Icahn Wants to Fix Amylin First, Not Sell on the Cheap, Alex Denner Says

5/19/09Follow @xconomy

Carl Icahn didn’t become a billionaire by buying stocks high, and selling them low. So he isn’t looking to quickly flip San Diego-based Amylin Pharmaceuticals (NASDAQ: AMLN) if he and other dissident shareholders gain control of a few board seats.

“Our plan is not to sell the company,” said Alex Denner, a portfolio manager for Icahn, and one of the nominees standing for election to Amylin’s board on May 27. He said Amylin was “incorrect” when it accused Icahn and Eastbourne earlier this month of pushing for a premature sale. “We have to bring discipline and accountability to the board,” Denner said. “Shareholders have to be put first, and we need a clear plan to commercialize (exenatide once-weekly).”

Denner added that “it’s not prudent” to try to sell Amylin because the stock is too low now. It closed yesterday at $11.07 a share. The company has lost two-thirds of its value from where it was a year ago, trading at $31.95.

Icahn, like any biotech investor, has had his winners and losers. The big winner he likes to point to is ImClone Systems, which he took control of on Oct. 25, 2006. Icahn accumulated his position in ImClone earlier that year when the company was worth about $2.4 billion. Over the next two years, ImClone hired a new chief executive with experience at Johnson & Johnson, built up its biotech drug manufacturing capability, and advanced new drugs in its pipeline behind its one big hit, cetuximab (Erbitux) for colorectal cancer. By July 2008, ImClone’s longtime partner, Bristol-Myers Squibb—which once had a rancorous relationship with the company—offered to buy ImClone for $60 a share. Icahn held out for more, and got it. ImClone agreed to be sold to Eli Lilly for $70 a share, or $6.5 billion, in October 2008.

Amylin challenged Icahn’s role in the ImClone success in an SEC filing on May 11. The company said rising sales of Erbitux were largely driven by royalties it collected passively from European sales generated by partner Merck KGaA. Cost controls were not really driven by budget cutting in the Icahn era, but rather because ImClone finished building a manufacturing plant the year before he entered the picture, Amylin said. “Icahn at ImClone – Right Place at the Right Time???” Amylin said in the filing.

The question of what Icahn and fellow dissidents at Eastbourne Capital would do if elected—and whether they can pull an ImClone-style turnaround—is taking on greater urgency in the last full week before the shareholder vote on May 27. The dissidents have been on a roll the past few days, as they got endorsements from all three major firms that advise shareholders on proxy voting—RiskMetrics Group, Glass Lewis & Co., and Proxy Governance. This came after Amylin founder Howard “Ted” Greene, made a highly publicized break with his former boardroom colleagues, saying he would vote for the dissidents.
Amylin has seen demand for its best-selling product, exenatide, drop since August, when the FDA warned physicians of several cases of patients who took the drug and developed pancreatitis, including two patients who died from the condition. Sales of the product dropped 12 percent in the first quarter, to $157.7 million.

The company announced two significant rounds of cost reductions-cutting 340 jobs in November, and another 200 employees earlier this month-in an attempt to turn cash flow positive by the end of 2010. It is also pinning its hopes for a turnaround on the introduction of a new version of exenatide that can be injected far less frequently-once a week instead of twice each day. Besides just making cuts, Amylin is trying to revamp its sales and marketing strategy. Instead of making the pitch for exenatide to the masses of primary care physicians—which is an expensive undertaking that requires many sales reps—Amylin will concentrate on the smaller pool of endocrinology specialists and doctors that treat many diabetes patients, while its partner, Eli Lilly, will pitch the drug to primary care doctors as well as endocrinologists.

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