There was no shortage of news from San Diego’s high-tech business front last week. If you’ve been on a holiday the past few days, here’s your chance to get up to speed.

—Legend 3D, the San Diego-based 3D film conversion specialist, laid off 15 percent of its local workforce Friday, according to a note I received over the holiday on behalf of the company and its founder and president, Barry Sandrew. As I reported last year, Legend 3D, has been on a fast-growth curve—increasing its local workforce to almost 400 five months ago. In the note, a spokeswoman for the company says working with Hollywood requires constant staff shifting and flexibility. Legend 3D attributes the local cuts to “the traditional summer season slow period, after having ramped and completed a round of large, successful blockbuster film projects.” There was no mention of Legend 3D’s workforce in Patna, India; I’ll follow this story with an update if I can gather more details.

—Zynga, the San Francisco-based maker of such popular Facebook games as Farmville and Mafia Wars, registered with the SEC for an initial public offering on Friday, saying it hopes to raise $1 billion. While that would normally be a more appropriate story for Xconomy San Francisco than here, Zynga’s IPO filing shows that San Diego’s Avalon Ventures holds a 6.1 percent stake in the company. Avalon founder Kevin Kinsella told me in September that Avalon’s investment in Zynga could rank as the firm’s single most successful deal. In November, Xconomy’s Bob Buderi talked about Zynga with Avalon’s Boston-based partner, Rich Levandov, who made the deal.

—San Diego-based SweetLabs, which was previously known as OpenCandy, launched a beta version of Pokki, a new platform the startup developed to help bring the convenience and ease of mobile apps to desktop PC users. SweetLabs also made its Pokki software developers’ kit widely available to third-party software developers. A spokeswoman for SweetLabs tells me that German software developer Uwe Keim created the first third-party Pokki app less than 24 hours later. It’s a Zeta-Uploader that allows users to send large files over email.

—Pentwater Capital Management, which owns about 3 percent of San Diego’s Leap Wireless, has asked a Delaware court for an order that would put three of its candidates up for election to … Next Page »

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Genzyme is raising cash to buy shares of its own stock, in a move that will mean taking on debt to gain more control of its shares.

The Cambridge, MA-based biotech powerhouse (NASDAQ:GENZ) reports today that it will sell $1 billion in corporate debt to complete the first part of a $2 billion share buyback plan. The firm is selling $500 million in senior notes at an interest rate of 3.625 percent due in 2015 and another $500 million in notes at 5 percent due in 2020. Genzyme expects to close on the sale of the notes to institutional buyers on June 17.

Genzyme’s stated motivation for the share buyback plan is to increase shareholder value, and it’s a common practice for companies to repurchase shares for that reason. Yet the buyback plan was announced last month amid the company’s proxy fight with the activist investor Carl Icahn, who reached an agreement with Genzyme last week to end the proxy contest in exchange for two of his associates being appointed to the company’s board. While Genzyme hasn’t related the stock buyback to Icahn’s bid to gain control of the company, the firm will increase its control of company stock by taking a significant number of shares out of play.

Last month, the company said it would repurchase $1 billion of its shares in the near term and spend the second $1 billion to buy shares over the next 12 months.

Genzyme, which is the world’s largest maker of drugs for rare genetic diseases, holds its annual meeting tomorrow. All 10 seats on the board of directors are up for re-election. Plus, the board is expected to appoint three more directors—including Icahn associates Steven Burakoff and Eric Ende—bringing the total number of seats on the board 13. People aren’t expecting there to be much drama at the annual meeting, given last week’s agreement between Genzyme and Icahn.

But we’re planning on being at the annual meeting anyway—because you never know what might happen.

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[Updated --- 3/22/10, 11:30 am Eastern time] There will be no proxy battle between billionaire Carl Icahn and Biogen Idec this year. Cambridge, MA-based Biogen (NASDAQ:BIIB) says this morning it has struck a deal with Icahn in which two new members have been added to Biogen’s board of directors, including one of the candidates Icahn nominated back in January.

The deal gives Icahn greater control over Biogen’s board and Biogen a reprieve from what could have resulted in a third year of wrangling with Icahn over board seats at its annual meeting. Icahn has agreed to back Biogen’s slate of candidates for open board seats at the company’s annual meeting and drop any plans to wage a proxy battle with the company this year.

As part of the pact, Icahn’s nominee Eric Rowinsky and biotech industry veteran Stephen Sherwin, Biogen’s pick, have joined Biogen’s board of directors. Rowinsky and Sherwin are two of the four nominees that Biogen will endorse and now Icahn will support for election to the firm’s board later this year. Rowinsky and Sherwin will need to be elected at the annual meeting to stay on the board because their appointments expire this year. As planned, Biogen CEO James Mullen, who recently announced his plans to retire, and Biogen director Bruce Ross are finishing their terms on the board and will not seek reelection. (Editor’s note: More detail about the appointment of Rowinsky and Sherwin to Biogen’s board was added to this paragraph.)

Biogen’s deal with Icahn comes as it searches to replace Mullen, who has often been a target of Icahn’s criticism related to the poor performance of the company’s stock. Mullen plans to retire in June. The deal could be an effort from both sides to make the company more attractive to a prospective CEO to replace Mullen. (Who wants to take over a company pitted in a proxy battle, let alone one with an influential investor like Icahn?)

