales of STENDRA in the Auxilium Territory. If Auxilium's net sales of STENDRA in a country are reduced by certain amounts following the entry of a generic product to the market, royalty payments will be reduced by certain percentages based on such reductions. Auxilium will also reimburse the Company for payments made to cover various obligations to MTPC during the term of the Auxilium License Agreement.

For the year ended December 31, 2013, VIVUS recognized $30.4 million as license revenue, as the Company determined that revenue was earned upon the delivery of the license rights and related know-how. Under the Auxilium Supply Agreement, VIVUS supplies the STENDRA drug product to Auxilium on a cost-plus basis.

In accordance with ASC 605-25, VIVUS identified the license and related know-how and supply services as separate deliverables under the agreements. The Company determined that the license and related know-how and supply services individually represent separate units of accounting because each deliverable has stand-alone value. The Company determined that the license and related know-how have stand-alone value based on various facts and circumstances in the arrangement, including Auxilium's option to sublicense. Although Auxilium is precluded from reselling the license, Auxilium's ability to use the delivered license and related know-how for its intended purpose without the receipt of the remaining deliverable indicated that the license and related know-how have stand-alone value.

VIVUS determined that the supply services have stand-alone value because: (i) the manufacturing process is not proprietary to the Company; (ii) a third-party manufacturer produces the product, and (iii) Auxilium may at any time with notice to the Company elect to accept assignment of VIVUS's agreements with the third-party manufacturer, or manufacture the licensed product itself or contract with a third-party manufacturer to produce it.

The Company allocated the non-contingent consideration relating to the stand-alone non-contingent deliverables on the basis of relative selling price, which is BESP because VSOE or TPE are unavailable for these deliverables. The objective of BESP is to determine the price at which the Company would transact a sale if the product or service were sold on a stand-alone basis. BESP for the license is based on discounted future projected cash flows relating to the licensed territories. Revenue related to the license was recognized in the fourth quarter of 2013, when the license and all related knowledge and data had been transferred. BESP for the supply services is based on third-party costs to manufacture the licensed product, plus a mark-up consistent with similar agreements. Revenues allocated to the supply services will be recognized when the product has met all required specifications and the related title and risk of loss and damages have been transferred to Auxilium. The Company has determined that the achievement of the regulatory milestone payment of $15.0 million upon approval by the FDA of a specific time of onset claim for STENDRA is contingent upon both the Company's completion of the study reports and upon FDA approval of the label expansion filing, resulting from the Company's efforts. At the time of the agreement, there was substantive uncertainty that the time of onset claim and label expansion filing would be approved, which are required for the additional milestone payment. In addition, the Company has determined that achievement of any and all of the potential net sales milestones is dependent solely upon the results of Auxilium and therefore none of the net sales milestones are deemed to be substantive. Royalties to be received from Auxilium will be recognized by the Company based upon the net sales of the product by Auxilium. For the year ended December 31, 2013, $1.1 million in net product revenue was recognized from initial product delivered under the Auxilium Supply Agreement.

Sanofi

On December 11, 2013, the Company entered into a license and commercialization agreement, or the Sanofi License Agreement, with Sanofi. Effective as of December 11, 2013, the Company entered into a supply agreement, or the Sanofi Supply Agreement, with Sanofi Winthrop Industrie, a wholly owned subsidiary of Sanofi. Under the terms of the Sanofi License Agreement, Sanofi received an exclusive license to commercialize and promote VIVUS's drug avanafil for therapeutic use in humans in Africa, the Middle East—Turkey and Eurasia, or the Sanofi Territory. During the term of the License Agreement, each party agreed not to develop, commercialize, or in-license any other product that operates as a phosphodiesterase type-5 inhibitor for therapeutic use in humans in the Sanofi Territory for a limited time period, subject to certain exceptions.

In December 2013, the Company received an upfront license fee of $5.0 million and a $1.5 million manufacturing milestone payment. The Company is also eligible to receive up to an additional $3.5 million in manufacturing milestone payments, up to $6.0 million in regulatory milestone payments, and up to $45.0 million in sales milestone payments, plus royalties on avanafil sales based on tiered percentages of the aggregate annual net sales in the Sanofi Territory. Sanofi will also reimburse the Company for a portion of any sales milestone paid by VIVUS to MTPC based on the share of Sanofi's net sales in the total worldwide net sales amount triggering the payment of such sales milestone.

