ZACKS CONSENSUS ESTIMATES

March 06, 2015 VIVUS Inc. (VVUS-NASDAQ) Current Recommendation SUMMARY DATA NEUTRAL Prior Recommendation Outperform Date of Last Change 03/06/2015 Current Price (03/05/15) $2.87 Target Price $3.00 52-Week High $6.34 52-Week Low $2.50 One-Year Return (%) -54.73 Beta 1.14 Average Daily Volume (sh) 2,019,295 Shares Outstanding (mil) 104 Market Capitalization ($mil) $298 Short Interest Ratio (days) 21.86 Institutional Ownership (%) 69 Insider Ownership (%) 10 Annual Cash Dividend $0.00 Dividend Yield (%) 0.00 5-Yr. Historical Growth Rates Sales (%) Earnings Per Share (%) Dividend (%) P/E using TTM EPS P/E using 2015 Estimate P/E using 2016 Estimate Zacks Rank *: Short Term 1 3 months outlook 3 - Hold * Definition / Disclosure on last page SUMMARY VIVUS fourth quarter results were disappointing with the company reporting a loss of $0.25 per share, wider than the Zacks Consensus Estimate by a penny and the year-ago loss of $0.09. Revenues fell 50.8% to $21.7 million, missing the Zacks Consensus Estimate of $23 million. The sequential decline in Qsymia prescriptions was also disappointing. Competition in the obesity market is increasing with the recent entry of Orexigen s Contrave. Given the competitive scenario and the lackluster performance of Qsymia, we are moving back to a Neutral recommendation on the stock. However, we are positive on Stendra s label expansion and are also encouraged by the company s multiple partnerships for the product. Risk Level * High Type of Stock Small-Growth Industry Med-Biomed/Gene Zacks Industry Rank * 98 out of 267 ZACKS CONSENSUS ESTIMATES Revenue Estimates (In millions of $) Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec) 2013 4 A 6 A 27 A 44 A 81 A 2014 37 A 22 A 34 A 22 A 114 A 2015 18 E 18 E 19 E 23 E 78 E 2016 119 E Earnings Per Share Estimates (EPS is operating earnings before non-recurring items, but including employee stock options expenses) Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec) 2013 -$0.53 A -$0.51 A -$0.48 A -$0.09 A -$1.30 A 2014 -$0.15 A -$0.25 A -$0.12 A -$0.25 A -$0.77 A 2015 -$0.24 E -$0.31 E -$0.31 E -$0.40 E -$1.26 E 2016 -$1.06 E Projected EPS Growth - Next 5 Years % 2015 Zacks Investment Research, All Rights reserved. www.zacks.com 10 S. Riverside Plaza, Chicago IL 60606

OVERVIEW Mountain View, CA-based VIVUS, Inc. focuses on developing compounds to treat obesity, sleep apnea, diabetes and sexual health. The company's portfolio comprises two drugs: Qsymia for chronic weight management and Stendra (EU trade name: Spedra) for erectile dysfunction (ED) Qsymia, which was launched in Sep 2012, is approved for use as an adjunct to a healthy diet (low on calories) and increased physical activity for chronic weight management in obese (Body Mass Index, or BMI - 30 or more) or overweight (BMI - 27 or more) adults suffering from at least one weight-related comorbid condition. Approval was granted with a Risk Evaluation and Mitigation Strategy (REMS) and postmarketing requirements. However, Qsymia is yet to gain approval in the EU, where the CHMP issued a negative opinion. Qsymia has the potential to be developed for the treatment of type II diabetes (phase II completed) and obstructive sleep apnea (phase II completed). VIVUS has collaborated for Stendra with privately held Italian pharmaceutical company, Menarini (40 European countries, Australia and New Zealand), Sanofi (Africa, the Middle East, Turkey, and the Commonwealth of Independent States including Russia) and Endo. Endo possesses the rights to Stendra in the U.S. and Canada. VIVUS licensed the product from Mitsubishi Tanabe Pharma Corporation. Revenues for 2014 increased 40.8% to $114.2 million. REASONS TO BUY Qsymia Targets Multi-Billion Dollar Obesity Market: VIVUS key product, Qsymia, is the first weightloss drug to receive FDA approval in 13 years. The obesity market represents huge commercial potential. On the fourth quarter call, the company said that the obesity pharmacotherapy market continues to expand with total prescriptions in the anti-obesity segment growing 10% in 2014. With the overall drug treatment rate remaining in the mid-single digits within the eligible patient population and the high unmet medical need, upside potential in this market remains high. VIVUS is also working on expanding its label beyond obesity and is evaluating the drug for type II diabetes (phase II completed) and obstructive sleep apnea (phase II completed). Label expansion will increase the commercial potential of the drug. Efforts to Boost Qsymia Sales: VIVUS is working on boosting Qsymia sales through expanding reimbursement and promotional initiatives. The company is working on improving patient access while reducing out-of-pocket costs for Qsymia. On the fourth quarter call, VIVUS said that Qsymia is the only anti-obesity agent to be listed on CVS/Caremark s performance drug list (PDL). The company is also pursuing several programs to increase the utilization of Qsymia for the most appropriate patient types. The company is also targeting patients who have failed other therapies and are yet to try pharmacotherapy. Meanwhile, VIVUS is looking for a partner for Qsymia and is in discussion with several companies. It is crucial for the company to find a suitable partner at this juncture which will enable it to realize the full potential of Qsymia. Fast-Action of Stendra Could Help Gain Market Share: Stendra s label was updated to include 15 minutes onset of action. This means that Stendra can now be taken as early as approximately 15 minutes before sexual activity. The previously approved prescribing information recommended Equity Research VVUS Page 2

