First Manhattan Company Outlines Strategic Plan to Fix Vivus
NEW YORK -- July 2, 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”) (VVUS), today announced that it has issued a
letter to all Vivus stockholders, outlining its strategic plan to turn around
Vivus, including the selection of a highly qualified CEO to lead the company
should FMC’s nominees be elected to the Board.
With the 2013 Vivus Annual Meeting approaching on July 15, 2013, FMC urges
Vivus stockholders to vote the WHITE proxy card for its nine board nominees
and its plan to unlock the real value potential of Qsymia through the right
management team, commercial partner, commercialization plan, reimbursement
strategy and EU regulatory approval plan.
The full text of the letter follows:
July 2, 2013
Dear Fellow Vivus Shareholders:
We at First Manhattan Co. have written to you before to discuss the very
important choice you have that will determine the future of your investment in
Vivus, Inc. Vivus’ Annual Meeting of Shareholders will be held on July 15,
2013, and we are seeking your help in replacing Vivus’ current Board of
Directors by electing our nine nominees to realize the value we all see in the
Our highly qualified nominees have been carefully chosen for the critical
skills and experience that we believe are necessary to turn around Vivus. In
addition, we have selected a world-class CEO with deep experience launching
blockbuster drugs in the U.S. to lead Vivus if our nominees are elected.
We believe that Qsymia is the most effective obesity drug ever developed. The
initial launch opportunity failed under the current management team and the
sitting board. This is the last chance to get it right. If Qsymia is properly
re-launched, Qsymia has the potential to improve the quality of life for
millions of people while generating substantial value for shareholders.
Qsymia’s potential has not been realized, nor do we believe it will ever be
realized under the sitting board and CEO. Our nominees have a carefully
constructed, multi-pronged strategic plan to turn around a company that in our
view is clearly flailing under the current leadership and clearly failing to
realize its potential. This is the last chance to save Vivus.
We ask your support in electing our nominees by voting the WHITE proxy card
today. If you previously voted on the gold card, you can change your mind by
simply voting on the WHITE card today.
Here are the key elements of our plan:
1. Ensure the right management is in place
We believe that Vivus’ CEO has demonstrated a lack of the expertise and
experience that is critical to successfully commercializing Qsymia.
Independent boards at biopharma companies need to transition from founder CEOs
to experienced commercial executives in the pre-launch years prior to FDA
approval. According to a recent Vivus press release, the CEO’s last U.S.
primary care blockbuster experience was with Naprosyn, a drug launched in
Much has changed since 1976. But instead of acting in the shareholders’ best
interests, the sitting board indulged the founder CEO by letting him attempt
to commercialize Qsymia, in our view. An independent board would have
gracefully transitioned the founder CEO and replaced him with a commercially
experienced successor. This critical transition has been the key to success at
countless biopharma companies.
We are very pleased that Tony Zook will lead Vivus if our nominees are
elected. Tony has a distinguished 30-year career in the pharmaceutical
industry, most recently as Executive Vice President, Global Commercial
Operations at AstraZeneca. At AstraZeneca, he was responsible for the market
delivery of several blockbuster products each with sales of approximately $1
billion or more, including Nexium, Crestor, Pulmicort Respules, Seroquel,
Toprol XL and Symbicort. In his role at AstraZeneca, Tony was responsible for
commercial activities worldwide that led to the delivery of a $28 billion
dollar business, and was responsible for approximately 28,000 people with
operations in more than 85 countries. He is excited by the opportunity at
Vivus, and we are very confident that he has the ideal combination of skills
to turn the company around and realize value for Vivus shareholders.
The contrast between Tony’s experience and Vivus’ current CEO’s experience is
striking, and we believe the Board’s failure to find a suitable new CEO to
lead the commercialization stage of Vivus’ development is stark evidence that
it has not been putting the interests of Vivus shareholders first.
2. Engage the right pharmaceutical partner on the right partnership terms
Qsymia has enormous potential. Its failure to launch is a direct consequence
of the sitting board and management’s failure to engage a primary care
pharmaceutical partner in the pre-launch years. Our nominees have a plan to
carefully select a partner with 1) a large sales force that can sell Qsymia in
the primary detail position, not in a secondary position as planned by Vivus;
2) a strong presence in managed markets that will overcome barriers to
insurance coverage that keep Qsymia from patients who need it; and 3) the
ability to limit the time that Qsymia is encumbered to ensure that all Vivus
shareholders can maximize our long-term economics.
3. Fix the unsustainable expense structure that is failing to generate revenue
Please take a close look at this graph.
It is clear that it will be many years before the revenue and expense lines in
the graph cross. Vivus has an unsustainable expense structure with spiraling
SG&A costs and, in our view, very little financial discipline. The current
Vivus board lacks a single director with public company CFO experience.
Consequently shareholder capital is burning at an accelerating pace. Our
shareholder slate includes two director nominees with public company CFO
experience, who have turned around troubled companies. Their skills will
benefit all shareholders.
