<PAGE>   1
================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                ----------------

                                    FORM 10-Q

                                ----------------


[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

                 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

                                       OR

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

         FOR THE TRANSITION PERIOD FROM ____________ TO ____________ .

                         COMMISSION FILE NUMBER: 0-23490

                                   VIVUS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                 DELAWARE                                   94-3136179
      (STATE OR OTHER JURISDICTION OF                    (I.R.S. EMPLOYER
      INCORPORATION OR ORGANIZATION)                   IDENTIFICATION NUMBER)

            1172 CASTRO STREET
            MOUNTAIN VIEW, CA                                  94040
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                     (ZIP CODE)

                                 (650) 934-5200
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                                       N/A
              (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
                          IF CHANGED SINCE LAST REPORT)

        Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No

        At March 31, 2001, 32,479,846 shares of common stock were outstanding.

                            Exhibit Index on Page 23

================================================================================

<PAGE>   2


                          PART I: FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS

                                   VIVUS, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (In thousands, except par value)

                                     ASSETS



<TABLE>
<CAPTION>
                                                                                     MARCH 31,            DECEMBER 31,
                                                                                       2001                   2000
                                                                                    -----------           ------------
                                                                                    (UNAUDITED)
<S>                                                                                  <C>                   <C>      
Current assets:
  Cash and cash equivalents .............................................            $  20,829             $  29,236
  Available-for-sale securities .........................................                9,140                 9,187
  Accounts receivable, net ..............................................                3,768                 3,434
  Inventories, net ......................................................                4,425                 5,045
  Prepaid expenses and other assets .....................................                  816                 1,143
                                                                                     ---------             ---------
          Total current assets ..........................................               38,978                48,045
  Property and equipment, net ...........................................               13,892                14,294
  Restricted cash .......................................................                3,324                 3,324
  Available-for-sale securities, non-current ............................                6,600                 3,511
                                                                                     ---------             ---------
          Total assets ..................................................            $  62,794             $  69,174
                                                                                     =========             =========

                                        LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable ......................................................            $   1,083             $   1,775
  Accrued and other liabilities .........................................               12,425                13,289
                                                                                     ---------             ---------
          Total current liabilities .....................................               13,508                15,064
  Accrued and other long-term liabilities ...............................                3,923                 3,923
                                                                                     ---------             ---------
          Total liabilities .............................................               17,431                18,987
                                                                                     ---------             ---------
Stockholders' equity:
  Common stock; $.001 par value; shares authorized 200,000;
     shares outstanding -- March 31, 2001, 32,480;
     December 31, 2000, 32,461; .........................................                   32                    32
  Paid in capital .......................................................              133,344               133,288
  Accumulated other comprehensive income ................................                  169                   165
  Accumulated deficit ...................................................              (88,182)              (83,298)
                                                                                     ---------             ---------
          Total stockholders' equity ....................................               45,363                50,187
                                                                                     ---------             ---------
          Total liabilities and stockholders' equity ....................            $  62,794             $  69,174
                                                                                     =========             =========
</TABLE>




                                       2

<PAGE>   3


                                   VIVUS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)




<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED
                                                              --------------------------------
                                                                MARCH 31,           MARCH 31,
                                                                  2001                2000
                                                              -----------          -----------
                                                              (UNAUDITED)          (UNAUDITED)
<S>                                                             <C>                  <C>     
Revenue
  US product .......................................            $  5,237             $  5,758
  International product ............................               1,418                2,038
  Returns ..........................................                (296)                (329)
                                                                --------             --------
          Total revenue ............................               6,359                7,467
Cost of goods sold .................................               3,633                2,927
                                                                --------             --------
Gross profit .......................................               2,726                4,540
Operating expenses:
  Research and development .........................               6,004                1,204
  Selling, general and administrative ..............               2,237                2,217
                                                                --------             --------
          Total operating expenses .................               8,241                3,421
                                                                --------             --------
Income (loss) from operations ......................              (5,515)               1,119
Interest and other income ..........................                 631                  599
                                                                --------             --------
     Income (loss) before provision for income taxes              (4,884)               1,718
Provision for income taxes .........................                  --                 (172)
                                                                --------             --------
     Net income (loss) .............................            $ (4,884)            $  1,546
                                                                ========             ========
Net income (loss) per share:
       Basic .......................................            $  (0.15)            $   0.05
       Diluted .....................................            $  (0.15)            $   0.05
Shares used in per share computation:
       Basic .......................................              32,472               32,223
       Diluted .....................................              32,472               33,556
</TABLE>





                                       3

<PAGE>   4


                                   VIVUS, INC.

            CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                 (In thousands)





<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED
                                                -------------------------------
                                                  MARCH 31,           MARCH 31,
                                                    2001                2000
                                                -----------          ----------
                                                (UNAUDITED)          (UNAUDITED)
<S>                                               <C>                 <C>    
Net income (loss) ....................            $(4,884)            $ 1,546
Other comprehensive income:
  Unrealized gain (loss) on securities                  4                  75
  Income tax benefit (provision) .....                 --                  (7)
                                                  -------             -------
                                                        4                  68
                                                  -------             -------
Comprehensive income (loss) ..........            $(4,880)            $ 1,614
                                                  =======             =======
</TABLE>




                                       4

<PAGE>   5

                                   VIVUS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)




<TABLE>
<CAPTION>
                                                                                   THREE MONTHS ENDED
                                                                                        MARCH 31,
                                                                           --------------------------------
                                                                               2001                 2000
                                                                           -----------           ----------
                                                                           (UNAUDITED)           (UNAUDITED)
<S>                                                                         <C>                  <C>     
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss) .............................................            $ (4,884)            $  1,546
  Adjustments to reconcile net income (loss) to net cash provided
     by (used for) operating activities:
     Depreciation and amortization ..............................                 564                  777
  Changes in assets and liabilities:
     Accounts receivable ........................................                (334)               1,901
     Inventories ................................................                 620                 (206)
     Prepaid expenses and other assets ..........................                 327                3,259
     Accounts payable ...........................................                (692)              (1,281)
     Accrued and other liabilities ..............................                (864)              (3,894)
                                                                             --------             --------
          Net cash provided by (used for) operating activities ..              (5,263)               2,102
                                                                             --------             --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Property and equipment purchases ..............................                (162)                (261)
  Investment purchases ..........................................             (12,109)             (57,534)
  Proceeds from sale/maturity of securities .....................               9,071               60,011
                                                                             --------             --------
          Net cash provided by (used for) investing activities ..              (3,200)               2,216
                                                                             --------             --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Exercise of common stock options ..............................                  56                  104
                                                                             --------             --------
          Net cash provided by financing activities .............                  56                  104
                                                                             --------             --------

NET INCREASE (DECREASE) IN CASH .................................              (8,407)               4,422
CASH:
  Beginning of period ...........................................              29,236                8,785
                                                                             --------             --------
  End of period .................................................            $ 20,829             $ 13,207
                                                                             ========             ========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Unrealized gain (loss) on securities ..........................            $      4             $     75
SUPPLEMENTAL CASH FLOW DISCLOSURE:
  Income taxes paid .............................................            $      5             $    440
</TABLE>




                                       5

<PAGE>   6

                                   VIVUS, INC.


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2001


1. BASIS OF PRESENTATION

        The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulations S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the three-month period
ended March 31, 2001 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001. For further information, refer
to the financial statements and footnotes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2000.

2. RESTRUCTURING RESERVE

        During 1998, the Company experienced a significant decline in market
demand for MUSE(R) due to the market launch of sildenafil, the first oral
treatment for erectile dysfunction. During the second and third quarters of
1998, the Company took significant steps to restructure its operations in an
attempt to bring the cost structure in line with current and projected revenues.
(See Notes 1 and 6 to the Consolidated Financial Statements for the year ended
December 31, 2000 included in the Company's Annual Report on Form 10-K.) The
restructuring reserve balance at March 31, 2001 was $4.1 million, down from $4.3
million at December 31, 2000.