REASONS TO SELL administration of Stendra approximately 30 minutes before. We believe that the label expansion will give an edge to Stendra over other approved PDE5 inhibitors including Viagra, Levitra and Cialis (none of which have an onset of action as fast as Stendra) and will help boost market share. According to the company, ED therapies recorded combined sales of over $5 billion in 2012. The ED market is expected to grow further in the coming years. Stendra Partnerships Reduce Risk: VIVUS is collaborating with several companies for the commercialization of Stendra. It has inked a licensing and commercialization deal with Sanofi for approval and commercialization of the drug in Africa, the Middle East, Turkey, and the CIS States including Russia. The Sanofi agreement marks the third deal for Stendra. Earlier collaborations include one with privately held Italian pharmaceutical company, Menarini (40 European countries, Australia and New Zealand) and the other with Endo. Endo possesses the rights to Stendra in the U.S. and Canada. Under the Stendra commercialization agreements, VIVUS has the potential to receive milestone and upfront payments of up to $461 million. Additionally, VIVUS will receive royalties on Stendra. We are positive on the agreements for Stendra as these provide VIVUS with a steady stream of cash flow in the form of upfront and milestone payments. Apart from that, the company also stands to gain from the vast marketing experience of its partners like Sanofi. Qsymia Performance Lackluster: Qsymia sales have been lackluster to date. The uptake has been slow due to a high out-of-pocket cost burden for patients owing to a lack of reimbursement for the product. Healthcare providers are often hesitant to treat obesity proactively despite the presence of evidence regarding the cardiometabolic benefits of weight loss among overweight and obese individuals. Moreover, Actavis is looking to bring its generic version of Qsymia to market. The earlierthan-expected entry of generics would be a major setback for the company. Competitive Pressure May Limit Potential: Currently approved products in the obesity market include Arena Pharmaceuticals Belviq and Orexigen s Contrave. Contrave, supported by positive interim data from a cardiovascular outcomes study, may have an edge over other approved obesity treatments including Qsymia, which is yet to enter into a cardiovascular outcomes study (AQCLAIM - expected to cost $180 $220 million and could take five to six years to complete). Qsymia s successful commercialization is critical for the long-term financial performance of the company.. Challenges in Obesity Market: Although there is significant unmet need in the obesity market, certain challenges remain. These include the tendency of healthcare providers to treat symptoms of obesity rather than the disease itself, a narrow focus on certain patient types for treatment, historically low third-party insurance coverage and the continued exclusion of anti-obesity medications from Medicare Part D. All these factors could limit uptake of the drug. RECENT NEWS Equity Research VVUS Page 3

VIVUS Loss Wider than Expected, Qsymia Disappoints Feb 24 VIVUS Inc. s (VVUS) fourth-quarter 2014 loss of $0.25 per share was wider than the Zacks Consensus Estimate by a penny and the year-ago loss of $0.09. The wider loss was primarily due to lower revenues. The company s total revenues for the fourth quarter of 2014 declined 50.8% to $21.7 million. Fourth quarter 2014 revenues did not include license and milestone revenues as compared to $38.8 million in the year-ago quarter. Revenues were below the Zacks Consensus Estimate of $23 million. VIVUS s 2014 loss of $0.74 per share was narrower than the year-ago loss of $1.30 and the Zacks Consensus Estimate of a loss of $0.76. Annual revenues came in at $114.2 million, up 40.8%. Revenues were in line with the Zacks Consensus Estimate. Quarter in Details Fourth quarter revenues included $8.2 million of supply revenues and $0.8 million of royalty revenues related to erectile dysfunction (ED) drug, Stendra (EU trade name: Spedra). The company s weight management drug Qsymia generated net product sales of $12.7 million as compared to $12.5 million in the third quarter of 2014. Qsymia prescriptions (approximately 136,000) witnessed an approximate 2.9% sequential decline. In the reported quarter, 61% of total prescriptions were a free good or on a discount offer. On the fourth quarter call, the company stated that it is still looking for partnership opportunities for Qsymia. In the reported quarter, research and development expenses were $2.7 million, down 46% year over year. Selling, general and administrative expenses were down 26.8% to $26.8 million. VALUATION VIVUS fourth quarter results were disappointing with the company posting a wider loss and lower revenues. Fourth-quarter 2014 loss came in at $0.25 per share, wider than the Zacks Consensus Estimate by a penny and the year-ago loss of $0.09. Fourth quarter revenues declined 50.8% to $21.7 million missing the Zacks Consensus Estimate of $23 million. The sequential decline in Qsymia prescriptions was also disappointing. Competition in the obesity market is increasing with the recent entry of Orexigen s Contrave. Given the competitive scenario and the lackluster performance of Qsymia, we are moving back to a Neutral recommendation on the stock. Meanwhile, we are positive on the label expansion of Stendra. We are also encouraged by the company s multiple partnerships for the product. VIVUS current trailing 12-month P/S multiple is 2.6, compared to the 8.3 average for its peer group. The stock is trading at 3.8x our 2015 sales estimate, at a discount to its peer group multiple of 6.2. Our target price of $3.00 per share is based on 4x our 2015 sales estimate. Equity Research VVUS Page 4

