CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2011	Dec. 31, 2010
Current assets:
Cash and cash equivalents	$ 31,334	$ 37,216
Available-for-sale securities	99,101	101,970
Inventories	3,225	3,225
Prepaid expenses and other assets	1,686	1,648
Current assets of discontinued operations		6
Total current assets	135,346	144,065
Property and equipment, net	188	221
Total assets	135,534	144,286
Current liabilities:
Accounts payable	1,587	2,395
Accrued research and clinical expenses	2,193	2,625
Accrued employee compensation and benefits	2,351	2,820
Accrued and other liabilities	444	932
Current liabilities of discontinued operations	3,125	3,512
Total current liabilities	9,700	12,284
Commitments and contingencies
Stockholders' equity:
Preferred stock; $1.00 par value; 5,000 shares authorized; no shares issued and outstanding
Common stock; $.001 par value; 200,000 shares authorized; 81,888 and 81,568 shares issued and outstanding at March 31, 2011 and December 31, 2010, respectively	82	82
Additional paid-in capital	435,701	432,041
Accumulated other comprehensive income	29	4
Accumulated deficit	(309,978)	(300,125)
Total stockholders' equity	125,834	132,002
Total liabilities and stockholders' equity	$ 135,534	$ 144,286

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Mar. 31, 2011	Dec. 31, 2010
CONDENSED CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 1.00	$ 1.00
Preferred stock, shares authorized	5,000	5,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	200,000	200,000
Common stock, shares issued	81,888	81,568
Common stock, shares outstanding	81,888	81,568

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2011	Mar. 31, 2010
Operating expenses:
Research and development	$ 4,480	$ 10,211
General and administrative	5,428	5,164
Total operating expenses	9,908	15,375
Loss from operations	(9,908)	(15,375)
Interest and other income (expense):
Interest and other income, net	43	62
Interest expense	(1)	(1,295)
Total interest and other income (expense)	42	(1,233)
Loss from continuing operations before income taxes	(9,866)	(16,608)
Provision for income taxes	(1)	(1)
Net loss from continuing operations	(9,867)	(16,609)
Discontinued operations:
Income (loss) from discontinued operations, net of tax	14	(2,209)
Net loss	$ (9,853)	$ (18,818)
Basic net loss per share:
Continuing operations, basic (in dollars per share)	$ (0.12)	$ (0.21)
Discontinued operations, basic (in dollars per share)		$ (0.02)
Net loss per share, basic (in dollars per share)	$ (0.12)	$ (0.23)
Diluted net loss per share:
Continuing operations, diluted (in dollars per share)	$ (0.12)	$ (0.21)
Discontinued operations, diluted (in dollars per share)		$ (0.02)
Net loss per share, diluted (in dollars per share)	$ (0.12)	$ (0.23)
Shares used in per share computation:
Basic (in shares)	81,819	80,698
Diluted (in shares)	84,111	80,698

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2011	Mar. 31, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from continuing operations	$ (9,867)	$ (16,609)
Adjustments to reconcile net loss to net cash used for operating activities from continuing operations:
Depreciation	33	27
Share-based compensation expense	2,120	1,614
Changes in assets and liabilities:
Prepaid expenses and other assets	(38)	2,094
Accounts payable	(808)	(2,497)
Accrued research and clinical expenses	(432)	658
Accrued employee compensation and benefits	(469)	(419)
Accrued and other liabilities	(488)	(273)
Net cash used for operating activities from continuing operations	(9,949)	(15,405)
Net cash (used for) provided by operating activities from discontinued operations	(367)	2,522
Net cash used for operating activities	(10,316)	(12,883)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment purchases		(50)
Investment purchases	(30,826)	(50,710)
Proceeds from sale/maturity of securities	33,720	36,996
Net cash provided by (used for) investing activities from continuing operations	2,894	(13,764)
Net cash used for investing activities from discontinued operations		(5)
Net cash provided by (used for) investing activities	2,894	(13,769)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from exercise of common stock options	1,540	779
Net cash provided by financing activities from continuing operations	1,540	779
Net cash used for financing activities from discontinued operations		(40)
Net cash provided by financing activities	1,540	739
NET DECREASE IN CASH AND CASH EQUIVALENTS	(5,882)	(25,913)
CASH AND CASH EQUIVALENTS:
Beginning of period	37,216	40,533
End of period	$ 31,334	$ 14,620

BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2011

BASIS OF PRESENTATION

BASIS OF PRESENTATION

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. Accordingly, they do not include all of the information and footnotes required by United States 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 quarter ended March 31, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. Management has evaluated all events and transactions that occurred after March 31, 2011 up through the date these condensed consolidated financial statements were filed. There were no events or transactions occurring during this subsequent event reporting period which require recognition in these condensed consolidated financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2010, as filed on March 1, 2011 with the Securities and Exchange Commission, or SEC. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Reclassifications

Certain prior year amounts in the condensed consolidated financial statements have been reclassified to conform to the current quarter presentation. On November 5, 2010, the Company completed the sale of MUSE®. As discussed in Note 2: “Discontinued Operations,” the results of operations, the assets and the liabilities related to MUSE have been reported as discontinued operations in accordance with FASB ASC topic 205, Discontinued Operations, or ASC 205. Accordingly, the assets, liabilities and results of operations related to MUSE from prior periods have been reclassified to discontinued operations.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

- Definition

Description containing the entire organization, consolidation and basis of presentation of financial statements disclosure. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements.