<TABLE>
<CAPTION>
                                                  INVENTORY          PROPERTY
                                                 AND RELATED        AND RELATED
                                                 COMMITMENTS        COMMITMENTS           TOTAL
                                                 -----------        -----------          -------
<S>                                              <C>               <C>                  <C>  
                  (000's)
        Balance at December 31, 2000 .......          942              3,324               4,266
        Activity in first quarter 2001 .....            0               (123)               (123)
                                                  -------            -------             -------
        Balance at March 31, 2001 ..........      $   942            $ 3,201             $ 4,143
                                                  =======            =======             =======
</TABLE>


        The Company expects that during the next twelve months it will make cash
payments of approximately $220 thousand related to the restructuring, with the
remaining $3.9 million in cash payments to occur in later periods.

3. ACCRUED AND OTHER LIABILITIES

        Accrued and other liabilities as of March 31, 2001 and December 31, 2000
consist of (in thousands):



<TABLE>
<CAPTION>
                                                         MARCH 31, 2001      DECEMBER 31, 2000
                                                         --------------      -----------------
                         (000's)
<S>                                                         <C>                  <C>     
        Restructuring ..........................            $  4,143             $  4,266
        Product returns ........................               1,616                2,008
        Income taxes ...........................               3,328                3,332
        Research and clinical expenses .........               1,897                2,076
        Royalties ..............................                 520                  541
        Unearned revenue .......................               2,120                1,917
        Employee compensation and benefits .....               1,514                1,670
        Other ..................................               1,210                1,402
                                                            --------             --------
                                                              16,348               17,212
        Amount classified as short-term ........             (12,425)             (13,289)
                                                            --------             --------
        Amount classified as long-term .........            $  3,923             $  3,923
                                                            ========             ========
</TABLE>





                                       6

<PAGE>   7


4. CONCENTRATION OF CUSTOMERS AND SUPPLIERS

        During the first three months of 2001 and 2000, sales to significant
customers as a percentage of total revenues are as follows:



<TABLE>
<CAPTION>
                                       2001           2000
                                       ----           ----
<S>                                    <C>            <C>
        Customer A .........            23%            14%
        Customer B .........            23%             *
        Customer C .........            15%            14%
        Customer D .........            14%            15%
        Customer E .........            10%            11%
</TABLE>


        * Customer's percentage was less than 10%

        The Company did not have any suppliers making up more than 10% of
operating costs.





                                       7

<PAGE>   8

        This Quarterly Report on Form 10-Q contains forward-looking statements
that involve risks and uncertainties. The Company's actual results could differ
from those set forth in such forward-looking statements as a result of certain
factors, including those set forth in the Risk Factors section starting on page
10 of this document.


I
TEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

        VIVUS, Inc. ("VIVUS" or the "Company") is a pharmaceutical company
developing innovative products to improve quality of life disorders in men and
women, with a focus on sexual dysfunction. The Company developed and markets in
the U.S. MUSE(R) (alprostadil) and ACTIS(R), two innovations in the treatment of
erectile dysfunction ("ED") and has entered into a license and supply agreement
with Abbott Laboratories ("Abbott") (NYSE:ABT) for the international marketing
and distribution of its male transurethral ED products. In Canada, VIVUS has
entered into a license and supply agreement with Paladin Labs, Inc. ("Paladin")
(TSE:PLB) by which Paladin will market and distribute MUSE. VIVUS has ongoing
research and development ("R&D") programs in male ED, female sexual dysfunction
("FSD"), and male premature ejaculation ("PE"). Adding to the Company's R&D
pipeline in the first quarter of 2001, VIVUS licensed from TANABE SEIYAKU CO,
LTD. ("TANABE"), a leading Japanese pharmaceutical company, TANABE's proprietary
phosphodiesterase type 5 (PDE5) inhibitor compound TA-1790 for both the oral and
local treatment of male and female sexual dysfunction. In January 2001, the
Company began enrolling patients in a multi-center clinical study for its female
sexual dysfunction product, ALISTA(TM), intended to evaluate the sexual response
in women with a primary diagnosis of Female Sexual Arousal Disorder ("FSAD").

        During 1998, the Company experienced a significant decline (greater than
80%) in market demand for MUSE as a result of the introduction of sildenafil in
April 1998. During the second and third quarters of 1998, the Company took
significant steps to restructure its operations to bring its cost structure in
line with current and projected revenues. As a result, the Company incurred a
net loss of $80 million and had negative operating cash flow of approximately
$27 million for the year ended December 31, 1998.

        During 1999, the Company continued to align its operations more closely
with the Company's current and expected revenues. The Company achieved
profitability for all quarters in 1999, earning $0.58 per diluted share for the
year. Cash, cash equivalents and available-for-sale securities at December 31,
1999 increased $16.5 million from December 31, 1998 to $40.4 million, while
total liabilities decreased $5.1 million during the same period. The Company was
awarded five patents in the areas of FSD, ED and PE to further build and
strengthen its patent portfolio. The Company established a targeted sales force
in the U.S. to support its product, MUSE, in the marketplace. The Company also
filed a New Drug Application ("NDA") for ALIBRA with the Food and Drug
Administration ("FDA") that was subsequently withdrawn in October 2000.

        During 2000, the Company continued to strengthen its balance sheet,
increasing working capital by $6.4 million, to enable investment in its R&D
projects and to pursue targeted technology acquisitions to expand its pipeline.
The Company filed an Investigational New Drug ("IND") application and began
clinical studies for ALISTA, its product for the treatment of FSD. The Company
signed an agreement with Abbott for the marketing of MUSE internationally,
except Canada, where Paladin is marketing and distributing MUSE. The Company was
awarded several new patents for the treatment of ED and solidified its FSD
intellectual property through its agreement with AndroSolutions. The Company
also received 510(k) clearance from the FDA in December 2000, for
over-the-counter (OTC) marketing of ACTIS, its adjustable constriction band used
to improve erections in men with ED.

FISCAL 2001

        In the first quarter of 2001, the Company reported a net loss of $4.9
million, for $0.15 net loss per share. The Company signed a development, license
and supply agreement with TANABE for its proprietary phosphodiesterase type 5
(PDE5) inhibitor compound TA-1790. Under the terms of this agreement, the
Company acquired worldwide rights, except Japan, China and certain Pacific Rim
countries, to develop and commercialize the compound for oral and local
treatments of male and female sexual dysfunction. During the first quarter 2001,
the Company made up-front, non-refundable milestone payments totaling $5 million
dollars to TANABE per the agreement. The Company expensed these payments, which
was the main reason the Company reported a net loss for the quarter.



                                       8

<PAGE>   9

RESULTS OF OPERATIONS

        Three Months Ended March 31, 2001 and 2000

        Product revenues for the quarter ended March 31, 2001 were $5.2 million
in the United States and $1.4 million internationally, compared to $5.8 million
in the United States and $2.0 million internationally for the quarter ended
March 31, 2000. U.S. product revenue decreased in the first quarter of 2001,
compared to the first quarter of 2000, due to an approximate 10% decline in MUSE
prescriptions over the past twelve months, as reported by NDC Health.
International product revenue decreased $620 thousand in the first quarter of
2001, compared to the same period last year. Shipments to Abbott and Paladin
account for this year's international revenue, while 2000 revenue included $1.7
million for product shipments associated with the termination of the
distribution agreement with AstraZeneca.

        Cost of goods sold was $3.6 million for the first quarter of 2001,
compared to $2.9 million for the first quarter 2000. Lower cost of goods in 2000
was primarily the result of lower costs associated with product manufactured for
AstraZeneca in 1999 that was shipped during the first quarter of 2000 in
connection with the termination of the distribution agreement between the
Company and AstraZeneca.

        Research and development expenses for the first quarter of 2001 were
$6.0 million, which included the expensing of up-front, non-refundable payments
totaling $5 million to TANABE for licensing their proprietary compound TA-1790
for the oral and local treatment of male and female sexual dysfunction. For the
three months ended March 31, 2000, R&D expenses were $1.2 million.

        Selling, general and administrative expenses of $2.2 million for the
first quarter 2001 were comparable to the same quarter last year.

     The Company did not record a tax provision for the first quarter of 2001
due to the net loss recorded for the quarter. In the first quarter of 2000, the
Company recorded a ten percent (10%) tax provision, which included the effect of
net operating losses ("NOLs") carried forward from prior periods. The 2000 tax
rate would have been substantially higher if the NOLs had not been available to
offset current income.