Icahn has also agreed to end his petition to amend Biogen’s bylaws to limit the number of members of the company’s board to 12. The company is expected to operate temporarily with 13 board members until this year’s annual meeting, after which the number will be 12. At that point, Icahn, who gained two seats on the company’s board last year, will control 25 percent of the board. He has been a proponent of trimming expenses and reprioritizing R&D efforts at the company to boost its stock price.

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Activist investor Carl Icahn has increased his stake in Cambridge, MA-based biotech firm Genzyme (NASDAQ:GENZ) from 1.5 million shares in the fourth quarter of 2009 to 4.6 million shares as of last week, Bloomberg reported last Friday. Icahn did not comment on his enlarged stake in Genzyme, according to Bloomberg, but his previous buying sprees of biotech stocks have led to proxy fights with firms such as Cambridge, MA-based biotech Biogen Idec (NASDAQ:BIIB), San Diego-based Amilyn Pharmaceuticals (NASDAQ:AMLN), and drug developer Imclone Systems, which was acquired by drug giant Eli Lilly in 2008.

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The season of proxy battles at Biogen Idec (NASDAQ:BIIB) is upon us. Billionaire investor Carl Icahn and his affiliates have sent word to Cambridge, MA-based Biogen that they plan to nominate three additional people for election to the board of directors at the company’s annual meeting this year, Biogen says.

Two of Icahn’s nominees are alumni of cancer drug developer Imclone Systems, of which Icahn and his affiliates took a majority of shares in 2006.  Thomas Deuel, a former board member at Imclone, is a professor who focuses on cancer research at the prestigious Scripps Research Institute in La Jolla, CA. Richard Young is an MIT biologist whose lab at the White Institute of Biomedical Research studies the role of small RNA in gene transcription. And Eric Rowinsky is the former chief medical officer at Imclone.

This slate has been introduced as Biogen looks to replace its CEO, James Mullen, who announced early this month that he would be retiring in June. Icahn, who controls nearly 5.6 percent of Biogen shares, could gain far more significant influence on the company’s board at a pivotal time if his nominees take three of the four seats open for election this year. Biogen’s board has formed a four-member committee to lead a search for a new CEO, and one of those four search committee members is company director Alex Denner, who is one of the two nominees from Icahn’s slate to be elected to the board last year. (Luke analyzed Icahn’s potential impact on filling board vacancies at Biogen last month.)

Another proposal that Ichan is making, for the third year straight, is to amend Biogen’s bylaws to fix the number of board seats at 12. Putting a cap on the number of company directors could be viewed as a longer-term measure to gain control of the board. It’s conceivable that, after the next election, Icahn’s people would occupy nearly half of the company’s board seats, giving him considerable influence over decisions, putting him in striking distance of gaining control of majority of the board in subsequent years.

Icahn’s been a major proponent of overhauling research priorities and trimming expenses at Biogen to lift the price of the company’s stock, which he says has underperformed compared with other similar stocks in recent years.

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A flurry of financing deals made it a good week for San Diego’s life sciences industry. Get the highlights here.

—VentiRx Pharmaceuticals, which is working on drugs for allergies and cancer, raised additional funds of $25 million, bringing the total received in its Series A round to $51.6million. The company is based in San Diego and Seattle.

—Tandem Diabetes Care, a San Diego-based company developing insulin pumps for diabetics, has raised $52.3 million in a round of equity financing that began last May. Venture-based Tandem hasn’t revealed much about its new pumps. The company’s website says the equipment will enable diabetics to remain active.

—Bruce had an interesting chat with Keith Murphy, CEO of Organovo, a San Diego-based startup using modified inkjet printer technology to build human tissue from living cells. Murphy says the company’s ultimate goal is to build livers, kidneys and other vital organs for transplant patients, but immediate plans call for engineering blood vessel grafts for patients with peripheral artery disease.

—Genzyme (NASDAQ: GENZ) entered into a “mutual cooperation agreement” with San Diego-based Relational Investors, a $6 billion activist investment fund and owner of about 4 percent of Genzyme stock. Late last year, Relational co-founder Ralph Whitworth began to publicly call for changes at the Cambridge, MA-based biotech. Although Whitworth praised Genzyme’s appointment of former Schering-Plough executive Robert J. Bertolini to its board in early December, he called for “significant further improvements” in the board’s composition.

—San Diego-based Quidel (NASDAQ: QDEL) which makes medical diagnostic tests used at the point-of-care, is paying $130 million in cash to acquire Athens, OH-based Diagnostic Hybrids, a privately held maker of medical diagnostic tests for hospitals and laboratories.

— Adventrx Pharmaceuticals (AMEX: ANX) boss Brian Culley talked with Bruce about the company’s remarkable reversal of fortune. Investors are optimistic about ANX-530, a reformulated chemotherapy drug for cancer.

