Management Comments

VIVUS, Inc. (Nasdaq: VVUS) announced positive results from a multicenter, placebo-controlled study, TA-501, designed to assess the efficacy of STENDRA (avanafil) in approximately 15 minutes. In the study, STENDRA patients achieved statistically significant improvement over placebo, in the mean proportion of attempts that resulted in erections sufficient for successful intercourse, as early as 10 minutes for the 200 mg dose and 12 minutes for the 100 mg dose after being taken.

The market opportunity for ED medical treatments continues to grow, with worldwide sales exceeding $5.5 billion in 2012. ED affects an estimated 52 percent of men between the ages of 40 and 70. Prevalence increases with age and can be caused by a variety of factors, including medications (anti-hypertensives, histamine receptor antagonists); lifestyle (tobacco, alcohol use); diseases (diabetes, cardiovascular conditions, prostate cancer); prostatectomy, and spinal cord injuries. Left untreated, ED can negatively impact relationships and self-esteem, causing feelings of embarrassment and guilt. However, about half of men being treated with currently available PDE5 inhibitors are dissatisfied with the results of that treatment.

"The recommendations for use of current PDE5 inhibitors instruct patients to take the medication and wait one to two hours prior to sexual activity or to take the medication daily," said Peter Tam, president of VIVUS, Inc. "Having a shorter waiting time prior to sexual activity in the label, if approved, would provide STENDRA a differentiated profile that is desired by many patients and prescribers."

"We intend to file for an amendment to both the FDA approval and the pending EMA application to include the results of this study and appropriate new labeling. If approved, STENDRA, and SPEDRA, as it is known in the European Union, will have the unique advantage of being the only PDE5 inhibitor to be able to make this claim," stated Wesley W. Day, Ph.D., vice president, clinical development of VIVUS, Inc.

The study protocol and statistical analysis plan were approved by the FDA. The study randomized 440 patients with mild to severe ED and was conducted at 30 sites in the United States. The study included both diabetic and non-diabetic patients. The average age of men in the study was 58, most of which had previously used other ED therapy. The design required patients to use a stopwatch to record the timing of sexual activity. The most common drug-related side effects were headache and nasal congestion. There were no drug-related serious adverse events reported in the studies.

The study results will be included in an amendment to the Stendra NDA, submitted to upcoming medical society meetings, and shared in ongoing partnership discussions.

Tesla Motors (Nasdaq: TSLA) posted the following notice of partial recall to its website today. The following is from CEO Elon Musk:

After a careful examination, we have concluded that some Model S vehicles manufactured between May 10, 2013 and June 8, 2013 may contain a defect. Specifically, the attachment strength of the mounting bracket for the left hand latch of the second row seat could be weaker than intended. This reduces our confidence that the left hand seat back will be properly retained in the event of a crash.

As designed, the striker bracket is both bonded and welded to the vehicle body, either one of which would be sufficient by itself. This is consistent with the primary design goal of the Model S, which is first and foremost to maximize safety. However, we discovered that, due to body side alignment adjustments in the factory, the bonded section of the joint was compromised and the welded section of the joint was weakened in some cars.

We do not wish to cause undue alarm, so it is perhaps worth clarifying that:

• The weld has not actually detached on any car
  
• There have been no customer complaints
  
• We are not aware of any injuries or near injuries
  
• No regulatory agency brought this to our attention

In a statement on Tuesday afternoon, NVIDIA (Nasdaq: NVDA) said it plans to expand its business model by licensing it GPU technology.

"The IT world is being upended," said NVIDIA EVP David Shannon. "PC sales are declining with the rise of smartphones and tablets. High-definition screens are proliferating, showing up on most every machine. Android is increasingly pervasive. Yesterday's PC industry, which produced several hundred million units a year, will soon become a computing-devices industry that produces many billions of units a year. And visual computing is at the epicenter of it all.

The consequences of these changes are apparent everywhere. New industry leaders are emerging. Companies differentiate not only on products but on business models. Some create systems from industry-standard chips. Others are vertically integrated and build their own chips, systems, software and even services. Some do both.

For chip-makers like NVIDIA that invent fundamental advances, this disruption provides an opening to expand our business model. Not so long ago, we only made and sold GPU chips, albeit the world's fastest ones. Five years ago, we introduced Tegra, a system on a chip. More recently, GRID – a complete system that streams cloud games and other graphics-rich content – as well as the SHIELD gaming portable have been unveiled.