+ References+ Details

DISCONTINUED OPERATIONS

3 Months Ended

Mar. 31, 2011

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS

2. DISCONTINUED OPERATIONS

On October 1, 2010, the Company entered into a definitive Asset Purchase Agreement with Meda AB, or Meda, to sell certain rights and assets related to MUSE, transurethral alprostadil, for the treatment of erectile dysfunction, or the MUSE Transaction. Meda has been the Company’s European distributor of MUSE since 2002. The assets sold in the MUSE Transaction include the U.S. and foreign MUSE patents, existing inventory, and the manufacturing facility located in Lakewood, New Jersey. The Company retained all of the liabilities associated with the pre-closing operations and products of the MUSE business and the accounts receivable for pre-closing MUSE sales. The transaction closed on November 5, 2010. Prior to the closing of the MUSE Transaction, the Company terminated all of the rights to MUSE and avanafil held by Deerfield Management Company, L.P. and affiliates and by Crown Bank, N. A. as collateral to the Company’s notes payable. Under the terms of the MUSE Transaction, the Company received an upfront payment of $22 million upon the closing and is eligible to receive an additional $1.5 million based on future sales of MUSE, provided that certain sales milestones are reached. Meda is now responsible for the manufacturing, selling and marketing of MUSE. Meda also assumed all post-closing expenses and liabilities associated with MUSE. The Company has agreed not to develop, manufacture or sell any transurethral erectile dysfunction drugs for a period of three years following the closing of the MUSE Transaction.

The sale of the MUSE product and certain related assets has been reported as discontinued operations in the condensed consolidated statements of operations for all periods presented, since (i) the MUSE product and related assets have identifiable cash flows that are largely independent of the cash flows of other groups of assets and liabilities, (ii) the Company does not have any significant continuing involvement with the product after the close of the transaction, and (iii) the cash milestone payment to be received upon achievement of certain sales levels is considered an indirect cash flow. The assets and liabilities related to the MUSE operations are reported as assets and liabilities of discontinued operations in the condensed consolidated balance sheets for all periods presented. The extinguishment of the largest liability of the discontinued operations, accrued product returns, will be settled in accordance with the returns policy by cash payments made to former customers for the return of expired MUSE product sold by VIVUS. The return window for expired MUSE product will end in 2013.

The following table presents the major classes of assets and liabilities that have been presented as assets and liabilities of discontinued operations in the condensed consolidated balance sheets (in thousands):

	March 31, 2011 (unaudited)		December 31, 2010
ASSETS
Trade accounts receivable, net	$	—	$	6
Total current assets of discontinued operations	$	—	$	6

	March 31, 2011 (unaudited)		December 31, 2010
LIABILITIES
Accounts payable	$	96	$	211
Accrued product returns	2,550		2,598
Accrued chargeback reserve	397		472
Accrued employee compensation and benefits	47		47
Accrued and other liabilities	35		184
Total current liabilities of discontinued operations	$	3,125	$	3,512

The following table presents summarized results of operations for the discontinued operations presented in the condensed consolidated statements of operations (in thousands)(unaudited):

	For the Three Months Ended
	March 31, 2011		March 31, 2010
Operating income (loss)	$	14	$	(2,112	)
Income (loss) before provision for income taxes	14		(2,202		)
Net income (loss) from discontinued operations	$	14	$	(2,209	)

SHARE-BASED COMPENSATION

3 Months Ended

Mar. 31, 2011

SHARE-BASED COMPENSATION.

SHARE-BASED COMPENSATION

3. SHARE-BASED COMPENSATION

The Company accounts for share-based compensation arrangements in accordance with SFAS 123R, Share-Based Payment, as codified in FASB ASC topic 718, Compensation—Stock Compensation, or ASC 718.

Total estimated share-based compensation expense, related to all of the Company’s share-based awards, recognized for the three months ended March 31, 2011 and 2010 was comprised as follows (in thousands, except per share data)(unaudited):

	Three Months Ended
	March 31,
	2011		2010

Research and development	$	538	$	332
General and administrative	1,582		1,282
Share-based compensation expense before taxes	2,120		1,614
Related income tax benefits	—		—
Share-based compensation expense, net of taxes	$	2,120	$	1,614
Basic and diluted per common share	$	0.03	$	0.02