LIQUIDITY AND CAPITAL RESOURCES

        Since inception, the Company has financed operations primarily from the
sale of preferred and common stock. Through March 31, 2001, VIVUS has raised
$154.5 million from financing activities and has an accumulated deficit of $88.2
million at March 31, 2001.

        Unrestricted cash, cash equivalents and available-for-sale securities
totaled $36.6 million at March 31, 2001, compared with $41.9 million at December
31, 2000. This decrease is due primarily to the $5 million in milestone payments
for licensing TA-1790 from TANABE.

        Accounts receivable at March 31, 2001 were $3.8 million, compared with
$3.4 million at December 31, 2000, an increase of $400 thousand due primarily to
the timing of international shipments.

        Total liabilities were $17.4 million at March 31, 2001, compared with
$19.0 million at December 31, 2000, a decrease of $1.6 million. The decrease
primarily relates to lower accounts payable and product returns.

        The Company anticipates that its existing capital resources combined
with anticipated future cash flows will be sufficient to support the Company's
operating needs throughout the next twelve months. However, the Company
anticipates that it will be required to obtain additional financing to fund the
development of its R&D pipeline in future periods in addition to the possible
launch of any future products.

        The Company expects to evaluate potential financing sources, including,
but not limited to, the issuance of additional equity or debt securities,
corporate alliances, joint ventures, and licensing agreements to fund the
development and possible commercial launch of its future products. The sale of
additional equity securities would result in additional dilution to the
Company's stockholders. The Company's working capital and additional funding
requirements will depend upon numerous factors, including: (i) the progress of
the Company's R&D programs; (ii) the timing and results of preclinical testing
and clinical trials; (iii) results of operations; (iv) demand for MUSE; (v)
technological advances; (vi) the level of resources that the Company devotes to
sales and marketing capabilities; and (vii) the activities of competitors.



                                       9

<PAGE>   10

        This Quarterly Report on Form 10-Q contains forward-looking statements
that involve risks and uncertainties. The Company's actual results could differ
from those set forth in such forward-looking statements as a result of certain
factors, including those set forth in the Risk Factors section.

                                  RISK FACTORS

NEW PRODUCT DEVELOPMENT AND UNCERTAINTY OF PRODUCT APPROVALS

        The Company's future operating results may be adversely affected if the
Company is unable to continue to develop, manufacture and bring to market new
drug products rapidly. The process of developing new drugs and/or therapeutic
products is inherently complex and uncertain. The Company must make long-term
investments and commit significant resources before knowing whether its
development programs will eventually result in products that will receive
regulatory approval and achieve market acceptance. After the FDA and
international regulatory authorities approve a product, the Company must
manufacture sufficient volumes to meet market demand. This is a process that
requires accurate forecasting of market demand. Given existing treatments and
the number of products introduced in the market each year, the drug development
process becomes increasingly difficult, expensive and risky. There is no
guarantee that future clinical studies will confirm the safety and efficacy of
any product in development or that the Company will receive regulatory approval
for such products. Further, even if the Company were to receive regulatory
approval for a product, there could be no assurance that such product would
prove to be commercially successful.

        In January 2001, VIVUS signed a licensing agreement with TANABE, a
leading Japanese pharmaceutical company, for TANABE's proprietary
phosphodiesterase type 5 (PDE5) inhibitor compound TA-1790 for the oral and
local treatment of male and female sexual dysfunction. TANABE has conducted a
Phase I clinical trial and VIVUS intends to initiate additional clinical studies
required for regulatory approval of an oral treatment for ED. However, as with
any pharmaceutical under development, there are significant risks in
development, regulatory approval and commercialization of new compounds. There
are no guarantees that future clinical studies will confirm the preliminary
results from the Phase I clinical trial or that the compound TA-1790 will
receive regulatory approval for any indication. Further, even if the Company
were to receive regulatory approval for a product, there could be no assurance
that such a product would prove to be commercially successful or profitable.

        In September 2000, the Company submitted an IND to the FDA to begin
clinical studies with its FSD product, ALISTA. Clinical studies will be focused
on the treatment of FSAD, a subcategory of FSD. In January 2001, the Company
began enrollment of patients in a Phase II multi-center study to evaluate the
safety and efficacy of ALISTA. There can be no assurances that the clinical
studies will be successful. Even if the trials are successful, and the Company
eventually files an NDA for ALISTA with the FDA, there are no assurances that it
will be approved. Even if ALISTA eventually becomes an approved product, there
can be no assurances that this treatment for FSD will be successful in the
marketplace. Furthermore, the FDA could suspend clinical studies at any time if
it is believed that the subjects participating in such studies are being exposed
to unacceptable health risks.

        In a proof of concept study completed during the first half of 2000, the
effect of on-demand therapy with several classes of compounds for the treatment
of premature ejaculation (PE) was evaluated. This study demonstrated
statistically significant effects on ejaculatory latency, and additional
formulation work to optimize the drug product for this indication is ongoing.
The Company anticipates resuming clinical studies once this formulation work has
been completed. There is no guarantee that the Company will be able to optimize
this formulation. Further, even if the formulation is optimized, there can be no
assurance that future clinical studies will confirm the preliminary results in
the proof of concept study or that a product for the treatment of PE will prove
to be commercially successful.

        In May 2000, the Company filed for marketing authorization for ALIBRA
with the European Agency for the Evaluation of Medicinal Products (EMEA) under
the Centralized Process in Europe. The Company met with the EMEA and continues
to discuss its pending European application. Based on these discussions, the
EMEA may (1) require the Company to provide more data; (2) require the Company
to perform additional clinical trials; or (3) not grant approval of the
application. Even if ALIBRA is approved, there can be no assurances that this
transurethral system to treat ED will be successful in the marketplace.

        In December 1999, the Company submitted an NDA to the FDA to market
ALIBRA, which it subsequently withdrew in October 2000. The Company met with the
FDA in December 2000 and continues to communicate with the FDA to determine what
additional data is required to obtain marketing clearance for ALIBRA. There can
be no assurance that the Company will re-file an NDA for



                                       10

<PAGE>   11

ALIBRA. Even if the Company does re-file an NDA for ALIBRA, there can be no
assurance that it will be approved or that it will be successful in the
marketplace.

INTENSE COMPETITION

        Competition in the pharmaceutical and medical products industries is
intense and is characterized by extensive research efforts and rapid
technological progress. Certain treatments for ED exist, such as oral
medications, needle injection therapy, vacuum constriction devices and penile
implants, and the manufacturers of these products will continue to improve these
therapies. The most significant competitive therapy is sildenafil, an oral
medication marketed by Pfizer, which received regulatory approvals in the U.S.
in March 1998 and in the European Union in September 1998. The commercial launch
of sildenafil in the U.S. in April 1998 significantly decreased demand for MUSE.

        Additional competitive products in the ED market include needle
injection therapy products from Pharmacia Upjohn and Schwartz Pharma, which were
approved by the FDA in July 1995 and June 1997, respectively. Other large
pharmaceutical companies are also actively engaged in the development of
therapies for the treatment of ED. These companies have substantially greater
research and development capabilities as well as substantially greater
marketing, financial and human resources abilities than VIVUS. In addition, many
of these companies have significantly greater experience than the Company in
undertaking preclinical testing, human clinical trials and other regulatory
approval procedures. For instance, Lilly ICOS LLC and Bayer AG both have oral
medications in late stage clinical testing for ED; and Senetek has a needle
injection therapy product approved recently in Denmark and has filed for
approval in other countries. These entities may market commercial products
either on their own or through collaborative efforts. The Company's competitors
may develop technologies and products that are more effective than those
currently marketed or being developed by the Company. Such developments would
render the Company's products less competitive or possibly obsolete. The Company
is also competing with respect to marketing capabilities and manufacturing
efficiency, areas in which it has limited experience.

FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FINANCING

        The Company anticipates that its existing capital resources combined
with anticipated future cash flows will be sufficient to support the Company's
operating needs throughout 2001. However, the Company anticipates that it will
be required to obtain additional financing to fund the development of its R&D
pipeline in future periods in addition to the possible launch of any future
products. There can be no assurance that the Company will be able to obtain such
financing when required, on acceptable terms or at all.

