Eli Lilly

Admittedly Research Reloaded has become a bit of a war room in regards to the special situation surrounding Amylin (AMLN)  shares these days. I personally find it to be an extremely interesting special situation and now have exposure to the shares. A lot of analysis of Carl Icahn and Eastbourne Capital's proxy fight with Amylin management has been done, and remains to be done, especially as to how these activist shareholders might be able deal with Amylin's poison puts. Though Dealbook has done a good job of explaining the situation.

If Mr. Icahn and Eastbourne are successful they could trigger poison put provisions in Amylin’s 2007 indenture for the company’s $575 million convertible notes due 2014 and Amylin’s 2007 credit agreement for its $125 million term loan.

But beyond speculation on the outcome of Mr. Icahn and Eastbourne's proxy fight with Amylin management, it is also useful to try and understand what kind of value Amylin has as a company to start with and where this value comes from, before considering whether activist shareholders have their way or not.

Along these lines, simple place to look for value is from the drugs Amylin already sells, on their own, without all the overhead Amylin has just to conduct R&D, grow future revenue streams etc. Basically, it is constructive to look at the potential value Amylin's established drugs might have if someone else justed wanted to buy the rights for these drugs alone, without the rest of Amylin's other costs or potential.

In response to the recent AMLN piece I wrote, I had a quality comment over at Seeking Alpha, and I thought my response and the original comment were worth a post.

mr. fernando - you have already hypothesized that icahn would broker a sale to lilly that would both make him a profit and give lilly a cheaper price than amylin after fda approval of lar. you then seem to be recommending this course of action. why would you not instead recommend that the best course for investors and amylin management is to wait until after approval to allow major changes in the management and/or ownership of the company? 

I am not recommending that AMLN accept a lower price than they should. I am simply explaining what the current situation might be between the three different entities, AMLN, LLY, and Mr. Icahn. 

I am then trying to understand if there is an opportunity for new investors to make money in AMLN shares. I am not recommending a course of action for AMLN as a company, I am recommending a course of action for potential new investors in its shares. There is a difference. 

If Mr. Icahn were to broker a sale at say $25, and new investors buy at $11, then while AMLN might not be getting the best price it can, new investors will do very well and their risk will be off the table. And if AMLN does indeed end up getting a higher price, one that it perhaps deserves, then new investors will do even better.