Amylin Pharmaceuticals (NASDAQ: AMLN) became one of San Diego’s Cinderella success stories in 2005, when the U.S. Food and Drug Administration approved two of its diabetes drugs—some 18 years after the biotech was founded. But the company has been buffeted by some unusual challenges in recent months.
Demand for exenatide, Amylin’s lead diabetes drug, has slumped since last summer, when the FDA reported that six patients using the drug marketed as Byetta had developed pancreatitis, an inflammation of the pancreas that in some cases can be fatal. The agency didn’t link those cases to exenatide, in fact, diabetic patients are at greater risk for such infections. But the warning put a big question mark over Amylin, which gets almost 90 percent of its product revenue from this drug. The price of Amylin shares have tumbled by two thirds since Aug. 18, when the FDA issued its warning .
Since then, a more significant question has arisen, which is whether the pancreatitis issue will affect Amylin’s request for FDA approval of a longer-lasting version of exenatide that requires injections only once-a-week, instead of twice daily. The company has been working on winning FDA approval with Eli Lilly(NYSE: LLY), which also markets Byetta in a partnership with Amylin. The progress of their application once seemed assured, but now the course is much more uncertain. After a setback with the FDA in November, when the price of Amylin shares fell to a seven year low, the company cut 340 employees, or 16 percent of its workforce. Amylin said the move was intended to save about $100 million and put the company in a stronger financial position for 2010.
In the meantime, the decline in Amylin’s stock price also stoked trouble on a different front with a couple of dissident shareholder groups, including one headed by Carl Icahn, the billionaire investor and corporate raider. Icahn began to significantly increase his stake after Amylin’s plunge last August, and now owns a 9.4 percent stake in the company.
In January, Icahn disclosed plans to nominate five directors to Amylin’s board. That was a sign to some analysts that Icahn wants to shake up Amylin and possibly even push for the company’s sale. Earlier this week, Icahn followed through by nominating his slate of candidates—Alex Denner, Thomas Deuel, Jules Haimovitz, Peter Liebert, and David Sidransky—to Amylin’s 12-member board, according to filings submitted to the Securities and Exchange Commission.
One problem Icahn faces now is that a second dissident investor group headed by Eastbourne Capital Management of San Rafael, CA, has nominated another slate of five candidates for Amylin’s board—M. Kathleen Behrens, Marina S. Bozilenko, Charles M. Fleischman, William A. Nuerge, and Jay Sherwood. Eastbourne holds more than 12 percent of Amylin’s stock.
As just about any savvy political handler will tell you, one way to help ensure that incumbent candidates win in a primary election is to confuse voters by fielding an excessive number of challengers. “I think it’s going to be hard for two dissident groups to get anybody elected,” said Hayden Trubitt, a San Diego lawyer who specializes in corporate governance.
Amylin said at the end of March it will nominate its current board of directors for re-election, with two exceptions. Current directors Howard E. “Ted” Greene Jr., an Amylin co-founder, and Ginger Graham, who was Amylin’s previous CEO, are not standing for re-election this year. To replace them, the biotechnology company nominated two out-of-town candidates, Paul N. Clark, a former chairman and CEO of Bothell, WA-based Icos , and Paulo F. Costa, the former chairman and CEO of Basel, Switzerland-based Novartis.
The spate of recent filings ensure that both sides have plenty of time to mail their proxy materials to Amylin stockholders, who have about seven weeks before the company’s shareholder meeting, which is expected to be held in late May. “The shareholders are seeing a lot of dialog here,” said Trubitt, “but seven weeks still leaves plenty of time for negotiations.”
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