        The Company expects to evaluate potential financing sources, including,
but not limited to, the issuance of additional equity or debt securities,
corporate alliances, joint ventures, and licensing agreements to fund the
development and possible commercial launch of its future products. The sale of
additional equity securities would result in additional dilution to the
Company's stockholders. The Company's working capital and additional funding
requirements will depend upon numerous factors, including: (i) the progress of
the Company's R&D programs; (ii) the timing and results of preclinical testing
and clinical trials; (iii) results of operations; (iv) demand for MUSE; (v)
technological advances; (vi) the level of resources that the Company devotes to
sales and marketing capabilities; and (vii) the activities of competitors.

LIMITED SALES AND MARKETING IN THE U.S.

        The Company supports MUSE sales in the U.S. through physician and
patient information/help lines, a small targeted sales support group for major
accounts, product education newsletters, and participation in national urologic
and sexual dysfunction forums and conferences, such as the American Urological
Association annual and regional meetings and the International Society for
Impotence Research. There can be no assurance that demand for the Company's
product MUSE will continue or that the Company will be able to adequately
support sales of MUSE in the U.S.

DEPENDENCE ON THIRD PARTIES

        In November 2000, the Company entered into an agreement granting Paladin
exclusive marketing and distribution rights for MUSE in Canada. This agreement
does not have minimum purchase commitments and the Company is entirely dependent
on Paladin's efforts to distribute and sell the Company's product effectively in
Canada. There can be no assurance that such efforts will be successful or that
Paladin will continue to support the product.



                                       11

<PAGE>   12

        In June 2000, the Company entered into an agreement granting Abbott
exclusive marketing and distribution rights for MUSE in all countries outside
the U.S. and Canada. This agreement does not have minimum purchase commitments
and the Company is entirely dependent on Abbott's efforts to distribute and sell
the Company's product effectively in all markets except the U.S. and Canada.
There can be no assurance that such efforts will be successful or that Abbott
will continue to support the product.

        In 1996, the Company entered into a distribution agreement with CORD
Logistics, Inc. ("CORD"), a wholly owned subsidiary of Cardinal Health, Inc.
Under this agreement, CORD (i) warehouses the Company's finished goods for U.S.
distribution, (ii) takes customer orders, (iii) picks, packs and ships its
product, (iv) invoices customers, and (v) collects related receivables. As a
result of this distribution agreement with CORD, the Company is heavily
dependent on CORD's efforts to fulfill orders and warehouse its products
effectively in the U.S. There can be no assurance that such efforts will be
successful.

        In 1996, the Company entered into an agreement with Gibraltar
Laboratories (Gibraltar). Under this agreement, Gibraltar performs sterility
testing on finished product manufactured by the Company to ensure that they
comply with product specifications. Gibraltar also performs microbial testing on
water and compressed gases used in the manufacturing process and microbial
testing on environmental samples to ensure that the manufacturing environment
meets appropriate cleanliness standards. As a result of this testing agreement,
the Company is dependent on Gibraltar to perform testing and issue reports on
finished product and the manufacturing environment in a manner that meets
regulatory compliance standards. There can be no assurance that such effort will
be successful.

        In 1996, the Company entered into an agreement with WRB Communications
("WRB") to handle patient and healthcare professional hotlines for the Company.
WRB maintains a staff of healthcare professionals to handle questions and
inquiries about MUSE and ACTIS. These calls may include complaints about the
Company's product due to efficacy or quality, as well as the reporting of
adverse events. As a result of this agreement, the Company is dependent on WRB
to effectively handle these calls and inquiries. There can be no assurance that
such effort will be successful.

        In 1996, the Company entered into a distribution agreement with
Integrated Commercialization Services ("ICS"), a subsidiary of Bergen Brunswig
Corporation. ICS provides "direct-to-physician" distribution capabilities in
support of U.S. marketing and sales efforts. As a result of this distribution
agreement with ICS, the Company is dependent on ICS's efforts to distribute
product samples effectively. There can be no assurance that such efforts will be
successful.

RAW MATERIALS

        The Company has obtained its current supply of alprostadil from two
approved sources. The first is Spolana Chemical Works a.s. in Neratovice, Czech
Republic ("Spolana"). The second is CHINOIN Pharmaceutical and Chemical Works
Co., Ltd. ("Chinoin"). Chinoin is the Hungarian subsidiary of the French
pharmaceutical company Sanofi Synthelabo. The Company is required to receive
regulatory approval for suppliers. At the present time, Spolana is the sole
source of supply for alprostadil used in the manufacture of product for
distribution in Europe, and the Company has a limited supply. Certain
restrictions have been put in place by the European regulatory authorities that
would require a variation to be approved before VIVUS can use the Chinoin
alprostadil supply for European manufacture. The Company is in the process of
transferring licenses in Europe to Abbott. Abbott intends to file variations
with the European regulatory authorities for the use of Chinoin alprostadil.
There can be no assurance that such variations will be approved in a timely
manner or at all, which could have a material impact on the Company's ability to
supply MUSE to Abbott for distribution in Europe.

        Furthermore, alprostadil is subject to periodic re-testing to ensure it
continues to meet specifications. There can be no guarantees the material will
pass these testing procedures and continue to be usable material. There is a
long lead time for manufacturing alprostadil. A short supply of alprostadil to
be used in the manufacture of MUSE would have a material adverse effect on the
Company's business, financial condition and results of operations.



                                       12

<PAGE>   13

SINGLE MANUFACTURING FACILITY

        The Company leases 90,000 square feet of space in Lakewood, New Jersey,
in which it constructed manufacturing, warehousing and testing facilities. The
FDA and MCA authorized the Company to begin commercial production and shipment
of MUSE from this facility in June and March 1998, respectively. The New Jersey
facility is currently the only place MUSE is manufactured. The Company has no
immediate plans to construct another manufacturing site. Since MUSE is produced
with custom-made equipment under specific manufacturing conditions, the
inability of the New Jersey manufacturing facility to produce MUSE for whatever
reason could have a material adverse effect on the Company's business, financial
condition and results of operations.

RISKS RELATING TO INTERNATIONAL OPERATIONS

        The Company's product MUSE is currently marketed internationally.
Changes in overseas economic and political conditions, currency exchange rates,
foreign tax laws or tariffs or other trade regulations could have a material
adverse effect on the Company's business, financial condition and results of
operations. The international nature of the Company's business is also expected
to subject it and its representatives, agents and distributors to laws and
regulations of the foreign jurisdictions in which they operate or where the
Company's product is sold. The regulation of drug therapies in a number of such
jurisdictions, particularly in the European Union, continues to develop, and
there can be no assurance that new laws or regulations will not have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, the laws of certain foreign countries do not protect
the Company's intellectual property rights to the same extent as do the laws of
the U.S.

HISTORY OF LOSSES

        The Company has generated a cumulative net loss of $88.2 million for the
period from its inception through March 31, 2001. The Company must successfully
manufacture and market MUSE and keep its expenditures in line with lower product
revenues. The Company is subject to a number of risks including its ability to
market, distribute and sell its product in the U.S., its reliance on Abbott to
market and distribute MUSE internationally, its reliance on Paladin to market
and distribute MUSE in Canada, intense competition, and its reliance on a single
therapeutic approach to ED. There can be no assurance that the Company will be
able to achieve profitability on a sustained basis. Accordingly, there can be no
assurance of the Company's future success.

DEPENDENCE ON THE COMPANY'S TRANSURETHRAL SYSTEM FOR ERECTION

        MUSE, a drug product developed by the Company to treat ED, relies on a
single therapeutic approach, a transurethral system for erection. The existence
of side effects or dissatisfaction with this product may impact a patient's
decision to use or continue to use or a physician's decision to recommend this
therapeutic approach as a therapy for the treatment of ED, thereby affecting the
commercial viability of MUSE. In addition, technological changes or medical
advancements could diminish or eliminate the commercial viability of the
Company's products, the results of which could have a material effect on the
business operations and results of the Company.

PATENTS AND PROPRIETARY RIGHTS

        The Company's policy is to aggressively maintain its patent position and
to enforce all of its intellectual property rights.

