First Manhattan Company (FMC) stepped up the pressure in its proxy fight with obesity drug maker Vivus Inc (VVUS.O), saying it was in advanced discussions with potential chief executive candidates to replace the current CEO should it prevail in gaining control of the Vivus board.
In a filing with U.S. securities regulators, FMC said it had gone as far as hiring recruiters with experience in the pharmaceutical industry to identify top CEO candidates.
"We are encouraged by the quality of those candidates and their level of interest," First Manhattan, Vivus' largest shareholder with nearly 10 percent of outstanding shares, said on Tuesday in a news release and the filing.
"We believe a new board independent of an entrenched CEO will attract the best talent to Vivus to lead the company forward," the FMC statement said.
FMC has put forth a slate of six candidates that it hopes will win seats on the Vivus board at the shareholder meeting next month, and said it was taking steps to make a leadership change immediately should it prevail.
"We are in advanced discussions with several senior executives to step in as CEO on day one," FMC said.
Sam Colin, senior managing director at FMC and a Vivus board nominee, said its proposed slate of directors has received support from other Vivus shareholders, but declined to name them. "We've got a great board and our message is clearly resonating," Colin said in a telephone interview.
Vivus said FMC is advocating ideas for its diet drug Qsymia and company strategy that are no different from what its own management team is already doing.
"We strongly believe that FMC does not have the expertise to launch a new product in a new category and they continue to demonstrate that they have no understanding of the costs associated with such a process," Vivus CEO Leland Wilson said in an emailed statement.
FMC has been highly critical of Vivus management, saying it had thoroughly botched the launch of the potential blockbuster obesity pill. It has said Vivus made a critical error by not moving prior to Qsymia's approval to replace longtime CEO Wilson with a top executive with extensive commercial experience in launching new medicines.
FMC has also accused Vivus management of dropping the ball in trying to get the diet drug approved in Europe. "Vivus' board appears to have written off Europe," the FMC filing said.
"It was amateur hour. They really executed quite poorly," Colin said of Vivus' EU efforts. "It's really inexcusable given the value that Europe represents."
FMC said it hired a European regulatory consultant to address the issue in addition to including two director candidates with EU regulatory experience - John Kastelein and Rolf Bass.
Qsymia has had minuscule sales since its launch and the Vivus share price is half of what it was around the heady times of the September U.S. approval of one of the first new diet drugs in decades.
Colin said Vivus' underwhelming performance had little to do with the quality of Qsymia as a product. "The drug is great," he said. "It's because of the very poor judgment of the management and the board."
Vivus shares closed down 3.5 percent at $12.57 on Nasdaq.
The Vivus shareholder meeting is scheduled for July 15.