Royalty payment obligations under the Sanofi License Agreement will be payable for avanafil in each country in the Sanofi Territory until the later to occur of (i) the expiration of the last-to-expire valid claim within the VIVUS patents that, absent the licenses granted to Sanofi under the Sanofi License Agreement, would be infringed by the sale of avanafil in such country; and (ii) December 11, 2029, or the Sanofi Royalty Payment Term. The Sanofi License Agreement will terminate as follows: (i) as to avanafil in each country in the Sanofi Territory, upon the expiration of the Sanofi Royalty Payment Term with respect to avanafil in such country, provided however, that Sanofi's obligation to reimburse VIVUS for Sanofi's pro-rata share of any sales milestone paid by the Company to MTPC will survive if such sales milestone has not yet come due; and (ii) in its entirety, upon the expiration of all royalty payment obligations arising under the Sanofi License Agreement in all countries in the Sanofi Territory.

In addition, the Company may terminate the Sanofi License Agreement immediately upon written notice to Sanofi on a country-by-country basis if Sanofi becomes subject to certain regulatory actions or legal restrictions. The Company may also terminate the Sanofi License Agreement in its entirety upon written notice to Sanofi if Sanofi or any affiliate commences any action or proceeding that challenges the validity, enforceability or scope of any VIVUS patent in the Sanofi Territory or any country outside of the Sanofi Territory, or if a similar action is instituted by a sublicensee and Sanofi does not terminate the sublicense after being aware of such action for a specified period. Further, Sanofi may terminate the Sanofi License Agreement in whole or on a country-by-country basis for convenience at any time upon advance notice to the Company. Either party may terminate the Sanofi License Agreement for the other party's uncured material breach, or bankruptcy or related actions or proceedings. In the event of an uncured material breach by the Company, Sanofi may, in lieu of terminating the Sanofi License Agreement in its entirety, elect to continue the Sanofi License Agreement in full force and effect except (i) the Company will have no further rights to receive certain commercialization reports, and (ii) Sanofi may set off any payments or amounts due by Sanofi but not yet paid to the Company against all direct and undisputed damages suffered by Sanofi as a result of the breach.

Under the terms of the Sanofi Supply Agreement, the Company will supply Sanofi Winthrop Industrie with avanafil tablets until June 30, 2015, or in the event the obligations of MTPC to supply avanafil tablets to us are amended to extend beyond June 30, 2015, then until the expiration of the MTPC supply obligations as amended. Either party may terminate the Sanofi Supply Agreement for (i) the other party's uncured material breach, or (ii) bankruptcy, insolvency, liquidation or certain receivership proceedings, or certain proceedings for reorganization under bankruptcy or comparable laws. In addition, the Sanofi Supply Agreement will automatically terminate upon the termination of the Sanofi License Agreement.

For the year ended December 31, 2013, VIVUS recognized $4.4 million in license revenue, as the Company determined that revenue was earned upon the delivery of the license rights and related know-how. Under the Sanofi Supply Agreement, VIVUS supplies the SPEDRA drug product to Sanofi on a cost-plus basis. For the year ended December 31, 2013, $446,000 in net product revenue was recognized from initial product delivered under the Sanofi Supply Agreement. As of December 31, 2013, the Company deferred $1.6 million of the manufacturing milestone payment received in 2013 from Sanofi, allocable to non-contingent product deliverables based on relative estimated selling prices, which were later supplied in the first quarter of 2014.

In accordance with ASC 605-25, VIVUS identified the license and related know-how and supply services as separate deliverables under the agreements. The Company determined that the license and related know-how and supply services individually represent separate units of accounting because each deliverable has stand-alone value. The Company determined that the license and related know-how have stand-alone value based on various facts and circumstances in the arrangement, including Sanofi's option to sublicense. Although Sanofi is precluded from reselling the license, Sanofi's ability to use the delivered license and related know-how for its intended purpose without the receipt of the remaining deliverable indicated that the license and related know-how have stand-alone value.

