In exchange for up to $180 million in cash, Vivus Inc. agreed to license its transdermal estradiol spray, EvaMist, to specialty pharmaceutical company KV Pharmaceutical Co.

"We wanted to monetize that asset for as much as possible, as quickly as possible," said Timothy Morris, Vivus' vice president of finance and chief financial officer.

And Mountain View, Calif.-based Vivus expects to get most of its money very quickly - likely before the end of the year. A $10 million upfront payment will be due at closing, expected in mid-2007. Another $140 million milestone payment is due upon the FDA's approval of EvaMist, which could come on its PDUFA date of July 29, 2007.

Following approval, St. Louis, Mo.-based KV Pharma will manufacture, sell and market the menopause drug, as well as assume responsibilities for regulatory requirements, expenses and liabilities. Launch is expected by September, and KV Pharma estimates the drug could achieve $125 million in peak annual net sales. The first time sales reach $100 million in a market year, Vivus will get another $10 million payment; if net sales climb to $200 million, Vivus gets a $20 million payment.

Most of the cash will be used to fund Phase III trials slated to begin in the second half of the year with obesity drug Qnexa. Ilya Kravets, analyst with Rodman and Renshaw LLC in New York, said he is "highly optimistic" about Qnexa, which combines two well-known drugs used to curb hunger and increase feelings of fullness.

Vivus' pipeline also contains Phase II female sexual dysfunction and erectile dysfunction drugs, as well as the marketed erectile dysfunction drug Muse (alprostadil). But even though the company has its own urology-focused sales force, launching EvaMist internally would have required building a separate OB/GYN-targeted sales force, Morris said.

Instead, Vivus chose to license U.S. rights for the drug to KV Pharma, which has a 285-person sales force in its Ther-Rx Corp. branded prescription business unit. Morris also cited KV Pharma's commitment to its women's health franchise, which includes a vaginal anti-fungal and a line of prenatal vitamins.

Vivus originally licensed U.S. rights to EvaMist from Australian drug delivery company Acrux Ltd., which still holds the rights in the rest of the world. The drug is a proprietary formulation of estradiol delivered once-daily via a metered-dose transdermal spray. In Phase III trials, EvaMist treatment resulted in a statistically significant reduction in the number and severity of moderate and severe hot flashes.

More than two-thirds of North American women have hot flashes during menopause, according to The North American Menopause Society, and hormone replacement is currently the only FDA-approved treatment option. The market for prescription estrogen therapies is estimated at $1.5 billion annually, but it previously topped $2 billion before studies by the Women's Health Initiative linked estrogen to an increased risk of stroke, deep-vein thrombosis, myocardial infarction and other complications.

The WHI studies scared many women away from estrogen and prompted pharma and biotech companies to pursue alternatives. The first of these, Wyeth Pharmaceuticals Inc.'s Pristiq (desvenlafaxine succinate), is under FDA review. Other alternatives in development include Bionovo Inc.'s MF101, a selective estrogen drug slated for Phase III trials in early 2008, and Depomed Inc.'s Gabapentin GR, an extended-release formulation of the approved drug gabapentin scheduled for Phase II trials in the first half of this year.

Kravets said he thinks the estrogen alternatives will "create a market position," but that the public reaction to the WHI studies was "blown a bit out of proportion" and that estrogen therapy has "started to come back in the last year or so."

Morris agreed that "estrogen therapy is coming back." He added that transdermal formulations may be safer than oral versions, citing a study published in Circulation earlier this month.

Transdermal estrogen formulations, like Elestrin (estradiol; BioSante Pharmaceuticals Inc. and Bradley Pharmaceuticals Inc.) already account for an estimated $300 million of the estrogen market. Kravets said that, if properly marketed, Elestrin and EvaMist have the clinical profiles to "take over the transdermal market and carve a piece out of the oral market as well."

Shares of Vivus (Nasdaq: VVUS) closed up 40 cents at $5.13 on Friday. Shares of KV Pharma (NYSE: KV-A) traded down 23 cents to close at $24.73.