The finances may get worse very soon. Vivus is now preparing to launch an
expensive direct-to-consumer campaign for Qsymia that almost surely reflects
the same amateurism of its previous commercial activities. Sales have been
negligible while expenses have been growing at a rate that will lead to even
more debt and shareholder dilution. Since Vivus has perhaps less than two
years of cash on hand, our nominees’ plan includes reducing wasteful spending
on commercial activities that do not generate revenue. We will intelligently
reallocate resources to increase demand for Qsymia and generate revenue. The
director nominees have established a committee that will, along with the new
CEO, conduct an immediate financial and operational review in conjunction with
a financial advisor.
4. Fix the U.S. commercial strategy
Vivus’ commercial strategy has included a succession of confusing discount and
rebate plans. None of them has worked. The Vivus rebate plans do not address
the realities of patients' ability to pay. They ignore a critical best
practice in pharma marketing: lower patients’ out-of-pocket costs to the
$30-$50 per month range to drive utilization. This is the out of pocket
pricing that underlies virtually all blockbuster drugs in the US primary care
Our nominees will look to create separate strategies for (i) the reimbursed
market with low out-of-pocket costs, and (ii) the non-reimbursed market that
has a high out-of-pocket expense. Vivus’ team has failed to make this critical
distinction and persists in the ill-founded belief that there is a blockbuster
to be created with the non-reimbursed patients whose out-of-pocket cost is
$150 per month. Even if there were no REMS program, and every retail drug
store in the U.S. were selling Qsymia, the Vivus $150 per month cash pay
strategy would be doomed to failure based on decades of large pharma
The goal is to lower patients’ out-of-pocket expenditures to no higher than
$50 per month. We would also look to target physician groups who already treat
substantial numbers of obese patients including psychiatrists and obstetrician
5. Optimize Medicare and commercial reimbursement strategy
We believe Vivus has a simplistic and inadequate plan for Medicare
reimbursement. Our nominees have critical experience within the U.S.
Department of Health and Human Services that oversees Medicare. The FMC
nominee plan includes aggressively pursuing difficult-to-obtain Medicare
acceptance through non-legislative pathways including: 1) demonstration
projects under the Patient Protection and Affordable Care Act to demonstrate
clear cost savings which can open an alternate path to Medicare coverage of
Qsymia; 2) pursuing regional Medicare carrier rulings; and (3) pursuing
Medicaid rulings on a state-by-state basis. We plan to make Qsymia the
standard of care for all public and private reimbursers.
6. Execute a Euro-centric approach to obtaining E.U. approval through the
We believe that Vivus’ seriously flawed approach to E.U. approval for Qsymia
has impaired the company’s credibility with European regulators and
jeopardizes its substantial value in Europe. Drs. John Kastelein and Rolf
Bass, two of our nominees, are highly experienced and respected members of the
European regulatory community. In addition, we have already engaged Dr. Ulrich
Granzer, one of the most respected regulatory consultants in Europe and the
co-founder of the European Union Regulatory Affairs Group.
If elected, the new directors will accelerate a cardiovascular outcomes trial
in Europe and will execute a Euro-centric approval approach to obtaining E.U.
approval through the centralized procedure. The centerpiece of this strategy
is conducting a cardiovascular outcomes trial that satisfies the needs of the
key members of the CHMP, Europe’s key regulatory body. We believe our
Eurocentric approach will engender the trust and confidence of European
regulators, and is the only way to unlock the enormous value of Qsymia’s
blockbuster potential in Europe.
You can find additional details regarding our nominees’ strategic plan for
value creation at http://www.ourmaterials.com/VVUS/. However, the execution of
any strategic plan, including the hiring of any management personnel, will be
subject to the fiduciary duties of the directors, if elected.
The Vivus annual meeting is fast approaching. This is the last chance to turn
around Vivus. We have the plan, the CEO and the director nominees to realize
the enormous potential of Qsymia. Your support is essential.
Please vote, sign and return the WHITE proxy card today. You can also vote by
telephone or internet.
Please disregard Vivus’ proxy materials. If you have already voted Vivus’ gold
proxy card, you can change your mind and vote the WHITE card. Your vote, no
matter how many shares, is important to all of us.
If you have any questions, require assistance with voting your WHITE proxy
card, or need additional copies of the proxy materials, please contact our
proxy solicitor, Mackenzie Partners, Inc. at (212) 929-5500 or Toll-Free (800)
Thank you for your support.
Sam Colin, M.D.
Senior Managing Director
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
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”) FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”) ON JUNE 3, 2013. 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 ABOUT THE PARTICIPANTS AND A DESCRIPTION OF
THEIR DIRECT OR INDIRECT INTERESTS BY SECURITY HOLDINGS. THE DEFINITIVE PROXY
STATEMENT AND FORM OF PROXY HAVE BEEN 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).
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