Amylin Shareholders Vote Today in Battle to Influence Board

5/27/09Follow @bvbigelow

[[Editor's note: Updated today at 10:55 am PT]]

A shareholder vote that could influence the course of San Diego’s Amylin Pharmaceuticals has been completed, but results of the board election were not released during the meeting today. “We do not have an indication [of the outcome] at this time,” Amylin chairman Joseph Cook told shareholders at the end of the company’s annual meeting. “We do not expect a complete preliminary tally of the vote to be available for one to two weeks.”

Amylin spokeswoman Alice Izzo said the process of counting ballots is complicated because of the number of candidates nominated to the board and the variety of proxy ballots. Amylin nominated 12 candidates to the 12-member board. Two dissident shareholder groups submitted two slates: three candidates on one proxy card and two on another. The proxy fight at Amylin Pharmaceuticals last fall.

A proposal by dissident shareholder Carl Icahn to move Amylin’s jurisdiction of incorporation to North Dakota from Delaware failed to receive a majority vote. Shareholders approved three administrative measures at the annual meeting, which called for approving Amylin’s equity incentive plan, increasing the employee stock ownership plan by 1.5 million shares and ratifying the selection of Ernst& Young as Amylin’s independent accounting firm.

In a final get-out-the-vote advisory issued yesterday afternoon, Amylin urged shareholders to vote their blue proxy card in support of the company’s 12 nominees for the 12-seat board. The company’s slate consists of 10 existing directors and two new nominees: Paul N. Clark, former chairman and CEO of Icos, and Paulo F. Costa, the former CEO of Novartis. Dissenting shareholders have nominated five directors to Amylin’s 12-member board in a bid to improve performance.

In pushing to get Clark and Costa onto the board, however, Amylin chairman Joseph Cook apparently pushed too hard for the resignations of former Amylin CEOs Ginger Graham and Howard “Ted” Greene, an Amylin co-founder and local biotech icon. Greene ultimately threw his support to the dissident shareholders, telling Xconomy, “I think certain members encumbered with traditional pharmaceutical dogma and our past mistakes should be replaced.”

Like Amylin, dissident shareholders issued a statement of their own yesterday. Eastbourne Capital Management of San Rafael, CA urged all Amylin shareholders yesterday to vote for the three candidates on Eastbourne’s white proxy card. Eastbourne also supports two board nominees submitted by Carl Icahn’s affiliates on a gold shareholder proxy card. The two dissident groups did not formally join forces to solicit the support of Amylin shareholders because the company has a “poison pill” in effect that is triggered if any shareholder accumulates a stake equivalent to a 20 percent ownership stake. Today Icahn’s affiliated holding companies control about 10 percent of Amylin’s stock, while Eastbourne holds a 12.5 percent stake in the company.

The two dissident groups apparently agreed to support a total of just five nominees for Amylin’s board because of another provision the company has in place. This provision requires Amylin to accelerate the repayment of debt the company issued in 2007 if six or more directors not approved by the board are elected.

As a result, Amylin’s candidates will retain a board majority even if all five dissident candidates are elected. But the dissidents could still gain significant influence if their candidates get seated. Dissident criticism about Amylin’s overhead costs and fumbling sales strategy arguably pushed the company to recently reduce its sales force by 35 percent.

While Amylin’s troubles may have been mounting for some time, the two dissident shareholder groups saw their opening last September, shortly after Amylin’s diabetes drug exenatide (Byetta) came under a cloud of regulatory suspicion. The FDA said in mid-August that two patients who were taking Byetta died of pancreatitis, an inflammation of the pancreas usually caused by gallstones. The drug, available in the United States since mid-2005, is Amylin’s leading drug for treating diabetes. Amylin has insisted that there’s no evidence demonstrating the drug causes pancreatitis, although the FDA warning has certainly spooked some doctors, and demand for the drug has declined.

The price of Amylin’s shares plunged on the news, and within weeks, billionaire investor Carl Icahn increased his Amylin holdings by 50 percent—amassing a 7.3 percent stake in the company by the end of September. Likewise, Eastbourne has been accumulating shares in Amylin for several years. The battle over Amylin has become increasingly bitter, with Icahn calling for the resignation of Joseph C. Cook, the company’s chairman, in a letter to shareholders last month.

Icahn and Eastbourne also gained the backing of four proxy advisory firms: RiskMetrics Group, Proxy Governance, Egan Jones, and Glass Lewis & Co. On Friday, P. Schoenfeld and Associates, which owns approximately a 1.5 percent stake in Amylin, added their support to the rebel cause.

The candidates that Eastbourne nominated to the board are:

—M. Kathleen Behrens, 56, a consultant and former managing director of RS Investments. She was previously a general partner and securities analyst with Robertson Stephens & Co., focusing on life sciences.

—Charles M. Fleischman, 51, retired CFO and COO of Digene, a medical device company.

—Jay Sherwood, 40, a managing director of Eastbourne Capital.

Icahn’s group nominated two candidates:

Alexander J. Denner, 39, a managing director of Icahn-affiliated entities who has previously served as a portfolio manager of healthcare and biotechnology funds for Morgan Stanley and Viking Global Investors.

—Thomas F. Deuel, 74, a professor of molecular and experimental medicine and cell biology, director of the division of molecular oncology, and director of the vascular biology affinity group at The Scripps Research Institute in San Diego.

In addition to Clark and Costa, Amylin nominated 10 existing directors for re-election: Adrian Adams, Steven R. Altman, Teresa Beck, Daniel M. Bradbury, Joseph C. Cook, Jr., Karin Eastham, James R. Gavin III, M.D., Ph.D., Jay S. Skyler, M.D., Joseph P. Sullivan, and James N. Wilson.

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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