—Life Technologies (NASDAQ: [[ticker:LIFE]) the Carlsbad, CA-based provider of biomedical diagnostic equipment and laboratory supplies, has agreed to acquire AcroMetrix, a diagnostics controls specialist based in the Bay Area community of Benicia, CA. Financial terms of the deal were not disclosed.

—SG Biofuels, a San Diego-based company focused on producing biodiesel and feedstock substitutes from the seeds of the Jatropha shrub, formed a strategic alliance with Life Technologies (NASDAQ: LIFE) the Carlsbad, CA-based maker of genetic diagnostic equipment, laboratory instruments, and other biotech supplies. Financial terms weren’t disclosed.

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Covering the life sciences in San Diego is never dull, and the news flow last year provided plenty of drama. What follows are some highlights from the past year:

— Embattled tools company Sequenom (NASDAQ: SQNM) scuttled the debut of a non-invasive prenatal Down syndrome test amid a data-mishandling scandal. CEO Harry Stylli was fired along with four other employees. Two others, including CFO Paul Hawran, resigned. The future of the diagnostic test is now in doubt and in November the company, which was being investigated by the SEC and FBI, said it was taking steps to conserve cash to improve its odds of survival.

—Dissident shareholders billionaire Carl Icahn and Eastbourne Capital won two of five board seats in a proxy fight that centered on San Diego-based Amylin Pharmaceuticals’ (NASDAQ: AMLN) strategic management of its strong-selling diabetes drug exenatide (Byetta). Months after its partial victory, Eastbourne sold its entire Amylin stake—after Eastbourne founder Rick Barry voiced some frustration over Amylin’s slow pace of change. Since then, the company struck an important deal to co-develop weight-loss drugs with Japan’s Takeda Pharmaceuticals.

—The spread of swine flu provided a fleeting business opportunity to companies working on diagnostic equipment or novel vaccines. Quidel (NASDAQ: QDEL) reported a surge in sales driven by purchases of its rapid flu test and Life Technologies (NASDAQ: LIFE) saw a bump in revenue from sales to public health laboratories of equipment and reagents for swine flu testing. Funding from the Navy enabled Vical (NASDAQ: VICL) to conduct pre-clinical studies of an experimental swine flu vaccine, but the company has not received the added support needed to conduct a human test.

—San Diego’s emergence as a center for algae-based biofuels came into view during the Algae Biomass Summit in October. Two of the most closely watched algae biofuels companies are here: Sapphire Energy, which is backed by billionaire Bill Gates, and Synthetic Genomics, whose partner, ExxonMobil, announced plans in July to invest $600 million investment in algae-derived biofuels. They and other start-ups are taking advantage of the rich pool of biotechnology talent here. Still, there is no denying it’s early days, and the technology needs to prove itself.

—Biotechs Arena Pharmaceuticals (NASDAQ: ARNA) and Orexigen Therapeutics (NASDAQ: OREX) continued their race for the next blockbuster obesity drug. The companies have released clinical trial results showing … Next Page »

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A quiet epilogue to last spring’s heated Amylin proxy battle was the lead story in an otherwise slow week for San Diego life sciences news.

—Eastbourne Capital, which won a partial victory in a proxy fight against Amylin Pharmaceuticals earlier this year, sold its entire stake in the San Diego diabetes company. The San Rafael, CA-investment firm owned 12.5 percent of Amylin (NASDAQ: [[ticker: AMLN]]) during the proxy contest. One of its three nominees, Kathleen Behrens, was elected to the Amylin board.

—San Diego ranked second last year to Cambridge, MA, in total venture capital investment in medical technology firms, according to a report from Ernst & Young. San Diego saw $151 million invested in 15 deals, compared to $169 million in nine deals for Cambridge. E&Y said 2008 was tough for medical device companies, in part because of the economy and concerns about health care reform. Southern California, which E&Y defines as San Diego and Orange County, has 82 venture-backed and 41 public medical technology companies, one of the highest concentrations in the country.

—Illumina (NASDAQ: ILMN) acquired worldwide rights to commercially develop Orchid Cellmark’s (NASDAQ: [[ticker: ORCH]]) single base nucleotide extension technology for forensics and diagnostics. Under the deal, Illumina paid Princeton, N.J.-based Orchid $850,000 up front and agreed to pay $150,000 in milestone payments.

—Avanir (NASDAQ: AVNR), which is located just across the San Diego border in Orange County, said its experimental drug for treating unprovoked emotional outbursts reached secondary endpoints in a clinical trial of people who had either multiple sclerosis or amyotrophic lateral sclerosis. Data presented at the annual meeting of the American Neurological Association in Baltimore showed that patients diagnosed with pseudobulbar affect experienced a statistically significant improvement in their mental states. Avanir previously announced that the drug dextromethorphan/quinidine, or DMQ, met the primary endpoint of reducing PBA symptoms—episodes of uncontrollable laughter or crying—by a clinically meaningful 30 percent. The drug could receive FDA approval during the second half of 2010.

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While San Diego has seen a big decline in VC investments this year, it’s nice to know that Domain Associates, one of the region’s most-active life sciences VCs, has raised a new fund. We’ve got the rundown on that and more news of interest to the life sciences community.

