881524--3/10/2010--VIVUS

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Risks Relating to our Product Development Efforts We face significant risks in our product development efforts. We are largely dependent on the success of our two investigational product candidates: Qnexa, for treatment of obesity, and avanafil, for treatment of erectile dysfunction, and cannot be certain that either product candidate will receive timely regulatory approval, if at all, or be successfully commercialized. The results of pre-clinical studies and completed clinical trials are not necessarily predictive of future results, and our current investigational product candidates may not have favorable results in later studies or trials. If the results of current or future pre-clinical studies, clinical testing and/or clinical trials indicate that our proposed investigational product candidates are not safe or effective for human use, our business will suffer. Our bioequivalence studies may fail to demonstrate acceptable comparability between formulations of investigational product candidates used in our Phase 3 clinical trials and new formulations, if any, of investigational product candidates we might choose to launch commercially, or choose to commercialize later, after launch. Association with fen-phen could lead to increased scrutiny of our investigational product candidate, Qnexa. Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval or limit the commercial profile of an approved label. Our investigational product candidate, Qnexa, is a combination of drugs approved individually by the FDA that are commercially available and marketed by other companies. As a result, our product may be subject to substitution with individual drugs contained in the Qnexa formulation and immediate competition. The FDA and other regulatory agencies will likely require more extensive or expensive trials for our combination investigational product candidate, Qnexa, than may be required for single agent pharmaceuticals. We have in-licensed all or a portion of the rights to our product candidates from third parties. If we default on any of our material obligations under those licenses, we could lose rights to our product candidates. While we may be entitled to future milestone payments under existing contractual arrangements, we may not receive these payments. We are dependent upon collaborative arrangements and strategic alliances. We face significant governmental regulation during our product development activities. Our applications for regulatory approval could be delayed or denied due to problems with studies conducted before we licensed some of our investigational product candidates from third parties. Following regulatory approval of any investigational product candidates, we will be subject to ongoing regulatory obligations and restrictions, which may result in significant expense and limit our ability to commercialize our potential drugs. Even if we receive regulatory approval to commercialize our product candidates, our ability to generate revenues from any resulting products will be subject to a variety of risks, many of which are out of our control. We have limited sales and marketing experience and resources and we may not be able to effectively market and sell our investigational product candidates, if approved, in the United States and/or internationally without a global pharmaceutical partner. Even if our investigational product candidates receive regulatory approval in the United States, we may never receive approval for or commercialize our products outside of the United States. We rely on third parties to conduct pre-clinical and clinical trials and studies for our investigational product candidates in development and those third parties may not perform satisfactorily. We rely on third parties to manufacture sufficient quantities of compounds within product specifications as required by regulatory agencies for use in our pre-clinical and clinical trials and future commercial operations and an interruption to this service may harm our business. We rely on third parties to maintain appropriate levels of confidentiality of the data compiled during clinical trials. Risks Relating to our Operations If we, or our suppliers, fail to comply with FDA and other regulatory agency regulations relating to our commercial manufacturing operations, we may be prevented from manufacturing our products or may be required to undertake significant expenditures to become compliant with such regulations. If we fail to comply with healthcare regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected. Any pre-marketing and marketing activities for our investigational product candidates and approved products are subject to continued governmental regulation. We must continue to monitor the use of our approved products and may be required to complete post-approval studies mandated by the FDA. We depend exclusively on third party distributors outside of the United States and we have very limited control over their activities. Sales of our current and any future products are subject to continued governmental regulation, as well as our ability to accurately forecast demand and our ability to produce sufficient quantities to meet demand. We have limited sales and marketing capabilities in the United States. We have little or no control over our wholesalers' buying patterns, which may impact future revenues, returns and excess inventory. The markets in which we operate are highly competitive and we may be unable to compete successfully against new entrants or established companies. If our raw material supplier fails to supply us with the active pharmaceutical ingredients, or APIs, for our products and investigational product candidates, for which availability is limited, we may experience delays in our product development and commercialization. We outsource several key parts of our operations and any interruption in the services provided by third parties could harm our business. We currently depend on a single source for the supply of alprostadil and an interruption to this supply could harm our business. We currently depend on a single source for the supply of plastic applicator components for MUSE and an interruption to this supply source could harm our business. We currently depend on a single source for the supply of laminated foil components for MUSE and an interruption to this supply source could harm our business. Previously, there was a global shortage of Acetonitrile, a solvent that is required in the testing and verification of MUSE, and an interruption to this supply could harm our business. All of our manufacturing operations are currently conducted at a single location, and a prolonged interruption to our manufacturing operations could harm our business. We are dependent upon a single