First Manhattan Mails Definitive Proxy Statement and Sends Letter to Vivus
NEW YORK -- June 4, 2013
First Manhattan Co. (“FMC”), an owner-managed and operated investment advisory
firm and the beneficial holder of approximately 9.9 percent of the outstanding
shares of VIVUS, Inc. (“Vivus”) (NASDAQ: VVUS), today announced that it has
filed definitive proxy materials with the Securities and Exchange Commission
regarding the election of its independent director nominees. FMC is seeking to
have its nine highly qualified nominees elected to Vivus’ Board at the
Company’s 2013 Annual Meeting of Stockholders.
First Manhattan Co. today mailed the proxy materials and a letter to Vivus
stockholders highlighting that FMC believes Vivus’ stock is undervalued, and
that the Company will never achieve its full value with Vivus’ current Board
of Directors. In the letter, FMC details its analysis of the reasons for the
destruction of value at Vivus, and explains its nominees’ plan to maximize
value for Vivus stockholders.
FMC urges Vivus stockholders to vote the WHITE proxy card for its nine board
nominees, who have demonstrated exceptional accomplishments in the key areas
required to unlock the substantial value at Vivus.
The full text of the letter follows:
First Manhattan Co.
399 Park Avenue
New York, NY 10022
June 4, 2013
Dear Fellow Vivus Shareholders:
You have an important choice to make.
We at First Manhattan Co. (“FMC”) are the largest shareholders of VIVUS, Inc.
(“Vivus”) with beneficial ownership of 9.9% of the common stock. We are
writing to you today to seek your help in replacing Vivus’ current Board of
Directors by electing our nine nominees.
Vivus’ upcoming annual meeting will be critical in determining the future for
all Vivus shareholders. We encourage you to read our enclosed proxy materials
carefully and vote FOR each of our nine highly qualified director nominees,
all of whom are independent of management.
VIVUS’ FUTURE IS IN YOUR HANDS, AND THE TIME FOR CHANGE IS NOW. VOTE THE WHITE
PROXY CARD TODAY.
Our shares and yours are significantly undervalued. The current valuation does
not reflect the enormous upside opportunity of Qsymia, the most effective
obesity drug ever developed, because the current Vivus leadership has not
delivered on Qsymia’s promise. We believe the stock’s current depressed level
is a direct result of Vivus (i) failing to secure a U.S. commercial
partnership, (ii) failing to properly plan and execute the Qsymia launch,
(iii) failing to obtain European Qsymia approval, and (iv) perpetuating an
entrenched Board culture that is not aligned with shareholder interests.
The following graphs speak for themselves:
Fortunately, there is a clear and actionable path to unlock significant share
price appreciation if shareholders vote for change now. However the window of
opportunity is rapidly closing. FMC has nominated a slate of nine highly
qualified individuals for the Vivus Board that will be elected at the Annual
Meeting of Shareholders scheduled for July 15, 2013. FMC and its nominees have
committed to the future of Vivus with actions, not just words—we collectively
own 12% of the common stock, so there can be no doubt that our interests are
fully aligned with shareholders. FMC’s nominees have the experience, skills
and independence to get it right on the critical issues where the sitting
Board has failed. The only interests served by the FMC-nominated Board will be
yours, not those of an entrenched management.
The current Vivus leadership enriches itself while it has destroyed tremendous
*Vivus’ Board members receive cash compensation higher than four out of the
five largest US companies by market capitalization including Apple,
Google, Berkshire Hathaway and Walmart, and nearly triple that of Vivus’
most comparable peers, Orexigen and Arena.
*Contrary to the shareholders’ best interests, the sitting Board maintained
its excessive cash retainers in January 2013, even though the company had
less than 12 months of cash left. The sitting Board also increased the
senior management’s cash bonuses by nearly 90%, including the Chief
Commercial Officer’s, whose bonus nearly doubled in 2012. Everybody
profited from the failed launch of Qsymia except the shareholders and the
patients who should be benefitting from the drug.
*Vivus stock declined over 60% from Qsymia’s FDA approval to the time of
our shareholder proposal nominating a new Board.
*Consensus revenue expectations for FY13 have declined by nearly 80% since
What caused this significant destruction in value?
*Vivus’ Board failed to prepare itself or management with the right
personnel to successfully commercialize Qsymia in the years leading up to
the launch: From 2009-2011, while its competitor Orexigen was assembling a
first class Board to oversee the commercial transformation of its company,
Vivus’ sitting Board did not add a single new non-employee Board member
despite the fact that no Board member had relevant commercial experience.
