Proxy adviser ISS has recommended that shareholders in US drug maker Vivus appoint some board members nominated by activist investor First Manhattan Co (FMC), while Glass Lewis has recommended investors reject all of them, according to summaries issued by the companies involved.
The clash of views from the two largest proxy advisory firms is likely to further intensify the proxy battle at Vivus, which makes the diet drug Qsymia. FMC, which owns a 9.9 percent stake in the drug maker, is asking shareholders to appoint nine of its handpicked members to the board at the annual shareholder meeting on July 15.
‘The dissidents have made a compelling case that the board would benefit from some increased oversight of the recently remodeled launch as well as a greater investor perspective and focus on the board,’ ISS says in a note to Vivus investors, according to a press release summary by FMC. The adviser recommends investors approve three of FMC’s nine proposed board members.
FMC claims Vivus has mishandled sales of Qsymia ‒ which the investor says has ‘blockbuster potential’ ‒ since the drug hit the market last September. Poor sales prompted a stock drop of more than 50 percent over the past year. FMC says the current board lacks the experience to oversee issues such as European approval of Qsymia, and only a complete board change will significantly boost profits.
Vivus reiterates in its own press release its view that it has already made adequate changes in the past year to boost sales, and it cites a report by Glass Lewis that rejects the proposed FMC board members in defending its current slate.
‘Glass Lewis shares our strong belief that FMC is creating unnecessary risk for our stockholders,’ Vivus says in its press release.
Vivus also cites phrases from the ISS statement as evidence its board needs no changes, including the ISS claim that ‘Vivus’ management team has made progress over the past year’ and that most of the FMC board nominees ‘do not have any experience in obesity drugs or pharmaceutical commercialization, and this lack of skills would create an unnecessary risk for Vivus’ other shareholders.’
FMC is counting on partial support from proxy adviser Egan-Jones, which states: ‘The dissidents’ nominees appear highly qualified and we recommend a vote ‘FOR’ this proposal on the WHITE proxy card provided by the dissidents,’ according to the FMC press release. ‘We are convinced that election of the dissidents’ slate of nominees to the company’s board of directors would work to the benefit of the shareholders.’
