UPDATE 2-Vivus set to give First Manhattan board majority -source
* First Manhattan is pushing to replace entire Vivus board
* First Manhattan accuses Vivus of bungling key drug launch
* The spat has been called ugliest proxy fight in biotech
NEW YORK, July 18 (Reuters) - Obesity drugmaker Vivus Inc is close to reaching a settlement with First Manhattan Co, giving the dissident investor a majority of the company board, a source familiar with the matter told Reuters on Thursday evening.
First Manhattan, which is Vivus' largest shareholder and owns 9.9 percent of shares outstanding, is pushing to replace all nine members of Vivus' board, a small drugmaker which has failed to capitalize on the first new diet pill to reach the U.S. market in over a decade.
Some analysts have called it the ugliest proxy fight yet in biotech, a field rife with activism from the likes of Carl Icahn and others.
The company had delayed its board election, which was scheduled for Thursday morning, as it negotiated with First Manhattan, according to two sources familiar with the situation.
Vivus and First Manhattan were not immediately available for comment on the news of the potential pact and had earlier declined comment on the progress of the negotiations.
The source who spoke of the potential settlement declined to be identified as the source was not authorized to speak to the media.
FMC has accused the company of bungling the marketing of its Qsymia drug and of failing to install a management team with extensive commercial drug launch experience.
Earlier this month, FMC took the unusual step of announcing that Tony Zook, a former senior executive at pharmaceutical company AstraZeneca, would be installed as the new Vivus CEO should it prevail in gaining control of the board.
Over the past few days the proxy battle has gotten particularly ugly, with each side accusing the other of illegal or unethical practices.
In a research report Wednesday, Cowen and Co analyst Simos Simeonidis predicted an outright victory for First Manhattan in shareholder balloting.