        The Company is the exclusive licensee of U.S. and Canadian patents
originally filed in the name of Dr. Gene Voss. These patents claim methods of
treating ED with a vasodilator-containing ointment that is administered either
topically or transurethrally.

        The Company is also the exclusive licensee of patents and patent
applications filed in the name of Dr. Nils G. Kock, in numerous countries. Four
U.S. patents have issued directed to methods and compositions for treating ED by
transurethrally administering an active agent. Patents have also been granted in
Australia, Austria, Belgium, Canada, Finland, France, Germany, Great Britain,
Greece, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway,
Spain, Sweden and South Africa. Patent applications are pending in Denmark and
Romania. The foreign patents and applications, like the U.S. patents, are
directed to the treatment of ED by transurethral administration of certain
active substances including alpha-receptor blockers, vasoactive polypeptides,
prostaglandins or nitroglycerin dispersed in a hydrophilic vehicle.

        The Company is the sole assignee of five U.S. patents deriving from
patent applications originally filed by Alza, covering inventions Dr. Virgil
Place made while he was an employee of Alza. The patents are directed to dosage
forms for administering a therapeutic agent to the urethra, methods for treating
ED, and specific drug formulations that can be delivered transurethrally for the
treatment of ED. With one exception, the patents derive from patent applications
that were filed in the U.S. prior to June 8, 1995, and



                                       13

<PAGE>   14

will therefore have a seventeen-year patent term calculated from the date of
patent grant. Foreign patents have been granted in Australia, Europe (including
Austria, Belgium, Denmark, France, Germany, Great Britain, Greece, Italy,
Luxembourg, the Netherlands, Spain, Sweden and Switzerland), Finland, Ireland,
Mexico, New Zealand, Norway, Portugal, South Africa and South Korea, and foreign
applications are pending in Canada and Japan.

        The Company's license and assignment agreements for these patents and
patent applications are royalty-bearing and do not expire until the licensed
patents expire. These license and assignment agreements provide that the Company
may assume responsibility for the maintenance and prosecution of the patents and
bring infringement actions.

        In addition to the Voss, Kock and Place patents and applications
identified above, the Company has thirteen issued U.S. patents, twelve pending
U.S. patent applications, three granted foreign patents, and twenty-two pending
foreign patent applications. Several of these patents and applications further
address the prevention, treatment and diagnosis of ED, while others are directed
to prevention and/or treatment of other types of sexual dysfunction, including
PE and FSD. One of the Company's issued patents covers the Company's ACTIS
venous flow control device.

        The Company has entered into an agreement with AndroSolutions, Inc., a
privately held biomedical corporation based in Knoxville, Tennessee that owns
patents and applications complementary to the Company's patents and applications
directed to the treatment of FSD. Both the Company and AndroSolutions have
contributed their FSD patents and applications into a jointly formed Limited
Liability Company, ASIVI, LLC, which exclusively licenses to VIVUS worldwide
rights to the common patents and applications.

        The Company's success will depend in large part on the strength of its
current and future patent position for the treatment of ED, PE and FSD. The
Company's patent position, like that of other pharmaceutical companies, is
highly uncertain and involves complex legal and factual questions. The claims of
a U.S. or foreign patent application may be denied or significantly narrowed,
and patents that ultimately issue may not provide significant commercial
protection to the Company. The Company could incur substantial costs in
proceedings before the U.S. Patent and Trademark Office, including interference
proceedings. These proceedings could also result in adverse decisions as to the
priority of the Company's licensed or assigned inventions. There can be no
assurance that the Company's patents will not be successfully challenged or
designed around by others.

        The Company is presently involved in an opposition proceeding that was
instigated by the Pharmedic Company against a European patent, inventors Nils G.
Kock et al., that is exclusively licensed to VIVUS. As a result of the
opposition proceeding, certain pharmaceutical composition claims in the European
patent were held unpatentable by the Opposition Division of the EPO. The
patentability of all other claims in the patent was confirmed, i.e., those
claims directed to the use of active agents in the treatment of ED, and to a
pharmaceutical composition claim for prazosin. The Company appealed the EPO's
decision with respect to the pharmaceutical composition claims that were held
unpatentable. The Pharmedic Company appealed the EPO's decision with respect to
the claims that were held patentable, but has since withdrawn the appeal.
Despite the withdrawal of the Pharmedic Company from the appeal process, the
Company has continued with its own appeal in an attempt to reinstate the
composition claims. The EPO Appeals Board must make its own finding whether the
claims that were deemed unpatentable by the Opposition Division are indeed
patentable before it can reverse the Opposition Division's decision. There can
be no assurance that the appeal will be successful or that further challenges to
the Company's European patent will not occur should the Company try to enforce
the patent in the various European courts.

        The Company was also the first to file a Notice of Opposition to
Pfizer's European patent application claiming the use of phosphodiesterase
inhibitors to treat ED. Numerous other companies have also opposed the patent,
and the Company will support these other entities in their oppositions as
necessary.

        There can be no assurance that the Company's products do not or will not
infringe on the patent or proprietary rights of others. The Company may be
required to obtain additional licenses to the patents, patent applications or
other proprietary rights of others. There can be no assurance that any such
licenses will be made available on terms acceptable to the Company, if at all.
If the Company does not obtain such licenses, it could encounter delays in
product introductions while it attempts to design around such patents, or the
development, manufacture or sale of products requiring such licenses could be
precluded. The Company believes there will continue to be significant litigation
in the pharmaceutical industry regarding patent and other intellectual property
rights.

        In addition to its patent portfolio, the Company also relies on trade
secrets and other unpatented proprietary technology. No assurance can be given
that the Company can meaningfully protect its rights in such unpatented
proprietary technology or that others will not independently develop
substantially equivalent proprietary products and processes or otherwise gain
access to the Company's



                                       14

<PAGE>   15

proprietary technology. The Company seeks to protect its trade secrets and
proprietary know-how, in part, through confidentiality agreements with employees
and consultants. There can be no assurance that the agreements will not be
breached, that the Company will have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known or be independently
developed by competitors. In addition, protracted and costly litigation may be
necessary to enforce and determine the scope and validity of the Company's
proprietary rights.

DEPENDENCE ON SINGLE SOURCE OF SUPPLY

        The Company relies on a single injection molding company, The Kipp Group
("Kipp"), for its supply of plastic applicator components. In turn, Kipp obtains
its supply of resin, a key ingredient of the applicator, from a single source,
Huntsman Corporation. The Company also relies on a single source, E-Beam
Services, Inc. ("E-Beam"), for sterilization of its product. There can be no
assurance that the Company will be able to identify and qualify additional
sources of plastic components or an additional sterilization facility. The
Company is required to receive FDA approval for suppliers. The FDA may require
additional clinical trials or other studies prior to accepting a new supplier.
Until the Company secures and qualifies additional sources of plastic components
or an additional sterilization facility, it is entirely dependent upon Kipp and
E-Beam. If interruptions in these supplies or services were to occur for any
reason, including a decision by Kipp and/or E-Beam to discontinue manufacturing
or services, political unrest, labor disputes or a failure of Kipp and/or E-Beam
to follow regulatory guidelines, the development and commercial marketing of
MUSE and other potential products could be delayed or prevented. An extended
interruption in sterilization services or the Company's supply of plastic
components would have a material adverse effect on the Company's business,
financial condition and results of operations.

DEPENDENCE ON KEY PERSONNEL

        The Company's success is highly dependent upon the skills of a limited
number of key management personnel. To reach its business objectives, the
Company will need to retain and hire qualified personnel in the areas of
manufacturing, research and development, clinical trial management and
preclinical testing. There can be no assurance that the Company will be able to
hire or retain such personnel as the Company must compete with other companies,
academic institutions, government entities and other agencies. The loss of any
of the Company's key personnel or the failure to attract or retain necessary new
employees could have an adverse effect on the Company's research, product
development and business operations.

GOVERNMENT REGULATION

        The Company's research, preclinical development, clinical studies,
manufacturing and marketing of its products are subject to rigorous testing and
extensive regulation processes of the FDA and equivalent foreign regulatory
agencies. To date, the Company's product MUSE has received marketing clearance
in more than 40 countries worldwide.

