UPDATED: Vivus and First Manhattan reach settlement to close out proxy war

Vivus ($VVUS) and dissident shareholder First Manhattan Co. have finally negotiated a peace treaty. According to the AP, the agreement will expand the board from 9 members to 11, with First Manhattan installing 6 directors as four Vivus directors step down. Former AstraZeneca ($AZN) exec Tony Zook, backed by FMC, is expected to round out the board, taking the place of current CEO Leland Wilson.

Tony Zook--Courtesy of AZN

Vivus put yesterday's annual shareholder meeting on hold in favor of negotiations, which came amid an all-out proxy war. First Manhattan first started making noise over Vivus botching the launch of its weight-loss drug, Qsymia, which hasn't lived up to early expectations. FMC blames the drug's lagging sales on Vivus' refusal to team up with a Big Pharma partner with more experience and sales firepower.

Though Vivus took steps to reassure its shareholders--such as securing a marketing partnership with Menarini for European sales of its erectile dysfunction drug, Spedra--First Manhattan continued to point the finger, and executives on both sides got testy. The past few days have been particularly heated. Vivus reported First Manhattan to the SEC for allegedly making false statements, postponing the shareholder meeting; FMC hit back with a lawsuit over the delay.

Later, FMC rejected an overhaul of the Vivus board that would have split control, with each party commanding four seats and Wilson bowing out to allow the new board to choose a replacement, but that proposal was quickly rejected by FMC leading up to Thursday's meeting.

But now, all of that is over, and Qsymia still needs help--and lots of it. The drug failed to win approval in Europe on its last go-around, which will have to be remedied. Shareholders are still waiting on the sales help that Wilson said in May he was finally open to. And Stendra, the U.S. version of Spedra approved by the FDA last year, is still on the shelf at Vivus waiting to be launched.

- here's the AP story