Vivus Gives First Manhattan Board Majority, Zook to be CEO

Vivus has agreed to give dissident shareholder First Manhattan a board majority, ending an acrimonious proxy fight and bringing in a new CEO to the drugmaker accused of bungling the launch of its groundbreaking diet pill.

The company is now likely to look for ways to ramp up sales of its drug Qsymia, once touted as a potential blockbuster amid a U.S. obesity epidemic, including partnering with a bigger pharmaceutical company.

Under the agreement, the newly reconstituted 11 member board will consist of new CEO Tony Zook, a former senior executive at AstraZeneca, and six nominees from First Manhattan, Vivus' largest shareholder with a 9.9% stake. The other four will be Vivus nominees.

Qsymia had a soft launch with Vivus initially cautious in its marketing and doctors slow to recommend it to patients given the troubled past of obesity drugs. Qsymia's side effects include heart risks and the possibility of babies being born with oral clefts when taken by women during pregnancy.

First Manhattan, which had pushed for replacing the entire board, had criticised Vivus for failing to capitalize on the first new diet pill to reach the U.S. market in over a decade, saying it had not installed a management team with extensive commercial drug launch experience.

It also noted growing competition from Arena Pharmaceuticals' Belviq anti-obesity drug.

Over the past few days the proxy battle became particularly hostile as each side accused the other of illegal or unethical practices. Some analysts called it the ugliest proxy fight yet in biotech, a field rife with activism from the likes of Carl Icahn and others.

Sarissa Capital Management, which owns about 2% of Vivus common stock, was also part of the settlement agreement that resolved the proxy fight.