        After regulatory approval is obtained, the Company's products are
subject to continual review. Manufacturing, labeling and promotional activities
are continually regulated by the FDA and equivalent foreign regulatory agencies,
and the Company must also report certain adverse events involving its drugs to
these agencies. Previously unidentified adverse events or an increased frequency
of adverse events that occur post-approval could result in labeling
modifications of approved products, which could adversely affect future
marketing. Finally, approvals may be withdrawn if compliance with regulatory
standards is not maintained or if problems occur following initial marketing.
The restriction, suspension or revocation of regulatory approvals or any other
failure to comply with regulatory requirements would have a material adverse
effect on the Company's business, financial condition and results of operations.

        Failure to comply with the applicable regulatory requirements can result
in fines, suspensions of regulatory approvals, product recalls, operating
restrictions and criminal prosecution, among other outcomes. In addition, the
marketing and manufacturing of pharmaceutical products are subject to continuing
FDA and other regulatory review, and later discovery of previously unknown
problems with a product, manufacturer or facility may result in the FDA and
other regulatory agencies requiring further clinical research or restrictions on
the product or the manufacturer, including withdrawal of the product from the
market. The restriction, suspension or revocation of regulatory approvals or any
other failure to comply with regulatory requirements would have a material
adverse effect on the Company's business, financial condition and results of
operations.

        Failure to maintain satisfactory compliance with Current Good
Manufacturing Practices ("cGMP") would have a material adverse effect on the
Company's ability to continue to market and distribute its products and, in the
most serious cases, could result in the issuance of additional warning letters,
seizure or recall of products, civil fines or closure of the Company's
manufacturing facility until such cGMP compliance is achieved.



                                       15

<PAGE>   16

        The Company obtains the necessary raw materials and components for the
manufacture of MUSE as well as certain services, such as testing and
sterilization, from third parties. The Company currently contracts with
suppliers and service providers, including foreign manufacturers that are
required to comply with strict standards established by the Company. Certain
suppliers and service providers are required by the Federal Food, Drug, and
Cosmetic Act, as amended, and by FDA regulations to follow cGMP requirements and
are subject to routine periodic inspections by the FDA and by certain state and
foreign regulatory agencies for compliance with cGMP requirements and other
applicable regulations. Certain of the Company's suppliers were inspected for
cGMP compliance as part of the approval process. However, upon routine
re-inspection of these facilities, there can be no assurance that the FDA and
other regulatory agencies will find the manufacturing process or facilities to
be in compliance with cGMP requirements and other regulations.

        Failure to achieve satisfactory cGMP compliance as confirmed by routine
inspections could have a material adverse effect on the Company's ability to
continue to manufacture and distribute its products and, in the most serious
case, result in the issuance of a regulatory warning letter or seizure or recall
of products, injunction and/or civil fines or closure of the Company's
manufacturing facility until cGMP compliance is achieved.

UNCERTAINTY OF PHARMACEUTICAL PRICING AND REIMBURSEMENT

        In the U.S. and elsewhere, sales of pharmaceutical products are
dependent, in part, on the availability of reimbursement to the consumer from
third party payors, such as government and private insurance plans. Third party
payors are increasingly challenging the prices charged for medical products and
services. With the introduction of sildenafil, third party payors have begun to
restrict or eliminate reimbursement for ED treatments. While a large percentage
of prescriptions in the U.S. for MUSE have been reimbursed by third party payors
since its commercial launch in January 1997, there can be no assurance that the
Company's products will be considered cost effective and that reimbursement to
the consumer will continue to be available or sufficient to allow the Company to
sell its products on a competitive basis.

        In addition, certain healthcare providers are moving towards a managed
care system in which such providers contract to provide comprehensive healthcare
services, including prescription drugs, for a fixed cost per person. The Company
hopes to further qualify MUSE for reimbursement in the managed care environment.
However, the Company is unable to predict the reimbursement policies employed by
third party healthcare payors. Furthermore, reimbursement for MUSE could be
adversely affected by changes in reimbursement policies of governmental or
private healthcare payors.

PRODUCT LIABILITY AND AVAILABILITY OF INSURANCE

        The commercial launch of MUSE exposes the Company to a significant risk
of product liability claims due to its availability to a large population of
patients. In addition, pharmaceutical products are subject to heightened risk
for product liability claims due to inherent side effects. The Company details
potential side effects in the patient package insert and the physician package
insert, both of which are distributed with MUSE, and the Company maintains
product liability insurance coverage. However, the Company's product liability
coverage is limited and may not be adequate to cover potential product liability
exposure. Product liability insurance is expensive, difficult to maintain, and
current or increased coverage may not be available on acceptable terms, if at
all. Product liability claims brought against the Company in excess of its
insurance coverage, if any, could have a material adverse effect upon the
Company's business, financial condition and results of operations.

UNCERTAINTY AND POSSIBLE NEGATIVE EFFECTS OF HEALTHCARE REFORM

        The healthcare industry is undergoing fundamental changes that are the
result of political, economic and regulatory influences. The levels of revenue
and profitability of pharmaceutical companies may be affected by the continuing
efforts of governmental and third party payors to contain or reduce healthcare
costs through various means. Reforms that have been and may be considered
include mandated basic healthcare benefits, controls on healthcare spending
through limitations on the increase in private health insurance premiums and
Medicare and Medicaid spending, the creation of large insurance purchasing
groups and fundamental changes to the healthcare delivery system. Due to
uncertainties regarding the outcome of healthcare reform initiatives and their
enactment and implementation, the Company cannot predict which, if any, of the
reform proposals will be adopted or the effect such adoption may have on the
Company. There can be no assurance that future healthcare legislation or other
changes in the administration or interpretation of government healthcare or
third party reimbursement programs will not have a material adverse effect on
the Company. Healthcare reform is also under consideration in some other
countries.



                                       16

<PAGE>   17

POTENTIAL VOLATILITY OF STOCK PRICE

        The stock market has experienced significant price and volume
fluctuations unrelated to the operating performance of particular companies. In
addition, the market price of the Company's common stock has been highly
volatile and is likely to continue to be so. Factors such as the Company's
ability to increase demand for its product in the U.S., the Company's ability to
successfully sell its product in the U.S. and internationally, variations in the
Company's financial results and its ability to obtain needed financing,
announcements of technological innovations or new products by the Company or its
competition, comments by security analysts, adverse regulatory actions or
decisions, any loss of key management, the results of the Company's clinical
trials or those of its competition, changing governmental regulations, patents
or other proprietary rights, product or patent litigation or public concern as
to the safety of products developed by the Company may have a significant effect
on the market price of the Company's common stock.

ANTI-TAKEOVER EFFECT OF PREFERRED SHARES RIGHTS PLAN AND CERTAIN CHARTER AND
BYLAW PROVISIONS

        In February 1996, the Company's Board of Directors authorized its
reincorporation in the State of Delaware (the "Reincorporation") and adopted a
Preferred Shares Rights Plan. The Company's Reincorporation into the State of
Delaware was approved by its stockholders and became effective in May 1996. The
Preferred Shares Rights Plan provides for a dividend distribution of one
Preferred Shares Purchase Right (a "Right") on each outstanding share of the
Company's common stock. The Rights will become exercisable following the tenth
day after a person or group announces acquisition of 20 percent or more of the
Company's common stock, or announces commencement of a tender offer, the
consummation of which would result in ownership by the person or group of 20
percent or more of the Company's common stock. The Company will be entitled to
redeem the Rights at $0.01 per Right at any time on or before the tenth day
following acquisition by a person or group of 20 percent or more of the
Company's common stock.

        The Preferred Shares Rights Plan and certain provisions of the Company's
Certificate of Incorporation and Bylaws may have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
attempting to acquire, control of the Company. The Company's Certificate of
Incorporation allows the Company to issue preferred stock without any vote or
further action by the stockholders, and certain provisions of the Company's
Certificate of Incorporation and Bylaws eliminate the right of stockholders to
act by written consent without a meeting, specify procedures for director
nominations by stockholders and submission of other proposals for consideration
at stockholder meetings, and eliminate cumulative voting in the election of
directors. Certain provisions of Delaware law could also delay or make more
difficult a merger, tender offer or proxy contest involving the Company,
including Section 203, which prohibits a Delaware corporation from engaging in
any business combination with any interested stockholder for a period of three
years unless certain conditions are met. The Preferred Shares Rights Plan, the
possible issuance of preferred stock, the procedures required for director
nominations and stockholder proposals and Delaware law could have the effect of
delaying, deferring or preventing a change in control of the Company, including
without limitation, discouraging a proxy contest or making more difficult the
acquisition of a substantial block of the Company's common stock. These
provisions could also limit the price that investors might be willing to pay in
the future for shares of the Company's common stock.