CASH, CASH EQUIVALENTS AND AVAILABLE-FOR-SALE SECURITIES

3 Months Ended

Mar. 31, 2011

CASH, CASH EQUIVALENTS AND AVAILABLE-FOR-SALE SECURITIES

CASH, CASH EQUIVALENTS AND AVAILABLE-FOR-SALE SECURITIES

4. CASH, CASH EQUIVALENTS AND AVAILABLE-FOR-SALE SECURITIES

The fair value and the amortized cost of cash, cash equivalents, and available-for-sale securities by major security type at March 31, 2011 and December 31, 2010 are presented in the tables that follow:

As of March 31, 2011 (in thousands)(unaudited):

Cash and cash equivalents	Amortized Cost		Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses
Cash and money market funds	$	27,827	$	27,827	$	—	$	—
U.S. Treasury securities	3,507		3,507		—		—
Total cash and cash equivalents	$	31,334	$	31,334	$	—	$	—

Available-for-sale securities	Amortized Cost		Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses
U.S. Treasury securities	$	99,072	$	99,101	$	29	$	—
Total available-for-sale securities	$	99,072	$	99,101	$	29	$	—

As of December 31, 2010 (in thousands):

Cash and cash equivalents	Amortized Cost		Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses
Cash and money market funds	$	37,216	$	37,216	$	—	$	—
Total cash and cash equivalents	$	37,216	$	37,216	$	—	$	—

Available-for-sale securities	Amortized Cost		Estimated Fair Value		Gross Unrealized Gains		Gross Unrealized Losses
U.S. Treasury securities	$	101,966	$	101,970	$	12	$	(8	)
Total available-for-sale securities	$	101,966	$	101,970	$	12	$	(8	)

The following table summarizes the Company’s available-for-sale securities by the contractual maturity date as of March 31, 2011 (in thousands)(unaudited):

	Amortized Cost		Estimated Fair Value
Due within one year	$	99,072	$	99,101
	$	99,072	$	99,101

There were no net realized gains or losses on available-for-sale securities for the periods ended March 31, 2011 and 2010.

During the three months ended March 31, 2011, the Company had no sales of available-for-sale securities. In the ordinary course of business, the Company may sell securities at a loss for a number of reasons, including, but not limited to: (i) changes in the investment environment; (ii) expectation that the fair value could deteriorate further; (iii) desire to reduce exposure to an issuer or an industry; (iv) changes in credit quality; or (v) changes in expected cash flow.

At March 31, 2011, the Company did not have any cash equivalent or available-for-sale securities that were in an unrealized loss position.

At December 31, 2010, the Company had the following cash equivalent and available-for-sale securities that were in an unrealized loss position (in thousands):

	Less Than 12 Months
December 31, 2010	Gross Unrealized Losses			Estimated Fair Value
U.S. Treasury securities	$	(8	)	$	42,822
Total	$	(8	)	$	42,822

The gross unrealized losses reported above for December 31, 2010 were primarily caused by general fluctuations in market interest rates from the respective purchase date of these securities through the end of those periods.

As the Company presently does not intend to sell its debt securities and believes it will not likely be required to sell the securities that are in an unrealized loss position before recovery of their amortized cost, the Company does not consider these securities to be other-than-temporarily impaired.

As of March 31, 2011 and December 31, 2010, the temporary unrealized gains on cash, cash equivalents and available-for-sale securities, net of tax, of $29,000 and $4,000, respectively, were included in accumulated other comprehensive income in the accompanying condensed consolidated balance sheets.

SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, FSP SFAS 115-2 and SFAS 124-4, Recognition and Presentation of Other-than-Temporary Impairments (“FSP 115-2/SFAS 124-2”) and SAB Topic 5M, Accounting for Non-current Marketable Equity Securities, as codified in FASB ASC topic 320-10, Investments—Debt and Equity Securities, or ASC 320-10, provides guidance on determining when an investment is other-than-temporarily impaired. Investments are reviewed quarterly for indicators of other-than-temporary impairment. Effective for all periods ending after June 15, 2009, it provides additional guidance designed to create greater clarity and consistency in accounting for and presenting impairment losses on securities. At March 31, 2011 and December 31, 2010, all available-for-sale securities were invested in U.S. Treasuries.

Fair Value Measurements

Effective January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements, as codified in FASB ASC 820, Fair Value Measurements and Disclosures, or ASC 820, which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. Broadly, the framework clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

As a basis for considering such assumptions, this statement establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, the Company measures its marketable securities at fair value.

The following fair value hierarchy tables present information about the Company’s assets (cash and cash equivalents, available-for-sale securities) measured at fair value on a recurring basis as of March 31, 2011 (in thousands)(unaudited):

	Basis of Fair Value Measurements
	Balance at March 31, 2011		Level 1		Level 2		Level 3
Cash and cash equivalents:
Cash and money market funds	$	27,827	$	27,827	$	—	$	—
U.S. Treasury securities	3,507		3,507		—		—
Total cash and cash equivalents	$	31,334	$	31,334	$	—	$	—

	Basis of Fair Value Measurements
	Balance at March 31, 2011		Level 1		Level 2		Level 3
Available-for-sale securities:
U.S. Treasury securities	$	99,101	$	99,101	$	—	$	—
Total available-for-sale securities	$	99,101	$	99,101	$	—	$	—
Reported as:
Cash and cash equivalents	$	31,334
Available-for-sale securities	99,101
Total	$	130,435