The Company determined that the supply services have stand-alone value because: (i) the manufacturing process is not proprietary to the Company; (ii) a third-party manufacturer produces the product, and (iii) Sanofi may at any time with notice to the Company elect to accept assignment of the Company's agreements with the third-party manufacturer (including agreements with Sanofi subsidiaries), or manufacture the licensed product itself, or contract with a third-party manufacturer to produce it.

On July 31, 2013, VIVUS entered into a Commercial Supply Agreement with Sanofi Chimie, a wholly owned subsidiary of Sanofi, or the Sanofi Chimie Supply Agreement, pursuant to which Sanofi Chimie will manufacture and supply the active pharmaceutical ingredient for VIVUS's drug avanafil.

Under the terms of the Sanofi Chimie Supply Agreement, Sanofi Chimie will manufacture and supply the active pharmaceutical ingredient, or API, for VIVUS's drug avanafil on an exclusive basis in the United States and other territories and on a semi-exclusive basis in Europe, including the EU, and Latin America. Each year, VIVUS must purchase a minimum quantity of API from Sanofi Chimie.

The Sanofi Chimie Supply Agreement has an initial five year term commencing on January 1, 2014 and will auto-renew for additional two-year periods unless either party makes a timely election not to renew. Either party may terminate the Sanofi Chimie Supply Agreement for the other party's uncured material breach or bankruptcy or in the event of a persistent force majeure event.

On November 18, 2013, the Company entered into a Manufacturing and Supply Agreement, effective as of September 1, 2013, with Sanofi Winthrop Industrie, or Sanofi Winthrop, a wholly owned subsidiary of Sanofi, or the Sanofi Winthrop Supply Agreement. Under the terms of the Sanofi Winthrop Supply Agreement, Sanofi Winthrop will manufacture and supply the tablets for VIVUS's drug avanafil on an exclusive basis in the United States and other territories and on a semi-exclusive basis in Europe, including the EU, Latin America and other territories. Beginning in 2015, VIVUS must purchase a minimum quantity of tablets each year for its drug avanafil from Sanofi Winthrop.

The Sanofi Winthrop Supply Agreement has an initial term commencing on September 1, 2013 and continuing for a period of five years after the date of the first commercial sale, and will auto-renew for additional two-year periods unless either party makes a timely election not to renew. Either party may terminate the Sanofi Winthrop Supply Agreement for the other party's uncured material breach or bankruptcy or in the event of a persistent force majeure event. In addition, the parties may mutually agree to terminate the Sanofi Winthrop Supply Agreement if (i) Sanofi Winthrop is unable to manufacture and deliver the required number of validation batches meeting the specifications within the time period specified in the technology transfer master plan, or (ii) registration of Sanofi Winthrop as the manufacturer and supplier for the tablets for VIVUS's drug avanafil fails.

Mitsubishi Tanabe Pharma Corporation

In January 2001, the Company entered into an exclusive development, license and clinical trial and commercial supply agreement with MTPC for the development and commercialization of avanafil, a PDE5 inhibitor compound for the oral and local treatment of male and female sexual dysfunction. Under the terms of the agreement, MTPC agreed to grant an exclusive license to us for products containing avanafil outside of Japan, North Korea, South Korea, China, Taiwan, Singapore, Indonesia, Malaysia, Thailand, Vietnam and the Philippines. The Company agreed to grant MTPC an exclusive, royalty-free license within those countries for oral products that it develops containing avanafil. In addition, the Company agreed to grant MTPC an exclusive option to obtain an exclusive, royalty-bearing license within those countries for non-oral products that it develops containing avanafil. MTPC agreed to manufacture and supply VIVUS with avanafil for use in clinical trials, which were the Company's primary responsibility. The MTPC agreement contains a number of milestone payments to be made by the Company based on various triggering events. Through December 31, 2013, under the terms of the MTPC agreement, the Company has paid a total of $15.0 million in milestone payments to MTPC, including $2.0 million in 2013 upon approval of SPEDRA (avanafil) in the EU and $3.0 million in 2012 upon FDA approval of STENDRA (avanafil) in the U.S. In addition, during 2013 and 2012, the Company purchased $9.9 million and $7.4 million, respectively, of product from MTPC under the supply portion of the Agreement in preparation for the commercial launch in the U.S., the EU and certain other territories that use the U.S. and EU approvals.

