AMLN - Icahn's Proxy Damning for AMLN Management

More on the battle between shareholder activists and biotech company Amylin's (AMLN) management.

Carl Icahn's latest broadside is a set of powerpoint slides, which can be found as a proxy statement with the SEC, which are pretty damning for Amylin management. Amylin management's own presentation is also on the SEC site and is a bit less compelling than that of Mr. Icahn. Hat tip to BNET Pharma for the links.

Carl Icahn's main points are that Amylin's principal product Byetta has not achieved its full potential and has a bloated cost structure partly due to a failed strategy using in-house sales representatives to target primary care. He also argues for a renogiation of the Byetta relationship with Eli Lilly (LLY) and says plainly that its ridiculous Amylin isn't profitable given the drug it owns.

That's a pretty interesting point. Amylin has even essentially admitted its sales force was bloated, since it recently announced a 35% reduction in sales representatives, more than the company had previously guided. He then outlines how many of Amylin's boardmembers are ex-Lilly veterans, and how the chairman of the board sold $23m of AMLN shares in the past at an average price of $41. He clearly played AMLN stock like a fiddle to the tune of about $16.3m given its now at under $12.

Mr. Icahn then goes on to highlight the value he created with ImClone and how there are many similarities between the situation of ImClone and that of Amylin. Thus he's going to do it again.

On the Amylin management side, I would say the only decent argument thay have is that their slate of board members has more direct experience with Amlyin. But duh, they've been there at Amylin already. So that's not much of a surprise. And also, while experience on paper is great, if you look at the results of the application of their "experience", ie. Amylin's financial performance and share price, well then their argument here falls apart.

To me one of the simplest reasons to trust in Mr. Icahn and Eastbourne Capital (the other major activist in Amylin) is that they have substantial interest in the outcome of Amylin's share price going forward. Management has some exposure, but they also have cushy jobs they can ride on as well.

One point where both sides agree? Byetta has substantial future potential once the once a week version Byetta LAR is released. Mr. Icahn's chart below. The thing I like about this special situation is that new investors today in the end are, in my view, likely to be rewarded no matter who wins as long as Byetta doesn't hit regulatory or safety related landmines. (Though this is somethign we have become somewhat comfortable with, viewing AMLN shares as akin to options on Byetta and thus accepting the downside risk that comes with it given the 2x,3x, or even higher upside potential for the shares.)

Voluntary disclosure: The author has exposure to AMLN shares. Please review the site's disclaimer section.