—San Diego’s life sciences community got some encouraging news earlier this week when the venture capital firm Domain Associates said it has closed Domain Partners VIII, a $500 million venture capital fund devoted exclusively to the life sciences industry. While Domain is based in Princeton, NJ, the firm maintains an office in San Diego, and many of its investments are in California.

—Seattle’s Bonnie Ramsey first learned of a cystic fibrosis drug under development by San Diego’s Aurora Biosciences nine years ago, when she was working for the Cystic Fibrosis Foundation’s Therapeutic Development Network. Aurora was later acquired by Vertex Pharmaceuticals (NASDAQ: VRTX), and now the Cambridge, MA, biotech has advanced development of Aurora’s CF drug—now known as VX-770—to the final stage of clinical trials. Luke talked at length with Ramsey, who is a clinical researcher affiliated with Seattle Children’s Hospital, and the University of Washington.

—How long should it take a company’s reconstituted board of directors to elect a new chairman? It’s taken more than two months at San Diego’s Amylin Pharmaceuticals (NASDAQ: AMLN), which was subjected to a proxy fight this spring. That’s taxing the patience of Rick Barry, the founder and portfolio manager of Eastbourne Capital Management. Barry, whose firm holds a 12.5 percent stake in Amylin and has been pushing for change at the diabetes drug specialist, told me he wants the new chairman to be chosen from one of the four newly elected directors to the company’s 12-person board.

—SpectraScience (OTCBB: [[ticker: SCIE]]), a San Diego-based maker of optical biopsy technology used to detect cancerous tissue, has raised $930,000 of a planned $5 million investment round among individual investors. The medical diagnostics company plans to use the capital to expand its sales and distribution network for equipment it has developed to search for telltale signs of cancer.

——The National Institute of Neurological Disorders and Stroke has awarded a $3.3 million grant to privately held Ichor Medical Systems of San Diego for development of a DNA vaccine for Alzheimer’s disease. The company makes it easier for cells to absorb its DNA vaccines by using an electroporation delivery system that creates temporary pores in cell membranes.

—Sequenom (NASDAQ: SQNM), the San Diego biotech developing DNA-based diagnostic tests, has maintained radio silence since it first disclosed three months ago it had uncovered R&D test data was mishandled for its much-anticipated genetic test for Down syndrome. In a recent statement, Sequenom says the company is no longer relying on previously announced test data and results, but it’s unclear if that means the company’s planned introduction is slipping further behind schedule. Sequenom had planned to introduce its SEQureDx test in June.

—Avanir Pharmaceuticals (NASDAQ: AVNR), a one-time San Diego biotech now based in Aliso Viejo, CA, said it hopes to submit results of its late-stage drug trial for treating an unusual neurological disorder to the FDA in the first half of next year. The company said this week that its drug passed a final-stage clinical trial, designed to see whether it was effective in treating involuntary bouts of laughter, crying, and other emotional outbursts.

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After a bruising proxy battle ousted Amylin Pharmaceuticals’ chairman and lead outside director, the San Diego biotech issued a statement on June 2 that seemed to signal a cease-fire with dissident shareholders (including Carl Icahn). “We look forward to working with all our new directors to bring transformational medicines to patients and to drive sustainable and profitable growth,” the company said.

But have the directors of the San Diego diabetes drug developer really been able to bury the hatchet?

One sign they may not have is the fact that in the two months since shareholders ousted chairman Joseph Cook and director James Wilson—and elected four new directors to Amylin’s 12-member board— Amylin has yet to announce a new chairman. Two of Amylin’s longtime directors, founding CEO Howard “Ted” Greene and Ginger Graham, another former CEO, were more or less forced to resign in April to make room for the company’s slate of new board candidates. Votes were cast on May 27th at Amylin’s annual shareholders meeting.

Whether that’s enough time for a corporate board to choose a new chairman is a matter of debate. Aside from telling me the company has no information concerning a new chairman, Amylin didn’t have much to say. When asked if continuing dissension is prolonging the board’s deliberations on the matter, spokeswoman Anne Erickson e-mailed this statement to me:  “Our Chairman of the Board is elected each year following our Annual Meeting of Stockholders by the newly-elected Board. With four new Directors, the Board is working together to make a thoughtful decision about this very important role to the organization. Amylin welcomes all four new Directors to the Board and looks forward to a productive working relationship.”

Those four new directors include two who were elected from the company’s slate of nominees—former Icos chairman and CEO Paul N. Clark and former Novartis CEO Paulo F. Costa. The other new directors came from the dissident camps—Alex Denner has served as a portfolio manager for Icahn, and Kathleen Behrens, a consultant and former managing director of RS Investments, was nominated by Eastbourne Capital Management of San Rafael, CA.

Since Eastbourne Capital holds a 12.5 percent stake in Amylin, I checked in with the firm’s founder and portfolio manager, Rick Barry, via e-mail:

Xconomy: Is Amylin’s board having difficulty electing a new chairman?

Rick Barry: We don’t know, but it has been over two months since the annual meeting and there is no announcement regarding a new Chairperson. This concerns us and is likely to concern all other Amylin shareholders.

X: Can you tell me which Amylin directors Eastbourne views as appropriate candidates for board chairman?