	Basis of Fair Value Measurements
	Balance at December 31, 2010		Level 1		Level 2		Level 3
Cash and cash equivalents:
Cash and money market funds	$	37,216	$	37,216	$	—	$	—
Total cash and cash equivalents	$	37,216	$	37,216	$	—	$	—

	Basis of Fair Value Measurements
	Balance at December 31, 2010		Level 1		Level 2		Level 3
Available-for-sale securities:
U.S. Treasury securities	$	101,970	$	101,970	$	—	$	—
Total available-for-sale securities	$	101,970	$	101,970	$	—	$	—
Reported as:
Cash and cash equivalents	$	37,216
Available-for-sale securities	101,970
Total	$	139,186

Fair values are based on quoted market prices, where available. These fair values are obtained primarily from third party pricing services, which generally use Level 1 or Level 2 inputs for the determination of fair value in accordance with ASC 820. Third party pricing services normally derive the security prices through recently reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information. For securities not actively traded, the third party pricing services may use quoted market prices of comparable instruments or discounted cash flow analyses, incorporating inputs that are currently observable in the markets for similar securities. Inputs that are often used in the valuation methodologies include, but are not limited to, benchmark yields, broker quotes, credit spreads, default rates and prepayment speeds. The Company performs a review of the prices received from third parties to determine whether the prices are reasonable estimates of fair value.

The Company generally obtains one price for each investment security. The Company performs a review to assess if the evaluated prices represent a reasonable estimate of their fair value. This process involves quantitative and qualitative analysis by the Company. Examples of procedures performed include, but are not limited to, initial and ongoing review of pricing service methodologies, review of the prices received from the pricing service, and comparison of prices for certain securities with different appropriate price sources for reasonableness. As a result of this analysis, if the Company determines there is a more appropriate fair value based upon available market data, which happens infrequently, the price of a security is adjusted accordingly. The pricing service provides information to indicate which securities were priced using market observable inputs so that the Company can properly categorize its financial assets in the fair value hierarchy.

As of March 31, 2011, the Company does not have any liabilities that are measured at fair value on a recurring basis.

Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). There were no assets or liabilities measured at fair value on a nonrecurring basis during the three months ended March 31, 2011.

- Definition

Disclosure of cash, cash equivalents, and available for sale securities. Cash and cash equivalents may include the types of deposits and money market instruments, applicable carrying mounts, restricted amounts and compensating balance arrangements. Cash and equivalents include: (1) currency on hand (2) demand deposits with banks or financial institutions (3) other kinds of accounts that have the general characteristics of demand deposits (4) short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Generally, only investments maturing within three months from the date of acquisition qualify. Available-for-sale Securities which consist of all investments in certain debt and equity securities neither classified as trading or held-to-maturity securities. A debt security represents a creditor relationship with an enterprise. Debt securities include, among other items, US Treasury securities, US government securities, municipal securities, corporate bonds, convertible debt, commercial paper, and all securitized debt instruments. An equity security represents an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. Equity securities include, among other things, common stock, certain preferred stock, warrant rights, call options, and put options, but do not include convertible debt. An entity may opt to provide the reader with additional narrative text to better understand the nature of investments in debt and equity securities which are categorized as Available-for-sale.

+ References+ Details

NOTES PAYABLE

3 Months Ended

Mar. 31, 2011

NOTES PAYABLE

NOTES PAYABLE

7. NOTES PAYABLE

Deerfield Financing

On April 3, 2008, the Company entered into several agreements with Deerfield Management Company, L.P., or Deerfield, a healthcare investment fund, and its affiliates, Deerfield Private Design Fund L.P. and Deerfield Private Design International, L.P. (collectively, the Deerfield Affiliates). Certain of the agreements were amended and restated on March 16, 2009, which included the addition of Deerfield PDI Financing L.P. as a Deerfield Affiliate. Under the agreements, Deerfield and its affiliates agreed to provide $30 million in funding to the Company. The $30 million in funding consisted of $20 million from a Funding and Royalty Agreement, or FARA, entered into with a newly incorporated subsidiary of Deerfield, or the Deerfield Sub, and $10 million from the sale of the Company’s common stock under a securities purchase agreement. Under the FARA, the Deerfield Sub made $3.3 million payments to the Company in April, September and December 2008 and February, June and September 2009, constituting all of the required payments under the FARA. The Company paid royalties on the net sales of MUSE and if approved, on future sales of avanafil, an investigational drug candidate, to the Deerfield Sub. The term of the FARA was 10 years. The FARA included covenants requiring the Company to use commercially reasonable efforts to preserve its intellectual property, manufacture, promote and sell MUSE, and develop avanafil.

