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Vivus Is in Talks With Potential Marketing Partners

Vivus Inc., maker of the obesity drug Qsymia, said it’s in talks with large pharmaceutical companies to explore ways to increase use of the medicine amid investor unrest over disappointing sales. The shares rose the most in five months.

Approved in July, Qsymia was the second obesity therapy to clear the U.S. Food and Drug Administration since 1999. Sales have lagged behind analysts’ estimates, coming in at $4.1 million in the first quarter, the Mountain View, California-based company said today. Six analysts had estimated $4.5 million, the average of projections compiled by Bloomberg.

“We’ve begun discussions with large pharmaceutical companies to explore how we can increase efforts with primary care physicians, which we believe is critical to maximizing the value of Qsymia,” Vivus Chief Executive Officer Leland Wilson said today on a conference call.

Vivus is exploring collaborations after the FDA in April expanded the number of pharmacies where Qsymia can be sold, Wilson told analysts and investors. Sales that had been restricted to certain mail-order outlets now also can be offered through thousands of certified retail pharmacies.

Vivus rose 9.7 percent to $13.21 at the close in New York, its biggest one-day increase since Dec. 17. The shares declined 1.6 percent this year and have lost 50 percent since Qsymia was approved on July 17.

Activist Shareholders

The move may be a reaction to brewing activism among shareholders, said Simos Simeonidis, an analyst with Cowen & Co. in New York. The drugmaker also has added a board member and said yesterday that Richard Fante, former head of AstraZeneca Plc’s North American business, will provide advice on selling Qsymia.

Talks with larger pharmaceutical companies should have come earlier, as a partnership can take six months to a year to materialize, Simeonidis said.

“They put themselves at a disadvantage,” said Simeonidis, who has a “neutral” rating on Vivus shares. “If they really want to do a partnership, they can’t just start today and have one tomorrow.”

Some of Vivus’s largest shareholders have expressed discontent with the company’s direction, and short interest, a gauge of bets against the stock, is at an all-time high, according to data compiled by Bloomberg.

First Manhattan Co., the largest holder of Vivus stock with more than 9 percent, filed a proxy statement May 1 proposing to replace six directors on Vivus’s board. With the addition of Robert Wilson, a former director of Johnson & Johnson, Vivus’s board has seven directors.

Sales Failure

“The upside potential of Qsymia, Vivus’ obesity drug, is enormous, but Vivus’ board and management have repeatedly failed to successfully execute Qsymia’s launch,” First Manhattan said in a statement yesterday. Vivus’s annual meeting is scheduled July 15, according to First Manhattan, which says it manages more than $14 billion.

QVT Financial LP, the third-largest holder of Vivus stock with 8.3 percent, said in a November filing that it met with Wilson, the Vivus CEO, and advocated a sale of the company because of concerns that Vivus wasn’t effectively marketing Qsymia. QVT also raised the possibility of its own representative joining the board, according to the filing.

“When two of the longstanding shareholders that were believers in this drug have gone activist, that kind of shows the level of frustration,” Simeonidis said. First Manhattan, he said, typically doesn’t advocate for change at the companies in which it invests, preferring to buy and hold stock for five years or more, he said.

“This is not Carl Icahn,” Simeonidis said. “First Manhattan has a similar mentality to Warren Buffett. The fact that a Warren Buffett-like investor went activist, you can tell there’s a problem.”

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