RB: Of the four newly elected independent directors, Paul Clark and Paulo Costa were selected after a rigorous process by the Company’s corporate governance committee. They were shown to have excellent qualifications and Amylin deemed them desirable additions to maximize value for all Amylin Shareholders. We too supported their election, as did an overwhelming majority of the other shareholders. We believe that either of these two individuals would be an excellent choice for Chairperson.

X: Are there any current directors that Eastbourne is unwilling to support?

RB: We believe the Board needs to be lead by someone who has a fresh perspective, unburdened by past decisions with ample time and a successful track record. We would support any of the four newly elected independent directors.

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San Diego-based Amylin Pharmaceuticals has witnessed an extraordinary struggle for control of its board of directors in which a key turning point came when founding CEO Howard “Ted” Greene publicly switched sides and urged shareholders to vote for the dissidents’ nominees.

So what does Greene have to say about the results of the shareholder vote that Luke reported this morning? I caught up with Greene this afternoon by telephone in northern Michigan, where he’s on vacation. He says the changes give the San Diego diabetes drug developer a fresh opportunity.

Greene sounds generally upbeat about the results, in which four new directors are joining Amylin’s 12-member board—two dissident nominees, and two new company nominees. From the dissidents’ camp, shareholders elected Alex Denner, a fund manager for billionaire investor Carl Icahn, and Kathleen Behrens, a consultant nominated by Eastbourne Capital Management. From the company’s own slate of candidates, shareholders elected two new independent directors, former Icos chairman and CEO Paul N. Clark and former Novartis CEO Paulo F. Costa.

“One-third of the board has turned over,” Greene says. “So the new board is going to take a hard look at the company’s performance and the way they do some of the marketing and sales.”

One of the extraordinary aspects to the outcome of the board election is not merely that the dissident faction gained two board seats in the May 27 shareholder vote. It’s that they dethroned the two most prominent incumbents—Amylin chairman Joseph Cook and lead independent director James Wilson—in an election that was a pure popularity contest. The 12 nominees elected to Amylin’s board are the ones who received the most shareholder votes. Cook and Wilson, who were the public faces of the company’s defensive reaction to the shareholder activists, were the ones who became least popular in the end.

Icahn and Eastbourne, which together hold about a 22.5 percent stake in Amylin, were targeting Cook and Wilson in their call for a board shakeup and improved performance at Amylin. But Greene, who is Amylin’s biggest individual shareholder and a leading figure in San Diego’s biotech community, clearly helped tip the balance.

When Greene was asked to resign from Amylin’s board in April, he groused in an open letter filed with the SEC that “the obvious and appropriate choice to not … Next Page »

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After months of buildup to get to yesterday’s shareholder vote to determine the makeup of Amylin Pharmaceuticals’ board of directors, a key question remains unresolved. Happily for those who like more closure, the rest of the week held more definitive news for San Diego’s life sciences companies.

—The protracted proxy battle between San Diego’s Amylin Pharmaceuticals and activist shareholders Carl Icahn and Eastbourne Capital Management came to a somewhat anticlimactic conclusion yesterday. The vote recap: Icahn and Eastbourne each got at least one of their candidates elected to the company’s 12-seat board, while Amilyn says it got 10 of its candidates elected. Final results are expected in a week or two, but a big question lingers: Which two of Amylin’s incumbent directors lost their board seats?

—The annual meeting of the American Society of Gene Therapy began yesterday in San Diego, with some 2,000 scientists gathering for presentations on the latest developments in the field. The society’s president, David M. Bodine, told Denise that a severe falloff in venture capital funding “has really slowed very promising trials from getting to patients.”

—San Diego’s Fate Therapeutics says a drug candidate it is developing to spur the growth of blood-forming stem cells has been used to treat the first patient in an early-stage clinical trial. The study is being conducted at the Dana-Farber Cancer Institute in Boston to determine the safety and tolerability of the drug in some cancer patients.

—San Diego’s Ophthonix raised $25.9 million in a “Series AA” venture round, with investors Kleiner Perkins Caufield & Byers, Enterprise Partners, DAG Ventures, Gund Investment Corporation, InterWest Partners, Trex Enterprises, and Wasatch Advisors’ Cross Creek Capital Fund participating in the deal. The vision correction company determines each patient’s lens prescription by using a laser to analyze how light travels through the eye.

—San Diego biotech Vical (NASDAQ: VICL) raised $20 million in private stock sales arranged with several institutional investors. The deal includes two longtime backers, the Pittsburgh, PA-based Federated Kaufmann Fund and New York’s Special Situations Funds. Vical is developing a vaccine for the H1N1 swine flu.

—Metabasis Therapeutics is reducing its workforce by another 45 employees, or 85 percent, leaving just seven employees remaining at the San Diego diabetes drug company. Metabasis says it may be forced to cease operations entirely.

—President Rolf Muller of San Diego’s Biomatrica says the company is starting to gain market acceptance for technology designed to store biological samples at room temperature. The Biomatrica products, which basically dehydrate and shrink-wrap samples, offer potential energy savings to biotech and research laboratories. Muller told Luke that sales have doubled in the last year, and that the company has grown from 13 to 25 employees.

