A proxy war with its top shareholder is building up the pressure on Vivus Inc to quickly ramp up the sales of its diet drug, Qsymia, as skepticism grows among investors and analysts about the medicine's potential.
First Manhattan Co, with a 9.9 percent stake in the company, has been the most active critic, claiming the company's management lacked experience to launch a major drug.
The investment management firm has nominated six directors to Vivus's board and is lobbying shareholders to back them over the company's slate at the annual shareholder meeting on July 15.
Analysts have wound back their sales forecasts for Qsymia this year because of the slow start and its shares have halved in value since the drug's approval.
Once touted as a promising therapy to fight a U.S. obesity epidemic, doctors have been slow to pick it up given the troubled past of obesity drugs. Qsymia's side effects include heart risks and the possibility of babies being born with oral clefts when taken by women during pregnancy.
In an emailed statement to Reuters, Vivus's finance chief, Timothy Morris, said the company remained confident about its sales strategy and was currently in partnership talks with larger pharmaceutical companies to market the drug.
But with competition growing from Arena Pharmaceuticals Inc's Belviq anti-obesity drug, First Manhattan argues Vivus has moved too slowly.
"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," the firm said in a letter to Vivus shareholders earlier this month.
First Manhattan did not comment when contacted, but directed to their publicly released statements.
Another shareholder, Dan Szemis of Chilton Investment Co, does not expect First Manhattan to win any seat on the board, but says there is disappointment over sales of Qsymia so far and the company's strategy to fix this must work.
If Qsymia sales fail to pick up over the next six months, Vivus will have to pursue a sale of the company, said Szemis, whose fund holds 2.4 percent of Vivus.
"I don't think that FMC's board nominees are a significant improvement versus the current board, and they appear to lack experience in this specific area of obesity treatment," he added.
Qsymia, widely touted as a potential blockbuster, is Vivus's first drug in production. The stock rose six-fold as the drug worked its way through trials in the five years leading up to its approval for sale last year.
But since then the shares have halved as the company's cautious initial marketing of the drug led to slow sales.
Thomson Reuters Pharma now estimates Qsymia sales to reach $568 million by 2017, less than half the $1.2 billion it was expecting in February.
The soft launch of the drug has been backed by industry experts and analysts, who said it was the right strategy for a new treatment with possible serious side effects, but their patience is running out.
"It's not clear to us if the obesity market just needs more time to develop, but unfortunately Vivus's cash/burn doesn't leave much time to turn things around," Lazard Capital Markets analyst Joshua Schimmer said in a note last month, after the company's latest quarterly results.
Vivus had about $150 million in cash, cash equivalents and available-for-sale securities as of March 31.