The agreements also provided the Company with an option to purchase, and the Deerfield Affiliates with an option to compel the Company to purchase, or put right, the Deerfield Sub holding the royalty rights. If the Company exercised its right to purchase the Deerfield Sub, the net price would be $23 million if exercised before April 3, 2011, or $26 million if exercised after April 3, 2011 but before April 3, 2012 (the purchase prices are subject to other adjustments as defined in the agreement). After April 3, 2011, the Deerfield Affiliates could have exercised the right to compel the Company to purchase the Deerfield Sub at a price of $17 million. This price could have increased up to $26 million, and the timing of the sale of the shares could have been accelerated under certain conditions including a change-in-control, sale of MUSE or avanafil, sale of major assets and the sale of securities in a transaction or a series of related transactions by the Company that exceed 20% of the Company’s outstanding common stock at the date the Option and Put Agreement was signed if at the time of the sale the Company’s market capitalization is below $300 million (each, a Major Transaction). Under these conditions, the cost of the shares of the Deerfield Sub would have been $23 million on or before April 3, 2011 and $26 million from April 3, 2011 through April 3, 2018. The sale of the shares of the Deerfield Sub could also have been accelerated if the Company’s cash, cash equivalents and available for sale securities fell below $15 million or the Company’s market capitalization fell below $50 million. The purchase prices under the put right were subject to other adjustments as defined in the agreements. If either party exercised its option, any further royalty payments would be effectively terminated. In exchange for the option right, the Company paid $2 million to the Deerfield Affiliates. The Company’s intellectual property and all of the accounts receivable, inventory and machinery and equipment arising out of or relating to MUSE and avanafil were collateral for this transaction.

In preparation for the closing of the MUSE Transaction and in accordance with the terms of the OPA, the Company exercised the option right and on October 21, 2010, it paid $27.1 million in satisfaction of all of its financial obligations under the FARA and OPA. The gross amount paid consisted of the Base Option Price of $25 million less the $2 million Option Premium Adjustment, or $23 million, plus the Cash Adjustment of $2.8 million and the Royalty Adjustment of $1.3 million. The Royalty Adjustment was calculated based upon royalties on MUSE sales not yet paid to the Deerfield Sub at the time of Option Closing. The Cash Adjustment was the total amount of cash remaining in the Deerfield Sub at time of Option Closing. As a result, all of the outstanding shares of the Deerfield Sub were acquired by the Company, the royalty rights to MUSE and avanafil were terminated and the notes payable of the Deerfield Sub were cancelled. In addition, the $2.8 million of cash held by the Deerfield Sub is now owned by the Company. All the security interests in the collateral related to MUSE and avanafil held by the Deerfield Sub and the Deerfield Affiliates as part of the FARA and OPA were terminated. The payoff of the Deerfield loan resulted in a loss on the early extinguishment of debt of $6 million which was recognized in the fourth quarter of 2010.

The Company evaluated the Deerfield financing in accordance with FASB Financial Interpretation No., or FIN, 46(R), Consolidation of Variable Interest Entities, or FIN 46R, as codified in FASB ASC topic 810, Consolidation, or ASC 810, and determined that the Deerfield Sub may constitute a Variable Interest Entity, or VIE; however, the Company also determined that it was not the primary beneficiary of this VIE and therefore concluded that the Company was not required to consolidate the Deerfield Sub. In December 2010, the Deerfield Sub was dissolved.

In accordance with Emerging Issues Task Force (EITF) Issue 88-18, Sale of Future Revenues, as codified in FASB ASC 605, the FARA transaction was in substance a financing arrangement, or loan, that was repaid by the Company. The minimum repayment amount was $17 million, the amount of the unconditional put option held by the Deerfield Affiliates, plus royalties paid during the term of the agreement on sales of MUSE and, if approved, avanafil. Accordingly, the Company recorded the advances from the Deerfield Affiliates, net of the $2 million option right payment and related fees and expenses, as a loan. The Company received all of the required advances under the financing arrangement. Per the agreement, the loan amount would be lower than the contractual amounts owed if the Company exercised its call option of $23 million to $26 million, or if the Deerfield Affiliates required the Company to purchase the shares as a result of a “Major Transaction”. Using the interest method under APB Opinion No. 21, Interest on Receivables and Payables, as codified in FASB ASC topic 835, Interest, subtopic 30, Imputation of Interest or ASC 835-30, interest expense on the loan was calculated and recognized over three years, which was the estimated term of the loan based on the earliest date that the Deerfield Affiliates could require the Company to repay the amounts advanced. The Deerfield Affiliates received quarterly payments based on net sales of MUSE. The initial imputed effective annual interest rate on the financing was approximately 32% as calculated based upon quarterly advances under the FARA, up to a loan balance of $17 million, offset by the estimated quarterly royalty payments to the Deerfield Affiliates. The imputed interest rate was revised to 31% at December 31, 2009 and 33% at December 31, 2008 based on the actual royalty payments made and the timing of payments and advances in 2009 and 2008, respectively. The imputed effective interest rate was utilized for purposes of calculating the interest expense only and did not reflect the amount of royalty paid to the Deerfield Affiliates on a quarterly basis. Quarterly royalty payments were based on a percentage of net MUSE sales at a rate substantially lower than the imputed effective interest rate used to calculate interest expense.