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Two dissident shareholder groups have succeeded in electing two new directors to the board of San Diego’s Amylin Pharmaceuticals, (NASDAQ: AMLN), according to the company and one of the shareholder groups.

In a statement issued today, Eastbourne Capital Management of San Rafael, CA, says, “based on voting estimates from its proxy solicitor,” it appears that candidates nominated by both Eastbourne and billionaire investor Carl Icahn were elected. Eastbourne did not say, however, how many of the five candidates nominated by Eastbourne and Icahn were elected. About an hour later, Amylin issued a statement that said it believes that “no more than two” dissident nominees—one from Eastbourne, and one from Icahn—were elected to the Amylin board. It didn’t name which dissident directors were thought to have won seats, or which Amylin directors lost their seats. Amylin added that Icahn’s proposal to reincorporate in North Dakota was defeated.

Amylin asked shareholders to support its own slate of 12 candidates for the company’s 12-seat board. During the meeting, Amylin chairman Joseph Cook said a final tally of the board election results would not be available for one to two weeks. In the statement that Amylin issued a couple hours after the meeting, it said shareholders had elected “at least 10″ of the company nominees were elected, including new independent directors Paul Clark and Paulo Costa.

“Today’s outcome affirms that shareholders have confidence in the Company’s plan to build value in 2009 and beyond, having apparently elected only two of the five dissident nominees,” Amylin said in its statement.

Eastbourne founder and portfolio manager Richard J. Barry said in a statement, “We want to thank Amylin shareholders for supporting us in effecting change to the Amylin Board and sending a strong message that the past results are not acceptable. We look forward to working constructively with the new Board of Amylin and doing our part to ensure the long-term success of the company.”

Barry addressed shareholders during the meeting, denying that Eastbourne’s goal was to push for a quick sale of Amylin. “I’m a user of Byetta,” Barry added, referring to exenatide, Amylin’s lead drug for treating diabetes. “It’s one of the reasons I’m here. It’s made a difference in my life.”

James Wilson, the lead independent director on Amylin’s board, voiced support for Amylin CEO Dan Bradbury as “an extremely effective and personable leader” in his remarks to shareholders. “I have never been more impressed with him than in these past few months, and we have been together a lot in the past few months.”

In his statement to shareholders, though, Barry argued that Amylin is not doing enough to get exenatide “into the hands of patients. That’s why we’ve done what we’ve done.”

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[[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.

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A battle for control of Amylin Pharmaceuticals (NASDAQ: AMLN)  that began last year will come to a final showdown tomorrow at the company’s annual shareholder meeting. Challenging Amylin’s leadership in the proxy fight is Carl Icahn, the billionaire New York investor, who owns approximately 10.5 percent of Amylin’s stock, and Eastbourne Capital Management, a hedge fund based in San Rafael, CA, that owns a 12.5 percent stake in Amylin.

Carl Icahn has called for Amylin’s chairman Joseph Cook’s resignation, and in recent days the two dissident shareholder groups have gained notable support. The most significant endorsement came from Howard “Ted” Greene, an Amylin co-founder and the company’s first CEO, who urged shareholders to vote for the board candidates proposed by Icahn and Eastbourne. Icahn and Eastbourne also gained the backing of three proxy advisory firms—RiskMetrics, Proxy Governance, and Glass Lewis & Co. On Friday, P. Schoenfeld and Associates, which owns approximately 1.5% of Amylin stocks, added their support to the rebel cause.

In the weeks leading up to the annual meeting, Amylin and the dissident groups have been sending almost daily pleas for support and memos to shareholders in a “slideshow war.”
Amylin has been urging them to vote for its slate of candidates, who are listed on a blue proxy card. Icahn’s nominees are on a gold proxy card and Eastbourne’s proxy card is white.
Here are five points of disagreement as the sides see them.
Amylin’s arguments are:

—Amylin is poised to revolutionize the treatment of diabetes. The company is successfully executing its business strategy and achieving key milestones.
—Amylin says half of its board already has changed since 2005, with six new directors joining.
—Current board members have the necessary diabetes knowledge to enhance stockholder value. Icahn and Eastbourne “suffer from a fundamental misunderstanding of Amylin’s business” and would replace existing directors with individuals with no relevant diabetes experience.
—The board has repeatedly tried to avoid a proxy contest. Icahn and Eastbourne want to sell the company at a time when it is seriously undervalued.
—Of the nine companies in which Icahn has gained board representation since 2000, ImClone is the only one that showed positive price performance.

Carl Icahn’s arguments are:
—Amylin’s board has diminished the company’s value and directors have put their interests before shareholder interests.
—The Current board can not be trusted to achieve full potential of the new diabetes drug Byetta LAR.
—Amylin’s partnership with Eli Lilly was destructive to the value of the company. A faulty partnership and launch strategy led to a bloated cost structure at Amylin.
—Of the 43 pharmaceutical companies selling the top 150 products in 2007, Amylin is the only company without operating profits in 2007 and 2008.
—Amylin’s CEO has been paid well despite poor performance.