approved therapeutic approach to treat erectile dysfunction. We depend upon consultants and outside contractors extensively in important roles within our company. If we fail to retain our key personnel and hire, train and retain qualified employees, we may not be able to compete effectively, which could result in reduced revenues or delays in the development of our product candidates . Allegations of discrimination, wrongful termination or other employment matters, regardless of merit, could negatively affect our operations by causing us to allocate additional monetary and personnel resources to these issues. We are subject to additional risks associated with our international operations. Any adverse changes in reimbursement procedures by government and other third party payors may limit our ability to market and sell our products or limit our product revenues and delay profitability. Federal legislation may increase the pressure to reduce prices of pharmaceutical products paid for by Medicare, which could adversely affect our revenues, if any. Federal legislation and actions by state and local governments may permit re-importation of drugs from foreign countries into the United States, including foreign countries where the drugs are sold at lower prices than in the United States, which could adversely affect our operating results and our overall financial condition. Defending against claims relating to improper handling, storage or disposal of hazardous materials could be time consuming and expensive. Our business and operations would suffer in the event of system failures. Natural disasters or resource shortages could disrupt our operations product development efforts and adversely affect results. Risks Relating to our Intellectual Property We may be sued for infringing the intellectual property rights of others or others may infringe on our intellectual property rights. Our inability to adequately protect our proprietary technologies could harm our competitive position and have a material adverse effect on our business. A dispute regarding the infringement or misappropriation of our proprietary rights or the proprietary rights of others could be costly and result in delays or termination of our future research, development, manufacturing and sales activities. We cannot protect our intellectual property rights throughout the world. We may face additional competition outside of the United States as a result of a lack of patent enforcement in foreign countries and off-label use of other dosage forms of the generic components in our investigational product candidates. We may be subject to claims that we, or our employees, have wrongfully used or disclosed alleged trade secrets of their former employers. We may be unable to in-license intellectual property rights or technology necessary to develop and commercialize our products. Our failure to successfully acquire, develop and market additional investigational product candidates or approved products would impair our ability to grow. We may participate in new partnerships and other strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our management. Setbacks and consolidation in the pharmaceutical and biotechnology industries, and our or our collaborators' inability to obtain third-party coverage and adequate reimbursement, could make partnering more difficult and diminish our revenues. We will need to obtain FDA approval of our proposed product names and any failure or delay associated with such approval may adversely impact our business. Risks Relating to our Financial Position and Need for Financing We require additional capital for our future operating plans, and we may not be able to secure the requisite additional funding on acceptable terms, or at all, which would force us to delay, reduce or eliminate product development programs or commercialization efforts. Raising additional funds by issuing securities will cause dilution to existing stockholders and raising funds through lending and licensing arrangements may restrict our operations or require us to relinquish proprietary rights. The current global economic environment poses severe challenges to our business strategy, which relies on access to capital from the markets and our collaborators. Our investment in the clinical development and manufacture of a commercial supply of Qnexa may not result in any benefit to us if Qnexa is not approved for commercial sale. The investment of our cash balance and our available-for-sale securities are subject to risks which may cause losses and affect the liquidity of these investments. The holders of our stock and other securities may take actions that are contrary to your interests, including selling their stock. Capital appreciation, if any, of our common stock will be your sole source of gain on an investment in our stock for the foreseeable future. We may become involved in securities class action litigation that could divert management's attention and harm our business. We have an accumulated deficit of $234.1 million as of December 31, 2009 and we may continue to incur substantial operating losses for the future. Our ability to utilize our net operating loss carryforwards to offset future taxable income may be limited. We may be unable to collect on our claim for reimbursement of product and establishment and NDA application fees from the FDA. If we become subject to product liability claims, we may be required to pay damages that exceed our insurance coverage. Risks Relating to an Investment in our Common Stock Our stock price has been and may continue to be volatile. Volatility in the stock prices of other companies may contribute to volatility in our stock price. Our stock price could decline significantly based on the results and timing of clinical trials and pre-clinical studies of, and decisions affecting, our most advanced product candidates. Our share ownership is concentrated, and our officers, directors and principal stockholders acting collectively can exert significant control over matters requiring stockholder approval. Our operating results may fluctuate from quarter to quarter and this fluctuation may cause our stock price to decline. Future sales of our common stock may depress our stock price. There may not be an active, liquid trading market for our common stock. Our charter documents and Delaware law could make an acquisition of our company difficult, even if an acquisition may benefit our stockholders. Changes in financial accounting standards related to share-based payments are expected to continue to have a significant effect on our reported results. Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses. Risks Relating to our Transaction with Deerfield Management Company, L.P. and Affiliates

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881524--3/10/2010--VIVUS_INC