Obesity drug maker Vivus Inc, embroiled in a bitter proxy war with its top shareholder First Manhattan Co, said on Wednesday that FMC had rejected an offer to give the sides equal representation on the board.
FMC responded by saying that it remains open to a fair settlement with the Vivus board, despite filing a lawsuit this week against the biotechnology company for postponing its annual shareholder meeting by three days. FMC said at the time of Monday's originally scheduled meeting it had the votes needed to seize control of the Vivus board.
Vivus also said its long-time Chief Executive, Leland Wilson, had offered to resign as part of the proposal rejected by First Manhattan, an investment firm that holds 9.9 percent of Vivus shares.
FMC has accused the company of bungling the marketing of its new diet pill Qsymia and of failing to install a management team with extensive commercial drug launch experience.
The rejected proposal was for four board representatives each from Vivus and FMC, and one independent investor representative, Vivus said. The four FMC nominees proposed would include three recommended by proxy advisory firm ISS plus a new CEO, Vivus said in a statement.
FMC appeared to have a different take on the settlement offer Vivus said it proposed.
"Vivus continues to insist on a board controlled by their current directors, despite their awareness of the likely voting results of the scheduled July 15 annual meeting, which they postponed," FMC said in a statement.
Despite the bitterness of the proxy battle, in which Vivus and FMC have accused each other of illegal or unethical practices, FMC said it had "reengaged in settlement discussions over the past several days, and offered that the reconstituted board be divided equally between FMC nominees and Vivus incumbents (including Leland Wilson), plus Tony Zook, the new proposed CEO."
The reconstituted board proposed by FMC would expand the current number of directors to 11 from nine.
Earlier this month, FMC took the unusual step of announcing that Zook, a former senior AstraZeneca executive, would be installed as the new Vivus CEO should it prevail in gaining control of the board.
Calling this "one of the ugliest biotech proxy fights in recent memory," Cowen and Co analyst Simos Simeonidis predicted an outright victory for First Manhattan in shareholder balloting.
Whether there is ultimately a settlement or a final board composition based on shareholder vote count, "we expect the majority of the current board and all of current senior management to be gone on Thursday or soon thereafter, including the CEO, president, CFO and chief commercial officer," Simeonidis wrote in a research note.
Vivus won U.S. regulatory approval for Qsymia last July and launched the product in September. Sales of the drug analysts said could be a blockbuster have so far been minuscule, leading to criticism from some shareholders that the company should have signed up a big pharmaceutical partner with deep pockets and a large sales force prior to the launch.
Vivus said in May that it had started talks with bigger companies on a potential Qsymia partnership.
Concerns regarding the drug's insurance reimbursement and a long history of safety issues related to obesity drugs have also held back sales, analysts say.
Vivus shares were up 37 cents, or 2.5 percent, at $14.77 in afternoon trading on Nasdaq - still about half their value at the time of the Qsymia approval a year ago.
(Reporting by Bill Berkrot in New York and Esha Dey in Bangalore; editing by Andrew Hay)