Eastbourne Capital Management’s arguments are:
—”We have been patient investors in Amylin, but Amylin’s shares have fallen more than 75 percent from 2007, a loss of approximately $5 billion of shareholder value.”
—”We are also struck by the timing of the apparent realization by Amylin’s management… that the company’s cost structure needs to be addressed, coming as it does less than a year after moving to increase the company’s sales force by 15 percent.”
—”We have lost confidence in Amylin’s leadership to take this rich product portfolio… Byetta was a break-through therapy and the company failed to capitalize on it!”
–Shareholders should judge the incumbent board by the results it has produced. The incumbent board should be held accountable for management’s lack of success.
—Eastbourne’s nominees are committed to maximizing the commercial potential of Amylin’s products.

Xconomy plans to follow Amylin annual shareholders meeting. We’ll keep you updated.

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Big proxy battles, like the one unfolding at San Diego’s Amylin Pharmaceuticals, have become much like national political campaigns. There’s a media strategy. There are carefully choreographed events. There are war rooms on both sides. When dissident shareholder Eastbourne Capital Management submitted its filing “Amylin Pharmaceuticals: The Case for Change” to the SEC on May 5th, Amylin responded nine days later with its point-by-point response, “Refuting Eastbourne’s Claims.”

So it was both unexpected and a big deal when Amylin’s founding CEO, Howard “Ted” Greene, threw his support to dissident shareholders Carl Icahn and Eastbourne Capital in a letter to shareholders. Greene, who was Amylin’s chief executive from 1987 to 1996, now supports a slate of five new directors nominated by Eastbourne and Icahn, who together own a 22.5 percent stake in Amylin.

Greene made no secret of his unhappiness in April, after it became clear in his resignation letter that Amylin’s board had more-or-less forced him and Ginger Graham, another former Amylin CEO, to resign their longtime board seats. But in an e-mail to me last month, Greene also made it clear that he still supported the company, saying, “I’ll look to find other ways to help my favorite company…”

So what happened? Could there be bad blood in the Amylin boardroom? Has something happened since Greene resigned that prompted him to switch sides? When I asked Greene to explain his change of heart, he responded at length, which I have copied here in its entirety:

“1. In my view, Amylin’s commercialization strategy has been flawed. It was crafted by the current Chairman of the Board (while he was CEO) and his corporate alma mater, Lilly, to make Amylin essentially an equal partner with Lilly in the commercialization process. At the time we believed our products would be so beneficial for patients that revenues would catapult us into the big pharma league and give us the critical mass needed for a large sales force. We were naïve. As we’ve now learned, selling non-insulin injectible products to primary care physicians is a big challenge, and even Lilly—with 80 years experience selling insulin—has stumbled. At this point I think Dan Bradbury has the right ideas for repositioning Amylin with a specialty sales force, and for innovative programs that help patients meet their expectations for our medicines. To ensure board support for these ideas, I think certain members encumbered with traditional pharmaceutical dogma and our past mistakes should be replaced.

2. With Ginger Graham’s and my departure, stock ownership by our board of directors declines by over 60 percent. I believe that our directors who do not own any stock (but just hold options) are dedicated to restoring value for shareholders. But, it’s disappointing to me that many of them have never put a significant amount [of] their own money into our stock, given how undervalued I think it now is. I’ve served on boards for over 30 years, and it’s clear to me that having a lot of skin in the game sharpens one’s strategic priorities and sense of urgency. Given that I’m not on the board anymore, I’ll sleep easier if the next proxy table of beneficial stock ownership by directors will show a much bigger number of shares.

Amylin is a great company with great technology and great employees. But, our board—myself included—using our best judgments at the time went down the wrong path for launching us into the commercial arena. In recognition of this, I think shareholders would be well served by supporting new members on our board.

As I said in my letter yesterday, this is why I plan to vote for the slate proposed by Eastbourne, including Icahn’s candidates.”

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In a letter to shareholders today, San Diego’s Amylin Pharmaceuticals (NASDAQ: ALMN) urges them to vote for the company’s slate of directors on a blue proxy card. Amylin’s annual meeting will be held on May 27th. The diabetes drug developer asks shareholders to discard gold or white proxy cards with board candidates nominated by billionaire Carl Icahn or Eastbourne Capital Management. Amylin defends its policy in its letter, citing the opportunity of its exenatide diabetes drug, and criticizing Icahn and Eastbourne for “fundamentally misunderstanding” the company.

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Although the financial meltdown has hit San Diego’s venture community pretty hard, Lux Capital’s Larry Bock says he made his most-successful investments during the biotech nuclear winter of the early 1990s. So what areas of venture innovation seem promising today? That’s what Xconomy is here for, my friends. Read on.

— Serial healthcare entrepreneur James Sweeney sees a wave of innovation coming in the field of wireless healthcare, and it might be worth listening to what he has to say. As Xconomy’s Juha-Pekka Tikka reported, one of the eight healthcare companies he founded was CardioNet, which is now regarded as the first commercially successful wireless health company in the United States. Sweeney will discuss his vision for wireless healthcare this Thursday morning at the Convergence Summit organized by San Diego’s Wireless Life Sciences Alliance at the Estancia La Jolla Hotel & Spa.