 
                          PART II: OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

        On September 11, 2000, the Company filed a Notice and Demand for
Arbitration with the American Arbitration Association ("AAA") against
AndroSolutions, Inc. ("ASI") in connection with certain contractual provisions
governing the parties' joint venture, ASIVI, LLC ("ASIVI"). The Company seeks an
award declaring that it is not liable to ASI for a $625,000 milestone payment
that ASI claims is due under the parties' Memorandum of Understanding dated
October 14, 1999 (the "MOU"). The Company also seeks an award directing ASI's
specific performance of other non-monetary contractual obligations. On October
5, 2000, ASI responded to the arbitration demand, denying all claims and
asserting its entitlement to the $625,000 milestone payment. ASI also asserted
counterclaims seeking an award directing VIVUS' specific performance of other
non-monetary contractual obligations. The Company believes ASI's counterclaims
are without merit and, on October 16, 2000, it filed its response to the
counterclaims, denying all liability. The parties began an arbitration hearing
in December 2000 that was postponed while the parties are attempting to agree on
a settlement of the claims. If the parties are not able to reach a settlement,
the hearing is expected to be continued in May 2001.

        On August 23, 2000, the Company received a notice of Demand for
Arbitration from Alza Corporation ("Alza") alleging a breach of a sales force
transition agreement dated July 6, 1998. The sales force transition agreement
provided for the transition of VIVUS' sales force to Alza, where they would
promote both VIVUS' and Alza's products for a period of time. The agreement
further provided



                                       17

<PAGE>   18

that VIVUS is to indemnify Alza for claims brought by any member of the sales
force relating to such person's employment (or termination) by VIVUS, and that
Alza is to indemnify VIVUS for claims brought by any member of the sales force
relating to such person's employment (or termination) by Alza. Alza alleges that
it is entitled to indemnification from the Company for Alza's attorneys' fees
and amounts paid to settle claims relating to Alza's failure to hire a former
Company employee. Alza seeks approximately $507,500 in damages. The Company
filed an answer with the AAA on September 22, 2000, in which it denied all of
the material allegations of the Demand for Arbitration. The Company is currently
engaged in discovery. A briefing schedule has been set with all arbitration
briefs to be submitted no later than May 17, 2001. No date has yet been set for
an arbitration hearing. The Company believes it has meritorious defenses and it
intends to vigorously defend the matter. Nevertheless, an adverse judgment in
this litigation is not expected to have a material impact on the Company's
financial position.

        On May 19, 2000, the Company was named, along with other defendants, in
a civil action filed in the Superior Court of New Jersey. The Complaint in this
action alleges that plaintiff was the victim of sexual harassment during the
second quarter of 1998, while she was working as a temporary worker for the
Company at a facility operated by PACO Pharmaceutical Services, Inc. At the
time, the Company was leasing space and workers from PACO to assist it with the
manufacture of the Company's product, MUSE. The complaint alleges hostile work
environment and quid pro quo sexual harassment, and seeks compensatory and
punitive damages. The Company denies liability, and intends to defend the case
vigorously. At this early stage in the litigation, it is not possible to predict
the outcome of the suit with any degree of certainty. In addition, plaintiff has
not yet provided the Company with information concerning the extent of her
alleged damages, so it is not possible to estimate the extent of any loss in the
event plaintiff prevails against the Company. Nevertheless, an adverse judgment
in this litigation is not expected to have a material impact on the Company's
financial position.

        On November 3, 1999, the Company filed a demand for arbitration against
Janssen Pharmaceutica International ("Janssen") with the AAA pursuant to the
terms of the Distribution Agreement entered into on January 22, 1997. The
Company seeks compensation for inventory manufactured in 1998 in reliance on
contractual forecasts and orders submitted by Janssen. The Company also seeks
compensation for forecasts and order shortfalls attributed to Janssen in 1998,
pursuant to the terms of the Distribution Agreement. The Company amended its
arbitration demand in August 2000 to include claims for lost profits due to
Janssen's failure to use the requisite diligence and reasonable efforts to gain
regulatory approval for and launch MUSE in each country of the Territory. This
amendment also includes claims based on Janssen's development of a competing
product intended for use in the treatment of male ED, in violation of the
Distribution Agreement. The Company's amended demand seeks an award of $7.9
million plus costs and interest. On October 20, 2000, Janssen submitted its
response to the Company's amended arbitration demand denying liability on all
claims, and asserting counterclaims against the Company for $1.8 million based
on the Company's alleged improper calculation of its Cost of Goods charged to
Janssen pursuant to the Distribution Agreement. On November 20, 2000 the Company
filed its response to the counterclaims, denying all liability. The Company
believes that Janssen's counterclaims are without merit and intends to defend
against them vigorously. Administration of the arbitration has been transferred
to JAMS and a three-member arbitration panel has been selected. The parties are
currently in the process of conducting discovery and anticipate a hearing in
October 2001.

        In the normal course of business, the Company receives and makes
inquiries regarding patent infringement and other legal matters. The Company
believes that it has meritorious claims and defenses and intends to pursue any
such matters vigorously. The Company is not aware of any asserted or unasserted
claims against it where the resolution would have an adverse material impact on
the operations or financial position of the Company.


ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

        None


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

        None


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        None



                                       18

<PAGE>   19


ITEM 5. OTHER INFORMATION

        None


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a) EXHIBITS (IN ACCORDANCE WITH ITEM 601 OF REGULATION S-K)



<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                   DESCRIPTION
-------                                  -----------
<S>           <C>
3.2(7)         Amended and Restated Certificate of Incorporation of the Company

3.3(4)         Bylaws of the Registrant, as amended


3.4(8)         Certificate of Designations of Rights, Preferences and Privileges
               of Series A Participating Preferred Stock

4.1(7)         Specimen Common Stock Certificate of the Registrant

4.2(7)         Registration Rights, as amended

4.4(1)         Form of Preferred Stock Purchase Warrant issued by the Registrant
               to Invemed Associates, Inc., Frazier Investment Securities, L.P.,
               and Cristina H. Kepner

4.5(8)         Second Amended and Restated Preferred Shares Rights Agreement,
               dated as of April 15, 1997 by and between the Registrant and
               Harris Trust Company of California, including the Certificate of
               Determination, the form of Rights Certificate and the Summary of
               Rights attached thereto as Exhibits A, B, and C, respectively

10.1(1)+       Assignment Agreement by and between Alza Corporation and the
               Registrant dated December 31, 1993

10.2(1)+       Memorandum of Understanding by and between Ortho Pharmaceutical
               Corporation and the Registrant dated February 25, 1992

10.3(1)+       Assignment Agreement by and between Ortho Pharmaceutical
               Corporation and the Registrant dated June 9, 1992

10.4(1)+       License Agreement by and between Gene A. Voss, MD, Allen C.
               Eichler, MD, and the Registrant dated December 28, 1992

10.5A(1)+      License Agreement by and between Ortho Pharmaceutical Corporation
               and Kjell Holmquist AB dated June 23, 1989

10.5B(1)+      Amendment by and between Kjell Holmquist AB and the Registrant
               dated July 3, 1992

10.5C(1)       Amendment by and between Kjell Holmquist AB and the Registrant
               dated April 22, 1992

10.5D(1)+      Stock Purchase Agreement by and between Kjell Holmquist AB and
               the Registrant dated April 22, 1992

10.6A(1)+      License Agreement by and between Amsu, Ltd., and Ortho
               Pharmaceutical Corporation dated June 23, 1989

10.6B(1)+      Amendment by and between Amsu, Ltd., and the Registrant dated
               July 3, 1992

10.6C(1)       Amendment by and between Amsu, Ltd., and the Registrant dated
               April 22, 1992

