VIVUS, Inc. (VVUS), AstraZeneca plc (ADR) (AZN): Great Job, Now You’re Fired

“As a founding CEO, over the past 22 years, Leland has secured four drug approvals, an unheard-of achievement for a small pharmaceutical company. He has taken VIVUS, Inc. (NASDAQ:VVUS) from start-up to what it is today.”

— Samuel Colin, senior managing partner at First Manhattan, VIVUS, Inc. (NASDAQ:VVUS)’ largest shareholder.

But “what it is today” apparently isn’t good enough for Colin. After a heated proxy fight, Colin succeeded in ousting VIVUS, Inc. (NASDAQ:VVUS)’ CEO Leland Wilson.

Rather than waiting to see which of the two slates of board nominees shareholders would vote in, First Manhattan and management reached a compromise. If you can call it that; First Manhattan clearly got the better end of the deal because, apparently, it was going to win anyway.

In addition to ousting Wilson, four other board members will resign from the board to make way for six of First Manhattan’s nominees. The board will be expanded from nine to 11 members, with First Manhattan’s choice for the CEO spot, Anthony Zook, taking the 11th spot.

If you haven’t been keeping score at home that’s: First Manhattan: 7 Old management: 4

New management! Different Story?
Zook, who served as executive vice president for global commercial operations at AstraZeneca plc (ADR) (NYSE:AZN) until February, has his work cut out for him. VIVUS, Inc. (NASDAQ:VVUS)’ obesity drug Qsymia hasn’t been flying off the shelves since it launched last September; in the first quarter, sales amounted to just $4.1 million.

It’s not like VIVUS, Inc. (NASDAQ:VVUS) wasn’t putting in the effort. In the first quarter, the company spent $44.7 million on selling, general, and administrative expenses to hock Qsymia.

Obesity is a big market with lots of patients, but doctors have been reluctant to try drugs, given the side-effect issues of Wyeth Limited (NSE:WYETH)‘s fen-phen, ABBOTT LABS (FRA:ABL)‘ Meridia, and Sanofi SA (ADR) (NYSE:SNY)‘s Acomplia, especially when diet and exercise are generally safer.

Patients also haven’t warmed up to the drug, given its cost. At the end of the first quarter, VIVUS, Inc. (NASDAQ:VVUS) had secured insurance coverage for about one-third of insured patients, but much of that is at the Tier 3 level, where co-pays can be as high as $50 to $100. By the end of the year, VIVUS is shooting for 50% coverage, but there’s still a long way to go before the sticker shock disappears.

Neither the doctors’ concerns nor the patients’ cost issues are going to change under new management.