AGREEMENTS

3 Months Ended

Mar. 31, 2011

AGREEMENTS

AGREEMENTS

8. AGREEMENTS

In 2001, VIVUS entered into a Development, Licensing and Supply Agreement with Tanabe for the development of avanafil, an oral PDE5 inhibitor investigational drug candidate for the treatment of erectile dysfunction. In October 2007, Tanabe and Mitsubishi Pharma Corporation completed their merger and announced their name change to Mitsubishi Tanabe Pharma Corporation, or MTPC. Under the terms of the 2001 Development, Licensing and Supply Agreement with Tanabe, the Company paid a $2 million license fee obligation to Tanabe in the year ended December 31, 2006. No payments were made under this agreement with MTPC in the year ended December 31, 2008; however, the Company paid MTPC $4 million in January 2009 following the enrollment in December 2008 of the first patient in the first Phase 3 clinical study. The Company expects to make other substantial payments to MTPC in accordance with its agreements with MTPC as the Company continues to develop and, if approved for sale, commercialize avanafil for the oral treatment of male sexual dysfunction. Such potential future milestone payments total $15 million in the aggregate and include payments upon: the first submission of an NDA, expected in the second quarter of 2011; obtainment of the first regulatory approval in the U.S. and any major European country; and achievement of $250 million or more in calendar year sales.

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 the Company’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.

On October 16, 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 our investigational drug candidate development program for QNEXA for the treatment of obesity, obstructive sleep apnea and diabetes. The Combination Therapy and all related patent applications, or the Patents, were transferred to the Company with worldwide rights to develop and commercialize the Combination Therapy and exploit the Patents. Pursuant to the Assignment Agreement, the Company has paid a total of $220,000 to Dr. Najarian through March 31, 2011 and has issued him options to purchase 40,000 shares of our common stock. The Company is obligated under the terms of the Assignment Agreement to make a milestone payment of $1 million and issue an option to purchase 20,000 shares of VIVUS’ common stock to Dr. Najarian upon marketing approval by the FDA of a product for the treatment of obesity that is based upon the Combination Therapy and Patents. The Assignment Agreement will require 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 currently serves as a Principal Scientist.

COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2011

COMMITMENTS AND CONTINGENCIES.

COMMITMENTS AND CONTINGENCIES

10. COMMITMENTS AND CONTINGENCIES

Lease Commitments

In November 2006, the Company entered into a 30-month lease for its corporate headquarters located in Mountain View, California. The lease commenced on February 1, 2007. The base monthly rent was set at $1.85 per square foot or $26,000 per month. The lease expired on July 31, 2009. On December 16, 2008, the Company entered into a first amendment to this lease. Under the terms of the amended lease, it continues to lease the office space for its corporate headquarters for a two-year period commencing on August 1, 2009 and expiring on July 31, 2011. The base monthly rent was set at $1.64 per square foot or $23,000 per month. The amended lease allowed the Company one option to extend the term of the lease for one year from the expiration of the lease. On November 12, 2009, the Company entered into a second amendment to this lease. The second amendment commenced on January 1, 2010, expires on July 31, 2011 and expands the leased space. The base rent for the expansion space was set at $2.25 per square foot or $8,500 per month. The option to extend the term of the amended lease for one year from the expiration of the lease applies to this expansion space as well. In December 2010, the Company entered into a third amendment to this lease. The third amendment extended the lease term for the original premises and the expansion space for a period of twelve months commencing August 1, 2011 and terminating July 31, 2012. Under the third amendment, the base rent for the original space will be set at $1.69 per square foot or $24,000 per month and the base rent for the expansion space will be set at $2.31 per square foot or $8,700 per month. The amended lease allows the Company one additional option to extend the term of the lease for one year from the expiration of the lease. The option to extend the term of the amended lease for one year from the expiration of the lease applies to this expansion space as well.

Future minimum lease payments under operating leases are as follows (in thousands)(unaudited):

2011	$	516
2012	406
Total	$	922

Other Agreements

The Company has entered into various agreements with clinical consultants and clinical research organizations to perform clinical studies on its behalf and at March 31, 2011, its remaining commitments under these agreements totaled $4.9 million. The Company has remaining commitments under various general and administrative services agreements totaling $4.2 million at March 31, 2011, including $1.5 million related to Leland F. Wilson’s Employment Agreement (see paragraph below). The Company has also entered into various agreements with research consultants and other contractors to perform regulatory services, drug research and testing and, at March 31, 2011, its remaining commitments under these agreements totaled $3.3 million.

