Icahn Moves on Amylin; Will Lilly Step Up?

Last Updated Jan 30, 2009 3:29 PM EST

BNET's 10-Q Detective, David Phillips, reports that Carl Icahn has filed papers to nominate a slate of directors for the board of Amylin, maker of diabetes drug Byetta.

The last time Icahn interfered with a smaller company, ImClone, it ended up being bought by Eli Lilly. Here's Phillips' description of Icahn's motivation:

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.
The obvious premium-payer for Icahn's shares is, again, Eli Lilly. Lilly and Amylin already have a joint deal to market Byetta, Amylin's second-line diabetes drug. Lilly's sales force would not need to be educated on the drug.

Plus, the company isn't worth a great deal. It has a market cap of about $1.5 billion, because Amylin only loses money. Icahn may be hoping that Lilly or a rival could be tempted to move quickly, before the FDA adds any more drugs to an already crowded market. Forbes:

Both Byetta and LAR would likely face competition from Novo Nordisk's developing liraglutide, which would be taken once-daily. Competition within the field is growing, with Merck & Co.'s Januvia already on the market, and Bristol-Myers Squibb Co. and AstraZeneca developing a treatment called saxagliptin.*
Icahn's problem is that, with ImClone in hand and a potential approval of blockbuster prasugrel coming, Lilly needs Amylin much less than it used to. That makes Amylin and Byetta relatively less attractive, especially given the hurdles Byetta has yet to overcome in the marketplace. (One example: Byetta isn't on the New York Medicaid preferred drug list, which other reimbursers often take their cues from.)

*Disclosure: The author has a family member employed by an outside agency that works on this drug.