—For a company locked in a proxy fight, San Diego’s Amylin Pharmaceuticals (NASDAQ: AMLN) did a good job last week of showing it doesn’t need billionaire investor Carl Icahn to cut its costs or to advance new drug products. Amylin said Monday it plans to lay off 200 sales reps, or 11 percent of its global workforce, as part of a sales reorganization. On Tuesday, the diabetes drug developer said it had submitted a new drug application to the U.S. Food and Drug Administration for exenatide, its once weekly drug for type 2 diabetes.

—The price of shares in Acadia Pharmaceuticals (NASDAQ: ACAD) more than doubled on Monday, when the San Diego biotech said it stands to get as much as $395 million in milestone payments from Biovail, Canada’s largest publicly traded pharmaceutical. Acadia’s stock lost some of its altitude through the week, closing at $1.81 a share on Friday, after trading above $2.60 a share Monday. Acadia has scheduled a conference call this afternoon to discuss its Q1 financial results and drug development programs.

—San Diego’s Vical (NASDAQ: VICL) said it is nearly ready to begin producing a prototype vaccine for the H1N1 influenza, aka swine flu . In a Q1 conference call Thursday, Vical CEO Vijay Samant said the company should be ready to start making vaccines this week that are suitable for clinical trials. “We are talking of production time of six to nine weeks rather than six to nine months with conventional vaccines,” Samant said.

—Spectrum San Diego is ready to introduce its CarScan technology next week at the Force Protection Equipment Demonstration conference in Stafford, VA. Spectrum’s founding CEO Steven W. Smith, who is an expert in digital signal processing and ultra-low level X-ray emissions, told me the car-scanning technology he developed produces clearer images of interior compartments by combining two different types of ultra-low level X-ray emissions. Motorists can remain in the car while it’s being scanned.

—Reva Medical, which got $42 million in venture capital in 2007 after clawing its way back from near death when the market for its metal stent collapsed, is preparing to move to human studies of its fully dissolvable cardiac stent. CEO Robert Shultz told Xconomy’s Denise Gellene the clinical trial will likely include 300 to 500 patients and take two … Next Page »

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Amylin Pharmaceuticals (NASDAQ: AMLN), which is engaged in a proxy fight, has submitted a new drug application to the U.S. Food and Drug Administration for exenatide, its once weekly drug for type 2 diabetes. The San Diego biotech made the announcement today with Eli Lilly (NYSE: LLY), its marketing partner, and Cambridge, MA-based drug developing company Alkermes (NASDAQ: ALKS).

Amylin, Lilly, and Alkermes have been working to develop a new version of Byetta, the diabetes drug developed by Amylin, as a once-a-week injection based on Alkermes’ proprietary technology for long-acting medications.

“The clinical data supporting this submission highlight the potential of exenatide once weekly to significantly advance the treatment of type 2 diabetes,” says Amylin’s president and CEO Daniel Bradbury, according to the companies’ joint statement. “If approved, exenatide once weekly would be the first and only once-a-week therapy for the treatment of type 2 diabetes,” says David Vondle, Lilly’s global brand development leader.

Billionaire investor Carl Icahn and Eastbourne Capital Management, who together hold a 22 percent stake in Amylin, have targeted the San Diego biotech’s financial performance (and lagging Byetta sales) in their quest to gain more control on the company’s board. Amylin said yesterday it plans to lay off 200 employees in a restructuring of its sales force.

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San Diego diabetes drugmaker Amylin Pharmaceuticals (NASDAQ: AMLN), under pressure to cut costs, said today it plans to lay off 200 sales representatives, or 11 percent of its total worldwide workforce. But it’s unclear if that will be enough to appease dissident shareholders Carl Icahn and Eastbourne Capital Management, which together own a 22 percent stake in Amylin.

Just two weeks ago, Amylin Pharmaceuticals’ lead director James Wilson asserted that Icahn wanted to make draconian cutbacks, and that Icahn was calling for a quick sale of Amylin to Eli Lilly, its drug-marketing partner. In his April 20 letter to Icahn, Wilson said Icahn was calling for an immediate 30 percent cut—beyond the 16 percent savings Amylin realized after laying off 340 employees at the end of 2008. Wilson made it sound like cuts of that kind would go too deep. “We believe additional cost cuts of 30 percent from our current budget would undermine our efforts to develop, prepare for and launch exenatide once weekly, which represents a major transformational opportunity for the treatment of Type 2 diabetes,” Wilson wrote.

The current round of cuts result from Amylin merging its primary care and specialty sales forces into a single organization, a move that will reduce its sales force by about one-third, or 35 percent. The company now has about 1,800 employees worldwide, said Amylin spokeswoman Anne Erickson. Amylin said the resulting field sales organization will include 325 sales reps focused on endocrinologists and primary care physicians. The company estimates that restructuring its sales force will save roughly $45 million next year, and each year thereafter. Check our update of San Diego’s tech layoffs here. 

In a statement, Amylin CEO Dan Bradbury said, “Today’s actions are in line with our stated goal of achieving positive operating cash flow by the end of 2010, while continuing to position the company to increase sales of Byetta and Symlin and bring exenatide once-weekly to market as quickly as possible.”

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