*In the wake of the failure of the Qsymia launch, and with less than one
year of cash left on the balance sheet, the sitting Vivus Board did not
act with urgency to find new talent for either the Board or management.
Shareholders witnessed inertia when they needed action.
*It was only in response to our shareholder proposal to replace the sitting
Vivus Board that it added three new directors. The sitting Board only took
action over the past five weeks when its highly compensated Board seats
were in jeopardy.
*Even today, with the addition of three new directors, the Vivus Board has
ZERO European regulatory experience, ZERO public CFO experience, ZERO
turnaround experience, and management representation remains double the
average of its peer group.
In contrast, our nominees bring the urgently needed expertise and independence
that will benefit all shareholders. If elected, our slate will be a magnet for
attracting and retaining the best available talent to make Qsymia the success
that shareholders expect. We will adopt ethical compensation practices; our
slate has committed to cut their cash pay by over 50% and eliminate the
sitting Board’s use of Restricted Stock Units which retain value even if the
stock declines. We will cut expenses and seek to turn around the Qsymia
launch. In short, we want 100% alignment between Vivus’ Board and Vivus’
Vivus’ Board and management damaged shareholders with a failed launch of
*No small company has ever successfully addressed the primary care
physician market because such a huge challenge requires the vast resources
of a large pharma partner. Vivus’ two obesity therapy competitors got this
fundamental decision right by partnering with larger companies in 2010.
Vivus’ management and Board got it wrong.
*In the absence of the required human and capital resources provided by a
large pharma partner, Vivus shareholders are footing a massive bill for
operating expenses—over $2.20 per share annualized—while generating
insignificant revenue. You are paying dearly for the unforced errors of
the sitting Vivus Board.
*The primary determinant of drug use is the out-of-pocket cost to the
patient. Due to the lack of adequate market research on this most basic
metric—consumer price sensitivity— the launch failed.
*Vivus fails to grasp why the patients continue on Qsymia for only three
months when medically they should continue for much longer. Inexplicably,
Vivus’ CEO recently proclaimed on a conference call that three months of
persistence is a great accomplishment that will underpin Qsymia becoming a
blockbuster. In reality, the low persistence on Qsymia is a sign of
trouble ahead for Vivus shareholders.
The Vivus Board and management have not delivered on their promises:
*In 2009, they discussed consummating a commercial partnership with big
pharma in the boldest terms, then subsequently disavowed this strategy.
Now, under the pressure of a proxy fight, they recently flipped back to
talking about partnership.
*In 2010, they discussed the sale of the erectile dysfunction drug Stendra
to bolster the company’s dwindling cash balance. The company is still
talking about it today, nearly two years after starting the auction
process. Most objective observers would see this as a “busted auction”
with no results to show for the $90 million of shareholder capital sunk
into this ill-advised investment.
*Today, Vivus claims there is light at the end of the tunnel due to the
REMS modification and improved insurance coverage. Despite the trends you
saw in the charts on page one, Vivus argues that shareholders should “stay
the course” to see if its failed current strategy works. Why should you
buy into “staying the course” when Vivus’ Board is not buying its own
strategy? Not a single Vivus director bought Vivus stock at depressed
prices for six months after the Qsymia launch failure. As you can see from
the trend lines on sales and expenses on page one, the light at the end of
the current “stay the course” tunnel is an oncoming train.
The time for change is now.
This Vivus management team and Board did not level with you in the recent
letter to shareholders (5/13/13) when the CEO stated in bolded capital letters
“Vivus has successfully executed the initial phase of its commercial
strategy.” This lack of candor has continued over many years; it continues
today in the face of their attempt to maintain control of the company, and
more lack of candor is what you can expect from the Vivus Board and management
unless shareholders vote for the significant change offered by our slate.
Our slate, composed of highly experienced independent candidates, is the last
chance to rescue Vivus from its commercially inept management and what we see
as the Board’s failure to act in the best interest of shareholders. Waiting
for change at next year’s annual meeting will not work – the critical
decisions that will determine the company's success or failure are about to be
made. Just like you, we are shareholders. Our interests are fully aligned with
your interests. The time for change is now.