Key Indicators P/S F1 P/S F2 Est. 5-Yr EPS Gr% P/CF P/S VIVUS Inc. (VVUS) 3.8 2.5 2.6 Peer Group Average 6.2 4.0 8.3 P/E 5-Yr High P/E 5-Yr Low MiMedx Group, Inc. (MDXG) 6.0 4.5 15.0 9.1 1106.0 163.1 AMAG Pharmaceuticals, Inc. (AMAG) 3.3 2.8 127.1 10.4 Merrimack Pharmaceuticals, Inc. (MACK) 14.3 7.4 12.3 Enzo Biochem Inc. (ENZ) 1.3 1.2 1.4 TTM is trailing 12 months; F1 is 2015 and F2 is 2016, CF is operating cash flow P/B Last Qtr. P/B 5-Yr High P/B 5-Yr Low ROE D/E Last Qtr. Div Yield Last Qtr. EV/EBITDA VIVUS Inc. (VVUS) 3.3 14.2 3.0-71.3 2.6 0.0-7.7 Industry Average 13.4 13.4 13.4-112.7 0.0 0.1-15.6 S&P 500 6.2 9.8 3.2 25.4 2.0 Equity Research VVUS Page 5

Earnings Surprise and Estimate Revision History Equity Research VVUS Page 6

DISCLOSURES & DEFINITIONS The analysts contributing to this report do not hold any shares of VVUS. The EPS and revenue forecasts are the Zacks Consensus estimates. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts personal views as to the subject securities and issuers. Zacks certifies that no part of the analysts compensation was, is, or will be, directly or indirectly, related to the specific recommendation or views expressed by the analyst in the report. Additional information on the securities mentioned in this report is available upon request. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. Because of individual objectives, the report should not be construed as advice designed to meet the particular investment needs of any investor. Any opinions expressed herein are subject to change. This report is not to be construed as an offer or the solicitation of an offer to buy or sell the securities herein mentioned. Zacks or its officers, employees or customers may have a position long or short in the securities mentioned and buy or sell the securities from time to time. Zacks uses the following rating system for the securities it covers. Outperform- Zacks expects that the subject company will outperform the broader U.S. equity market over the next six to twelve months. Neutral- Zacks expects that the company will perform in line with the broader U.S. equity market over the next six to twelve months. Underperform- Zacks expects the company will under perform the broader U.S. Equity market over the next six to twelve months. The current distribution of Zacks Ratings is as follows on the 1128 companies covered: Outperform - 15.5%, Neutral - 75.4%, Underperform 8.3%. Data is as of midnight on the business day immediately prior to this publication. Our recommendation for each stock is closely linked to the Zacks Rank, which results from a proprietary quantitative model using trends in earnings estimate revisions. This model is proven most effective for judging the timeliness of a stock over the next 1 to 3 months. The model assigns each stock a rank from 1 through 5. Zacks Rank 1 = Strong Buy. Zacks Rank 2 = Buy. Zacks Rank 3 = Hold. Zacks Rank 4 = Sell. Zacks Rank 5 = Strong Sell. We also provide a Zacks Industry Rank for each company which provides an idea of the near-term attractiveness of a company s industry group. We have 264 industry groups in total. Thus, the Zacks Industry Rank is a number between 1 and 264. In terms of investment attractiveness, the higher the rank the better. Historically, the top half of the industries has outperformed the general market. In determining Risk Level, we rely on a proprietary quantitative model that divides the entire universe of stocks into five groups, based on each stock s historical price volatility. The first group has stocks with the lowest values and are deemed Low Risk, while the 5 th group has the highest values and are designated High Risk. Designations of Below-Average Risk, Average Risk, and Above-Average Risk correspond to the second, third, and fourth groups of stocks, respectively. Analyst Last Updated By Copy Editor - Content Editor QCA Lead Analyst Reason for Update Q4 + Rec Change Equity Research VVUS Page 7