On December 19, 2007, the Compensation Committee of the Board of Directors of the Company approved an employment agreement, or the Employment Agreement, with Leland F. Wilson, the Company’s Chief Executive Officer. The Employment Agreement includes salary, incentive compensation, retirement benefits and length of employment, among other items, as agreed to with Mr. Wilson. The Employment Agreement had an initial term of two years commencing on the effective date, June 1, 2007, or the Effective Date. On January 23, 2009, the Compensation Committee approved an amendment to the Employment Agreement, or the Amendment, which amends the Employment Agreement. Pursuant to the Amendment, the initial term of the Employment Agreement was increased from two to three years commencing on June 1, 2007 and other relevant dates were also extended to reflect the three-year initial term. On January 21, 2011, the Compensation Committee approved the second amendment to Mr. Wilson’s Employment Agreement. Pursuant to the second amendment, the initial term of the Employment Agreement is increased to four years commencing on June 1, 2007.

Indemnifications

In the normal course of business, the Company provides indemnifications of varying scope to certain customers, third party service providers and business partners against claims of intellectual property infringement made by third parties arising from the use of its products and to its clinical research organizations and investigator sites against liabilities incurred in connection with any third-party claim arising from the work performed on behalf of the Company, among others. Historically, costs related to these indemnification provisions have not been significant and the Company is unable to estimate the maximum potential impact of these indemnification provisions on its future results of operations.

On May 15, 2007, the Company closed its transaction with K-V Pharmaceutical Company, or K-V, for the sale of its investigational drug candidate, Evamist. At the time of the sale, Evamist was an investigational drug candidate and was not yet approved by the Food and Drug Administration, or FDA, for marketing. Pursuant to the terms of the Asset Purchase Agreement for the sale of the Evamist product to K-V, the Company made certain representations and warranties concerning its rights and assets related to Evamist and the Company’s authority to enter into and consummate the transaction. The Company also made certain covenants that survive the closing date of the transaction, including a covenant not to operate a business that competes, in the U.S., and its territories and protectorates, with the Evamist product.

Pursuant to the terms of the Asset Purchase Agreement, (see Note 2: “Discontinued Operations”), the Company entered into with Meda AB, or Meda, to sell certain of the assets related to the MUSE business to Meda, or the MUSE Transaction, the Company agreed to indemnify Meda in connection with the representations and warranties that it made concerning its rights, liabilities and assets related to the MUSE business and its authority to enter into and consummate the MUSE Transaction. The Company also made certain covenants in the Asset Purchase Agreement which survive the closing of the MUSE Transaction, including a three year covenant not to develop, manufacture, promote or commercialize a trans-urethral erectile dysfunction drug.

To the extent permitted under Delaware law, the Company has agreements whereby it indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The indemnification period covers all pertinent events and occurrences during the officer’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company maintains director and officer insurance coverage that reduces its exposure and enables the Company to recover a portion of any future amounts paid. The Company believes the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal.

INCOME TAXES

3 Months Ended

Mar. 31, 2011

INCOME TAXES

INCOME TAXES

11. INCOME TAXES

The Company makes certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

As part of the process of preparing its condensed consolidated financial statements, the Company is required to estimate its income taxes in each of the jurisdictions in which it operates. This process involves the Company estimating its current tax exposure under the most recent tax laws and assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in the Company’s condensed consolidated balance sheets.

The Company assesses the likelihood that it will be able to recover its deferred tax assets. The Company considers all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. If it is not more likely than not that the Company will recover its deferred tax assets, the Company will increase its provision for taxes by recording a valuation allowance against the deferred tax assets that the Company estimates will not ultimately be recoverable. As a result of the Company’s analysis of all available evidence, both positive and negative, as of March 31, 2011, it was considered more likely than not that the Company’s deferred tax assets would not be realized. However, should there be a change in the Company’s ability to recover its deferred tax assets, the Company would recognize a benefit to its tax provision in the period in which the Company determines that it is more likely than not that it can recover its deferred tax assets.

The total gross unrecognized tax benefits as of March 31, 2011 are $1.2 million and relate to state tax exposures, of which $7,000 would affect the effective tax rate if recognized. The total unrecognized tax benefits as of March 31, 2011 include approximately $1.2 million of unrecognized tax benefits that have been netted against the related deferred tax assets.

The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of its provision for income taxes. As of March 31, 2011, the Company has accrued $1,000 of interest and penalties related to unrecognized tax benefits.

The Company’s income tax return for the year ended December 31, 2007 is currently under examination by the California Franchise Tax Board. The Company’s income tax return for the years ended December 31, 2007 and 2008 are currently under examination by the Internal Revenue Service. Because the Company used net operating loss carryforwards and other tax attributes to offset its taxable income on its 2007 income tax returns for U.S. Federal and California, such attributes can be adjusted by these taxing authorities until the statute closes on the year in which such attributes were utilized. Tax years 1991 to 2009 remain subject to examination by the appropriate governmental agencies due to tax loss carryovers from those years.

The Company is in various stages of the examination process in connection with all of its tax audits and it is difficult to determine when these examinations will be settled. It is reasonably possible that over the next twelve-month period the Company may experience an increase or decrease in its unrecognized tax benefits. It is not possible to determine either the magnitude or range of any increase or decrease at this time.