Time is of the essence. We urge you to VOTE THE WHITE PROXY CARD to help us
deliver the necessary change to salvage Vivus’ potential. It is important that
you submit your WHITE proxy card AS SOON AS POSSIBLE. If you do not vote your
shares, you are endorsing the status quo. Importantly, if you receive a gold
card from Vivus, DO NOT return it.
If your shares are registered in your own name, please submit your vote by
signing, dating and returning the enclosed WHITE proxy card in the
postage-paid envelope provided. If you hold your shares in “street” name with
a bank, brokerage firm or other nominee, it is critical that you instruct the
institution that holds your shares to execute a proxy in favor of our
proposals. If you have any questions regarding your WHITE proxy card or need
assistance in executing your proxy, please contact MacKenzie Partners, Inc. at
(212) 929-5500 or Toll-Free (800) 322-2885.
First Manhattan Co.
About First Manhattan Co.
First Manhattan Co. (“FMC”) was founded in 1964 and remains an owner-operated
investment advisory firm. FMC is registered with the U.S. Securities and
Exchange Commission as an investment adviser and as a broker-dealer, and is a
member of the Financial Industry Regulatory Authority (FINRA).
FMC provides professional investment management services primarily to high net
worth individuals as well as to partnerships, trusts, retirement accounts,
pension plans and institutional clients. The firm currently manages in excess
of $14 billion.
Additional Information and Where to Find It
For additional information, please visit http://www.ourmaterials.com/VVUS/.
FIRST MANHATTAN CO., FIRST HEALTH, L.P., FIRST HEALTH LIMITED, FIRST HEALTH
ASSOCIATES, L.P., FIRST BIOMED MANAGEMENT ASSOCIATES, LLC, FIRST BIOMED, L.P.
AND FIRST BIOMED PORTFOLIO, L.P. (COLLECTIVELY, “FIRST MANHATTAN”) HAS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”) A DEFINITIVE PROXY
STATEMENT AND ACCOMPANYING PROXY CARD TO BE USED TO SOLICIT PROXIES FROM THE
STOCKHOLDERS OF VIVUS, INC. (THE "COMPANY") IN CONNECTION WITH THE COMPANY'S
2013 ANNUAL MEETING OF STOCKHOLDERS. ALL STOCKHOLDERS OF THE COMPANY ARE
ADVISED TO READ THE DEFINITIVE PROXY STATEMENT AND OTHER DOCUMENTS RELATED TO
THE SOLICITATION OF PROXIES BY FIRST MANHATTAN, SARISSA CAPITAL MANAGEMENT LP,
SARISSA CAPITAL OFFSHORE MASTER FUND LP, SARISSA CAPITAL DOMESTIC FUND LP,
MICHAEL JAMES ASTRUE, ROLF BASS, JON C. BIRO, SAMUEL F. COLIN, ALEXANDER J.
DENNER, JOHANNES J.P. KASTELEIN, MELVIN L. KEATING, DAVID YORK NORTON AND
HERMAN ROSENMAN (COLLECTIVELY, THE "PARTICIPANTS") FROM THE STOCKHOLDERS OF
THE COMPANY BECAUSE THEY CONTAIN IMPORTANT INFORMATION, INCLUDING ADDITIONAL
INFORMATION RELATED TO THE PARTICIPANTS. THE DEFINITIVE PROXY STATEMENT AND
FORM OF PROXY WILL BE FURNISHED TO SOME OR ALL OF THE STOCKHOLDERS OF THE
COMPANY AND ARE, ALONG WITH OTHER RELEVANT DOCUMENTS, AVAILABLE AT NO CHARGE
ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, COPIES OF THE
DEFINITIVE PROXY STATEMENT AND ACCOMPANYING PROXY CARD MAY BE OBTAINED WITHOUT
CHARGE UPON REQUEST BY CONTACTING MACKENZIE PARTNERS, INC. AT (800) 322-2885
(TOLL-FREE) OR (212) 929-5500 (COLLECT).
INFORMATION ABOUT THE PARTICIPANTS AND A DESCRIPTION OF THEIR DIRECT OR
INDIRECT INTERESTS BY SECURITY HOLDINGS IS CONTAINED IN THE DEFINITIVE PROXY
STATEMENT ON SCHEDULE 14A FILED BY FIRST MANHATTAN WITH THE SEC ON JUNE 3,
2013. THIS DOCUMENT CAN BE OBTAINED FREE OF CHARGE FROM THE SOURCES INDICATED
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