Icahn Bruising For Proxy Battle With Amylin Management

Last Updated Jan 30, 2009 10:27 AM EST


Activist investor Carl Icahn announced in a regulatory filing with the Securities and Exchange Commission his intention to nominate a slate of five directors to the board of Amylin Pharmaceuticals at the drugmaker's May 2009 annual meeting, and to solicit proxies in favor of that slate. The move raises questions about whether Icahn plans to push Amylin for a management shakeup or position the company for a sale.

What's Icahn's interest in Amylin? Ill-timed purchases of stock in 2008--in the mistaken belief that the shares were undervalued, according to a May 2008 regulatory filing. The billionaire investor's position of approximately 11.4 million shares, acquired at an estimated purchase of $26.23 a share, has lost almost 58 percent in value, as prescription sales of Amylin's lead product Byetta, the diabetes medication sold in partnership with Eli Lilly, slowed to a crawl in the second-half 2008 after the FDA announced several severe cases of acute pancreatitis among patients taking the drug.

Icahn's frustration with current management and Chief Executive Daniel Bradbury is understandable. Byetta is currently prescribed as adjunctive therapy, administered as a subcutaneous injection 30 to 60 minutes before the first and last meal of the day. The safety issues surrounding Byetta, however, have both delayed an FDA decision on the use of Byetta as single-agent therapy--previously expected by year-end 2008--and raised fears among industry watchers that Amlyn's decision to seek approvability for exenatide once-weekly long-acting release (LAR) based solely on data from its DURATION-1 will prove to be a costly error in judgement. Management gambled that the surest path to marketing approval was to demonstrate comparability in efficacy between twice-daily injections and exenatide LAR. However, this rush-to-file strategy will likely backfire on the company. In light of the pancreatitis controversy (and high-profile pharma drug withdrawals over the last several years), the FDA will face political pressure to require additional safety testing, forcing Amlyn to delay its plans for exenatide LAR's new drug application to the FDA until late 2009, as additional patient data from DURATION-2 and â€"3 study information will not be available prior to the second and third-quarter of 2009, respectively.

The impact of a delay in bringing exenatide LAR could prove disastrous to Amalyn, for competitive threats to Byetta loom around the bend, with Onglyza (saxagliptin), a joint venture between Bristol Myers and AstraZeneca in Phase III clinical development, and Novo Nordisk's Victoza (Iraglutide, the same class as exenatide, but with allegedly better efficacy) expected to be reviewed by a FDA Advisory Committee in March 2009.

It is foolish to think that Icahn can do much to expedite the development of diabetic and obesity compounds in Amlyn's portfolio. He might, however, be more 'persuasive' in convincing Bradbury and the board to sell the company to its diabetic partner, Eli Lilly. Afterall, in October 2008, he pushed Imclone into the arms of Lilly after taking control of the oncology company in a bruising 2006 proxy fight.
  • David Phillips

    David Phillips has more than 25 years' experience on Wall Street, first as a financial consultant and then as an equity analyst for several investment banking firms. He sifts through SEC filings for his blog The 10Q Detective, looking for financial statement soft spots, such as depreciation policies, warranty reserves and restructuring charges. He has been widely quoted in outlets such as BusinessWeek, The International Herald Tribune, Investor's Business Daily, Kiplinger's Personal Finance, and The Wall Street Journal.