LEGAL MATTERS

3 Months Ended

Mar. 31, 2011

LEGAL MATTERS

LEGAL MATTERS

14. LEGAL MATTERS

In the normal course of business, the Company receives claims and makes inquiries regarding patent infringement and other related legal matters. The Company believes that it has meritorious claims and defenses and intends to pursue any such matters vigorously.

Securities Related Class Action Lawsuits

A federal securities class action lawsuit captioned Kovtun v. Vivus, Inc., et al. is pending in the U.S. District Court, Northern District of California, which asserts claims for violations of Section 10(b) and 20(a) of the federal securities laws, purportedly relating to statements allegedly made by the Company in connection with its New Drug Application, or NDA, for QNEXA as a treatment for obesity. The essential factual allegation is that the Company and its officers misled the investing public regarding the prospects for QNEXA’s NDA approval, and the drug’s efficacy and safety. On February 2, 2011, the court granted a stipulation and order appointing a lead plaintiff and a lead counsel for the class. On February 3, 2011, the court granted a stipulation and order requiring the lead plaintiff to file any amendment to the operative complaint no later than 60 days from February 2, 2011, with the defendants’ answer or motion to dismiss to be filed no later than 60 days after plaintiffs file the amended complaint. Plaintiffs’ amended complaint was filed on April 4, 2011 and defendants’ response is due on or before June 3, 2011. Plaintiffs’ opposition to defendants’ motion to dismiss the amended complaint must be filed on or before August 2, 2011, and defendants must file their reply to the opposition on or before September 16, 2011. Discovery is stayed in the Kovtun matter pending resolution of the defendants’ motion to dismiss.

Also pending in the U.S. District Court, Northern District of California and formally related to the Kovtun matter is a shareholder derivative action captioned Turberg v. Logan, et al., which restates the allegations in Kovtun by claiming that certain of the Company’s officers and directors caused or allowed the Company to violate the federal securities laws by issuing material misrepresentations to the investing public. On February 7, 2011, the court granted a stipulation and order requiring plaintiffs to file and serve any amendment to the complaint no later than 60 days from the filing of the consolidated amended complaint in the Kovtun matter, with the defendants’ answer or motion to dismiss to be filed no later than 60 days after the court enters an order ruling on defendants’ motion to dismiss in the Kovtun matter. In the event the defendants file a motion to dismiss in the Turberg matter, the plaintiffs will have 60 days to oppose the motion and the defendants will have 45 days to reply to the plaintiffs’ opposition. The court order stayed all discovery in the Turberg matter pending resolution of the defendants’ motion to dismiss.

Additionally, three separate shareholder derivative suits were filed in California Superior Court, Santa Clara County. The allegations in these shareholder derivative suits are nearly identical to those in the Turberg federal shareholder derivative action. On February 3, 2011, the court granted a stipulation and order consolidating the three suits into the action captioned Wilkinson v. Wilson, et al. and appointing a lead plaintiff and a lead counsel for the shareholder derivative actions. The court order requires the plaintiffs to file and serve a consolidated complaint no later than 60 days from the court’s order and the parties to meet and confer on a briefing schedule for the defendants’ motion to dismiss the consolidated complaint no later than 30 days from the service of the consolidated complaint. Plaintiffs’ consolidated complaint was filed on April 4, 2011 and the parties intend to meet and confer on a briefing schedule in early May 2011.

The Company believes that the allegations in the various federal and state actions have no merit and that the Company has meritorious defenses to the claims stated in such actions. The Company intends to vigorously defend itself in the various actions. Although there may be no merit to such allegations or claims, the Company will be required to allocate monetary and personnel resources to defend itself and the officers and directors named as defendants to various lawsuits. The Company believes the disposition of the current lawsuits and claims is not likely to have a material effect on its financial condition or liquidity.

In the ordinary course of business the Company may become involved in lawsuits and subject to various claims from current and former employees including wrongful termination, sexual discrimination and employment matters. The Company was a party to a lawsuit involving a former employee, which was dismissed on procedural grounds with plaintiff being granted leave to refile certain of his state law claims. The Company has also been named as a potential defendant in a complaint filed by a former employee. The Company has investigated each of the claims and believes the allegations have no merit and that the Company has meritorious defenses to such charges. Due to the current economic downturn, employees may be more likely to file employment-related claims following termination of their employment. Employment-related claims also may be more likely following a poor performance review. Although there may be no merit to such claims or legal matters, the Company may be required to allocate additional monetary and personnel resources to defend against these type of allegations. The Company believes the disposition of the current lawsuit and claims is not likely to have a material effect on its financial condition or liquidity.

The Company is not aware of any other asserted or unasserted claims against it where an unfavorable resolution would have an adverse material impact on the operations or financial position of the Company.

Document and Entity Information	3 Months Ended
Document and Entity Information	Mar. 31, 2011	Apr. 28, 2011
Document and Entity Information
Entity Registrant Name	VIVUS INC
Entity Central Index Key	0000881524
Document Type	10-Q
Document Period End Date	Mar. 31, 2011
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		81,888,428
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q1