The Company expects to make other substantial payments to MTPC in accordance with the MTPC agreement as VIVUS and its sublicensees continue to commercialize avanafil for the oral treatment of male sexual dysfunction in its territories. Potential future milestone payments include $6.0 million upon the achievement of $250.0 million or more in worldwide net sales during any calendar year.

The term of the MTPC agreement is based on a country-by-country and on a product-by-product basis. The term shall continue until the later of (i) 10 years after the date of the first sale for a particular product, or (ii) the expiration of the last-to-expire patents within the MTPC patents covering such product in such country. In the event that VIVUS's product is deemed to be (i) insufficiently effective or insufficiently safe relative to other PDE5 inhibitor compounds based on published information, or (ii) not economically feasible to develop due to unforeseen regulatory hurdles or costs as measured by standards common in the pharmaceutical industry for this type of product, the Company has the right to terminate the agreement with MTPC with respect to such product.

In August 2012, the Company entered into an amendment to its agreement with MTPC that permits VIVUS to manufacture the API and tablets for STENDRA itself or through third parties. According to the amendment, the transition of manufacturing from MTPC must occur on or before June 30, 2015. On July 31, 2013, as mentioned above, VIVUS entered into a Commercial Supply Agreement with Sanofi Chimie to manufacture and supply the API for avanafil on an exclusive basis in the United States and other territories and on a semi-exclusive basis in Europe, including the EU, Latin America and other territories. Further, as mentioned above, on November 18, 2013, the Company entered into a Manufacturing and Supply Agreement with Sanofi Winthrop Industrie to manufacture and supply the avanafil tablets on an exclusive basis in the United States and other territories and on a semi-exclusive basis in Europe, including the EU, Latin America and other territories. The Company intends to submit an amendment to the NDA for avanafil to the FDA, and the marketing authorization, or MA, for avanafil to the EMA, to include Sanofi Chimie as a qualified supplier of the avanafil API and Sanofi Winthrop Industrie as a qualified supplier of the avanafil tablets.

On February 21, 2013, the Company entered into the third amendment to its agreement with MTPC which, among other things, expands VIVUS's rights, or those of VIVUS's sublicensees, to enforce the patents licensed under the MTPC agreement against alleged infringement, and clarifies the rights and duties of the parties and VIVUS's sublicensees upon termination of the MTPC agreement. In addition, the Company was obligated to use its best commercial efforts to market STENDRA in the U.S. by December 31, 2013, which was achieved by its commercialization partner, Auxilium. On July 23, 2013, the Company entered into the fourth amendment to its agreement with MTPC which, among other things, changes the definition of net sales used to calculate royalties owed by the Company to MTPC.

Other

In October 2001, the Company entered into an assignment agreement, or the Assignment Agreement, with Thomas Najarian, M.D., for a combination of pharmaceutical agents for the treatment of obesity and other disorders, or the Combination Therapy, that has since been the focus of the Company's investigational drug candidate development program for Qsymia for the treatment of obesity, obstructive sleep apnea and diabetes. The Combination Therapy and all related patent applications, or the Patents, were transferred to VIVUS with worldwide rights to develop and commercialize the Combination Therapy and exploit the Patents. Pursuant to the Assignment Agreement, through December 31, 2013, the Company has paid a total of $1.2 million and has issued fully vested and exercisable options to purchase 60,000 shares of VIVUS's common stock to Dr. Najarian. In addition, the Assignment Agreement requires the Company to pay royalties on worldwide net sales of a product for the treatment of obesity that is based upon the Combination Therapy and Patents until the last-to-expire of the assigned Patents. To the extent that the Company decides not to commercially exploit the Patents, the Assignment Agreement will terminate and the Combination Therapy and Patents will be assigned back to Dr. Najarian. In 2006, Dr. Najarian joined the Company as a part-time employee and served as a Principal Scientist. In November 2013, Dr. Najarian's employment with the Company ended although he continues to work for VIVUS on a consulting basis.