Amylin and Icahn – Nothing New Here
In recent documents filed with the SEC Carl Icahn outlines his reasons why his slate of directors should be elected and the current Amylin (NASDAQ:AMLN) board replaced. Looking over the PowerPoint presentation Mr. Icahn basically covers the same ground everyone has heard before. Simply put Amylin has done a poor job with Byetta and their relationship with Lilly (NYSE:LLY). He reiterates that Amylin cost structure is bloated and that his slate of directors would maximize shareholder value just as they did with ImClone. About the only thing he and Amylin agree on is the Byetta LAR, which was just submitted to the FDA, has the potential to be a mega-blockbuster.
While Diabetic Investor understands the points made by Mr. Icahn regarding Amylin’s past performance, it seems pointless to look backwards when the real issue here should be which team can maximize LAR’s potential. Once again Icahn offers few specifics as to just how he would do this other than his standard cost-cutting and restructuring the Amylin Lilly partnership.
The truth is Mr. Icahn has no intention of maximizing LAR’s sales potential, his one and only interest here is to get his slate elected, take control of the company and sell it to the highest bidder. Diabetic Investor has no problem with what Icahn wants to do as major shareholder in Amylin he has every right to make his concerns heard and his nominees voted on. And no one can dispute that Mr. Icahn has enriched shareholders with his previous deals. However, Diabetic Investor believes it’s just a bit ironic that Icahn faults Amylin’s Chairman for selling shares in the company at levels higher than were the stock trades today, something Icahn will do when the company is eventually sold.
A few other points that need to be made here, while Diabetic Investors agrees that the Lilly relationship is flawed Icahn’s contention that targeting primary care physicians with their own sales force was wrong just can’t be supported. His notion that larger companies such as Bristol Myers Squibb (NYSE:BMY) partnered to sell their diabetes drugs does not really apply to Amylin. First and foremost it should be noted that nearly 80% of patients with diabetes are treated by primary care physicians and there is absolutely no way LAR will reach its potential without reaching this critical market. All one has to do is look at the success of Lantus from Sanofi-Aventis (NYSE:SNY), now the world’s number one selling insulin, whose success is largely due to Sanofi’s ability to reach the primary care physician.
Second, Bristol was selling an oral medication targeted at type 2 patients, while Byetta and Byetta LAR, are not only from a completely new class of drugs but are delivered by injection. Frankly it is foolish to believe that LAR will somehow sell itself even with its excellent profile. When it comes to market patients using LAR will need to mix the product prior to injection. (Amylin has already announced they are working on a pen delivery system which will make administration easier for the patient in the future.) While Diabetic Investor does not see this fact hurting LAR sales, however physicians and their staffs will require training on this aspect of LAR. Just by way of comparison when Lantus first came to market it was only available using a vial and syringe. Unlike LAR Lantus users were not required to mix Lantus prior to injection they simply filled their syringe and injected. Just as LAR will one day be delivered in a pen, Lantus is now available in pen making administration easier for the patient. Not surprisingly Lantus sales have been helped by this fact.
The question which investors really should be asking is not whether primary care physicians should be targeted rather how they should be reached. If he’s done his homework Mr. Icahn would see what happens when a company partners with the wrong company to sell a diabetes drug. Some may recall when Novo Nordisk (NYSE:NVO) partnered with Schering Plough (NYSE:SGP) when they launched their oral medication for type 2 patients, Prandin. With absolutely no experience in diabetes the Schering sales team was ill-equipped to handle the intricacies of the diabetes market. Prandin’s all important launch was a disaster and sales of the drug never recovered.
Although no one can question Mr. Icahn’s credentials when it comes to finance, proxy fights, shareholder rights and the like the diabetes market is a complex market. One would hope that should Mr. Icahn gain control of the company that he would sell it quickly to someone with experience in the diabetes market. Given his public statements it appears likely that before a sale is completed he would make further cuts to Amylin’s sales team while he renegotiates the Lilly partnership. Timing here will be critical as a well-trained sales team is needed when LAR gets approved. LAR’s launch will be critical and it would be a mistake to sell the company during the launch.
Playing a role here will be the FDA and how long they take to approve LAR. No one knows just how long this process will take especially given the agency’s recent decisions with other diabetes drugs. While Diabetic Investor does anticipate any delays with the process it’s impossible to predict when LAR will be approved.
Finally for the sake of the millions of patients who will benefit from LAR’s approval let’s hope that the Amylin situation is clarified in short order. Considering that nearly two-thirds of all patients with diabetes are not adequately controlling their diabetes and that LAR has proven to be very effective it would a shame if LAR’s potential was hindered by this three way war between Amylin, Icahn and Eastbourne. Diabetic Investor understands that as a publicly traded company shareholders have the right to question management and the decisions they make. Nor do we have any issue with shareholders making money this is the reason they invest in the first place. However, there is a great deal more at stake here than just money. It would be wise if all involved here remember that as well.