10.6D(1)+      Stock Purchase Agreement by and between Amsu, Ltd., and the
               Registrant dated July 10, 1992

10.11(4)       Form of Indemnification Agreements by and among the Registrant
               and the Directors and Officers of the Registrant

10.12(2)       1991 Incentive Stock Plan and Form of Agreement, as amended

10.13(1)       1994 Director Option Plan and Form of Agreement

10.14(1)       Form of 1994 Employee Stock Purchase Plan and Form of
               Subscription Agreement

10.17(1)       Letter Agreement between the Registrant and Leland F. Wilson
               dated June 14, 1991 concerning severance pay

10.21(3)+      Distribution Services Agreement between the Registrant and
               Synergy Logistics, Inc. (a wholly-owned subsidiary of Cardinal
               Health, Inc.)+ dated February 9, 1996

10.22(3)+      Manufacturing Agreement between the Registrant and CHINOIN
               Pharmaceutical and Chemical Works Co., Ltd. dated December 20,
               1995

10.22A(11)+    Amendment One, dated as of December 11, 1997, to the
               Manufacturing Agreement by and between VIVUS and CHINOIN
               Pharmaceutical and Chemical Works Co., Ltd. dated December 20,
               1995

10.23(6)+      Distribution and Services Agreement between the Registrant and
               Alternate Site Distributors, Inc. dated July 17, 1996
</TABLE>




                                       19

<PAGE>   20



<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                   DESCRIPTION
-------                                  -----------
<S>           <C>
10.24(5)+      Distribution Agreement made as of May 29, 1996 between the
               Registrant and ASTRAZ AB

10.24A(14)+    Amended Distribution Agreement dated December 22, 1999 between
               AstraZeneca and the Registrant

10.27(11)+     Distribution Agreement made as of January 22, 1997 between the
               Registrant and Janssen Pharmaceutica International, a division of
               Cilag AG International

10.27A(11)+    Amended and Restated Addendum 1091, dated as of October 29, 1997,
               between VIVUS International Limited and Janssen Pharmaceutica
               International

10.28(7)       Lease Agreement made as of January 1, 1997 between the Registrant
               and Airport Associates

10.29(7)       Lease Amendment No. 1 as of February 15, 1997 between Registrant
               and Airport Associates

10.29A(10)     Lease Amendment No. 2 dated July 24, 1997 by and between the
               Registrant and Airport Associates

10.29B(10)     Lease Amendment No. 3 dated July 24, 1997 by and between the
               Registrant and Airport Associates

10.31(9)+      Manufacture and Supply Agreement between Registrant and Spolana
               Chemical Works, A.S. dated May 30, 1997

10.32A(11)     Agreement between ADP Marshall, Inc. and the Registrant dated
               December 19, 1997

10.32B(11)     General Conditions of the Contract for Construction

10.32C(11)     Addendum to General Conditions of the Contract for Construction

10.34(12)+     Agreement dated as of June 30, 1998 between Registrant and Alza
               Corporation

10.35(12)+     Sales Force Transition Agreement dated July 6, 1998 between
               Registrant and Alza Corporation

10.36(13)      Form of, "Change of Control Agreements," dated July 8, 1998 by
               and between the Registrant and certain Executive Officers of the
               Company.

10.30A(13)     Amendment of lease agreement made as of October 19, 1998 by and
               between Registrant and 605 East Fairchild Associates, L.P.

10.37(13)      Sublease agreement made as of November 17, 1998 between Caliper
               Technologies, Inc. and Registrant

10.22B(13)+    Amendment Two, dated as of December 18, 1998 by and between
               VIVUS, Inc. and CHINOIN Pharmaceutical and Chemical Works Co.

10.31A(13)+    Amendment One, dated as of December 12, 1998 by and between
               VIVUS, Inc. and Spolana Chemical Works, A.S.

10.38(14)+     License Agreement by and between ASIVI, LLC, AndroSolutions,
               Inc., and the Registrant dated February 29, 2000

10.38A(14)+    Operating Agreement of ASIVI, LLC, between AndroSolutions, Inc.
               and the Registrant dated February 29, 2000

10.39(14)      Sublease agreement between KVO Public Relations, Inc. and the
               Registrant dated December 21, 1999

10.40(15)+     License and Supply Agreement made as of May 23, 2000 between the
               Registrant and Abbott Laboratories, Inc.

10.41(16)++    License and Supply Agreement made as of November 20, 2000 between
               the Registrant and Paladin Labs, Inc.

10.42(16)++    Development, License and Supply Agreement made as of January 22,
               2001 between the Registrant and TANABE SEIYAKU CO., LTD.
</TABLE>



------------

+       Confidential treatment granted.

++      Confidential treatment requested.

(1)     Incorporated by reference to the same-numbered exhibit filed with the
        Registrant's Registration Statement on Form S-1 No. 33-75698, as
        amended.

(2)     Incorporated by reference to the same numbered exhibit filed with the
        Registrant's Registration Statement on Form S-1 No. 33-90390, as
        amended.

(3)     Incorporated by reference to the same-numbered exhibit filed with the
        Registrant's Annual Report on Form 10-K for the year ended December 31,
        1995, as amended.



                                       20

<PAGE>   21

(4)     Incorporated by reference to the same numbered exhibit filed with the
        Registrant's Form 8-B filed with the Commission on June 24, 1996.

(5)     Incorporated by reference to the same numbered exhibit filed with the
        Registrant's Current Report on Form 8-K/A filed with the Commission on
        June 21, 1996.

(6)     Incorporated by reference to the same-numbered exhibit filed with the
        Registrant's Quarterly Report on Form 10-Q for the quarter ended
        September 30, 1996.

(7)     Incorporated by reference to the same-numbered exhibit filed with the
        Registrant's Annual Report on Form 10-K for the year ended December 31,
        1996, as amended.

(8)     Incorporated by reference to exhibit 99.1 filed with Registrant's
        Amendment Number 2 to the Registration Statement of Form 8-A (File No.
        0-23490) filed with the Commission on April 23, 1997.

(9)     Incorporated by reference to the same-numbered exhibit filed with the
        Registrant's Quarterly Report on Form 10-Q for the quarter ended June
        30, 1997.

(10)    Incorporated by reference to the same numbered exhibit filed with the
        Registrant's Quarterly Report on Form 10-Q for the quarter ended
        September 30, 1997.

(11)    Incorporated by reference to the same-numbered exhibit filed with the
        Registrant's Annual Report on Form 10-K for the year ended December 31,
        1997.

(12)    Incorporated by reference to the same-numbered exhibit filed with the
        Registrant's Quarterly Report on Form 10-Q for the quarter ended June
        30, 1998.

(13)    Incorporated by reference to the same-numbered exhibit filed with the
        Registrant's Annual Report on Form 10-K for the year ended December 31,
        1998.

(14)    Incorporated by reference to the same-numbered exhibit filed with the
        Registrant's Annual Report on Form 10-K for the year ended December 31,
        1999.

(15)    Incorporated by reference to the same-numbered exhibit filed with the
        Registrant's Quarterly Report on Form 10-Q for the quarter ended June
        30, 2000.

(16)    Incorporated by reference to the same-numbered exhibit filed with the
        Registrant's Annual Report on Form 10-K for the year ended December 31,
        2000.


        (b)     REPORTS ON FORM 8-K

                None


                                       21

<PAGE>   22


                                   SIGNATURES


        Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


Date: April 30, 2001        VIVUS, Inc.

                                           /s/ RICHARD WALLISER                
                            ---------------------------------------------------
                                             Richard Walliser                  
                                Vice President and Chief Financial Officer     
                                                                               
                                           /s/ LELAND F. WILSON                
                            ---------------------------------------------------
                                             Leland F. Wilson                  
                                   President and Chief Executive Officer       




                                       22

<PAGE>   23

                                   VIVUS, INC.

                               INDEX TO EXHIBITS*



<TABLE>
<CAPTION>
EXHIBIT                                                     DESCRIPTION
-------                                                     -----------
<S>                                                            <C> 
                                                                None
</TABLE>


------------

* Exhibits incorporated by reference are set forth in the exhibit listing
included in Item 6 of the Quarterly Report on Form 10-Q.




                                       23