Afaq--
Civil suits are a matter of public record. If VVUS is a defendant
and is making counter-claims agains HVSF, such circumstances will
need to be noted (per SEC regulations) in the next 10-Q for the
quarter ended 12/31/97. I have rarely seen a defendant company
go out of its way to publicize the fact that it is being sued,
unless in the form of a statement that the charges are baseless,
... will vigorously defend, etc. VVUS has apparently not made
such a statement to the newswire services that I can access.
If this is an area of concern to you, I suggest you call Nina
Ferrari at IR and ask if you can participate in Thursday's CC,
and then you may have a chance to ask Leland about it directly.
David
P.S. there is no mention of a HVSF lawsuit in the following section
of the Vivus 9/30/97 10-Q (but who is that Consultant?):
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PROPRIETARY RIGHTS AND RISK OF LITIGATION
The Company's success will depend, in large part, on the strength of its
current and future patent position relating to the transurethral delivery of
pharmacologic agents for the treatment of erectile dysfunction. The Company's
patent position, like that of other pharmaceutical companies, is highly
uncertain and involves complex legal and factual questions. Claims made under
patent applications may be denied or significantly narrowed and issued patents
may not provide significant commercial protection to the Company. The Company
could incur substantial costs in proceedings before the United States Patent
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 is 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 that is
exclusively licensed to VIVUS. As a result of the opposition proceedings,
certain claims in the European patent were held to be unpatentable by the
Opposition Division of the European Patent Office (EPO). These claims related to
all pharmaceutical compositions that included prostaglandin E(1). The
patentability of other claims in the patent was confirmed. These claims included
the use of active agents in the treatment of erectile dysfunction by
administration via the urethra to the corpora cavernosa, and 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. Despite the withdrawal of
the Pharmedic Company from the appeals 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.
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 would be
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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 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 or other intellectual property rights.
A former consultant to the Company has claimed that he is the inventor of
certain technology disclosed in two of the Company's patents. The former
consultant further claims that the Company and certain of its officers and
directors defrauded him by allegedly failing to inform him that they intended to
use and patent this technology and by failing to compensate him in the manner
allegedly promised. On May 28, 1996, the Company filed a complaint for
declaratory judgment against the former consultant in the United States District
Court for the Northern District of California, which seeks a declaration from
the court that the former consultant is not an inventor of any of the
technology. On July 17, 1996, the former consultant filed a lawsuit that sought
to have two of the Company's patents corrected to name him as an inventor, or in
the alternative, declared invalid on the grounds that they fail to list him as
an inventor. The former consultant also sought damages for alleged fraud. On
September 16, 1996, the Court dismissed the consultant's lawsuit, and ordered
him to refile his claims as counterclaims in the action initiated by the Company
on May 28, 1996. The consultant filed his counterclaim on September 26, 1996. On
July 25, 1997, the Company filed motions for summary judgment, which request
that the Court enter judgment against the former consultant on all of his
claims. The Company's motions were heard by the Court on September 8, 1997. By
orders dated September 9, 1997, the Court denied one of the Company's motions
which related to the inventorship issues and granted in part and denied in part
the Company's other motion, which was related to the fraud issues. This case is
set for trial on December 9, 1997. The Company has conducted a review of the
circumstances surrounding this matter and believes that the allegations are
without merit. Although the Company believes that it should prevail in the
litigation, the uncertainties inherent in litigation, and in particular, jury
trials, prevent the Company from giving any assurances about the outcome of such
litigation. A judgment in favor of the consultant on some or all of his claims
would have a material adverse effect on the Company.
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