But it's not practical to build silicon or systems to address every part of the expanding market. Adopting a new business approach will allow us to address the universe of devices.

So, our next step is to license our GPU cores and visual computing patent portfolio to device manufacturers to serve the needs of a large piece of the market.

The reality is that we've done this in the past. We licensed an earlier GPU core to Sony for the Playstation 3. And we receive more than $250 million a year from Intel as a license fee for our visual computing patents.

Now, the explosion of Android devices presents an unprecedented opportunity to accelerate this effort.

We'll start by licensing the GPU core based on the NVIDIA Kepler architecture, the world’s most advanced, most efficient GPU. Its DX11, OpenGL 4.3, and GPGPU capabilities, along with vastly superior performance and efficiency, create a new class of licensable GPU cores. Through our efforts designing Tegra into mobile devices, we’ve gained valuable experience designing for the smallest power envelopes. As a result, Kepler can operate in a half-watt power envelope, making it scalable from smartphones to supercomputers.

Kepler is the basis for currently shipping GeForce, Quadro and Tesla GPUs, as well as our next-generation Tegra mobile processor codenamed Logan. Licensees will receive all necessary designs, collateral and support to integrate NVIDIA’s powerful graphics cores into their devices.

We’ll also offer licensing rights to our visual computing portfolio. This will enable licensees to develop their own GPU functionality while enjoying design freedom under the best visual computing patent portfolio in the world.

This opportunity simply didn't exist several years ago because there was really just one computing device – the PC. But the swirling universe of new computing devices provides new opportunities to license our GPU core or visual computing portfolio.

As the world leader in visual computing technology, we believe we're uniquely positioned to benefit. We invest more in R&D in this area than any other company in the world – over $1 billion annually and more than $6 billion since our founding. The vast majority of our 8,500 employees are engaged in these efforts, and we have more than 5,500 patents issued and pending – the industry’s best visual computing patent portfolio.

But more importantly, more devices will have the potential to take advantage of our investments. That means more of the planet's users will be able to enjoy our advanced graphics technologies. And that's what really gets us excited here at NVIDIA."

Amid speculation that Huawei might make a run at Nokia (NYSE: NOK), Huawei consumer business group chairman Richard Yu also took a shot at Microsoft (Nasdaq: MSFT) at a launch event for the Ascend P6.

The Financial Times piece focused mainly on speculation of a takeover, but Yu also issued the following comment: "Whether Windows Phone [will be] successful is difficult to say – it has a very small market share. [Windows Phones] are weak but still require a license fee. That’s not good. [Google (Nasdaq: GOOG)] Android is free."

Clearly Huawei isn't planning to move into Windows Phone anytime soon. That's good news for Nokia, but bad news for Microsoft. Despite the Redmond, WA-based tech giant launching tablets and potentially smartphones, it shares the basic trait of Google: it really just wants to get more software into more hands.

Or does it? Charging a licensing fee for an operating system seems a little unusual, particularly when your operating system isn't popular. If Google started charging even a modest fee, handset makers would be more likely to pay-up given the user base that is now on Android.

If Microsoft is planning to go the Apple (Nasdaq: AAPL) route of making money from hardware, well that's bad news for Nokia and unlikely at this point. Apple started with both in hand, not trying to make one and add the other in. Microsoft has been solely software-focused from the start and, really, probably wants to continue that way.

Shares of Microsoft ended the session down modestly.

Pool Corporation (Nasdaq: POOL) today provided an update on market conditions and the impact on its 2013 earnings expectations.

"Our four largest, year-round markets remain on track," said Manuel Perez de la Mesa, President and CEO. "Our seasonal markets in North America and Europe, however, experienced cooler and wetter than normal conditions, resulting in later pool openings and reduced consumer purchases in these markets, causing sales to lag our expectations. Given the late start to the pool season and our review of sales results through mid-June, we have reduced our full year earnings guidance to a range of $2.03 to $2.13 per diluted share from our previous range of $2.13 to $2.23 per diluted share. While we are reducing our 2013 earnings expectations by approximately 5%, we expect a disproportionately greater impact on our second quarter results compared to the third and fourth quarters."

The Street sees FY13 EPS of $2.21 and revs of $2.09 billion.

"The overall fundamentals of the industry are unchanged with a modest recovery shown in discretionary purchases in 2013, albeit below our anticipated levels in our seasonal markets. Despite adverse weather conditions, we still expect to grow earnings by 10% to 15% in 2013 with our medium to long term growth expectations remaining intact," Perez de la Mesa added.