Vivus hands control to rebel investors, with new CEO ready to step in

By Carly Helfand and Tracy Staton

Vivus ($VVUS) and dissident shareholder First Manhattan Co. have finally negotiated a peace treaty. The company will hand over control to FMC, ending an unusually bitter proxy fight. With a clear board majority and its own hand-picked CEO in charge, FMC will be on the hook to jump-start Qsymia sales and remake Vivus' fortunes as promised.

Under the deal, which has to be approved by shareholders, the board of directors will expand to 11 members from 9. Vivus will retain four board seats and FMC's nominees will take 6. 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

In announcing the settlement, FMC chief Sam Colin could afford to be magnanimous: He praised the accomplishments of soon-to-be-ex-CEO Leland Wilson and Chairman Peter Tam, calling Vivus' four new-drug approvals an accomplishment "unheard of" among small pharma companies. And now, his team will take the baton. "The new board and Tony Zook share a strong commitment to realizing Vivus's true potential," Colin said in a statement.

The deal followed some last-ditch peace talks yesterday. Vivus put its 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 announcement from Vivus

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