If not Lilly, who?
Now that Amylin (NASDAQ:AMLN) is about to be put up for sale our attention turns to who will acquire the company. The most logical choice would be Lilly (NYSE:LLY) as they are already partnered with Lilly. Lilly also needs Amylin as Byetta LAR could reinvigorate their struggling diabetes franchise and give them a much needed blockbuster product. Finally Lilly has dealt with Carl Icahn before with ImClone.
While Lilly may be the most logical candidate, they are not the ideal candidate. As Diabetic Investor has reported in the past the relationship between Lilly and Amylin has been rocky at best. Based on statements made by Lilly it seemed they were deliberately trying to undercut Amylin. Diabetic Investor always believed this was just an attempt to control Amylin’s share price so they could eventually acquire the company on the cheap. It’s also well known that Amylin officials were less than thrilled when Lilly hampered the initial launch of Byetta by not having an adequate amount of product to meet demand.
But there are other reasons why Lilly may not step up to the plate. The company just spent $6.5 billion to acquire ImClone this past October and does not appear to be in the mood to have another go around with Mr. Icahn. There are several key issues facing Amylin which make an acquisition at this time very risky. Lilly is known for many things but taking big risks isn’t one of them.
So if it’s not Lilly, who will it be?
Before we spin the roulette wheel and see where the ball falls a few quick items. Diabetic Investor does not believe Mr. Icahn will force a sale until he gets his people on the Amylin board. This move also buys him some time as by the time Amylin has their annual meeting we should at least know what type of label change Byetta receives. Additionally we should also know the state of their major competitor Novo Nordisk (NYSE:NVO) as we’ll know the results of the April 2nd panel meeting for liraglutide. (Although a date has not yet been set for Amylin’s meeting it traditionally falls in May.) Finally, we should also have a clearer picture if Amylin will hit their stated deadline for submitting LAR to the FDA.
If the stars align perfectly by the time the annual meeting roles around Amylin could be a much more valuable or should we say attractive company.
Looking over the possible range of candidates it would make the most sense if the acquiring company had some experience in the diabetes market. The diabetes market while not overly complex does have its own unique set of circumstances. Pfizer’s (NYSE:PFE) Exubera disaster is a perfect example of what happens when a company with no diabetes experience enters the market. Granted Exubera had its own set of problems, however many of these problems were made worse by Pfizer who didn’t understand the diabetes market.
Given that Amylin’s most promising drug is delivered via injection it would enormously helpful if the acquiring also had experience with injectable therapies. Frankly anyone can sell a therapy that’s taken orally it’s a whole different ball of wax selling an injectable therapy.
Finally the acquiring company must have experience selling to primary care physicians. As we noted previously nearly 80% of the patients with diabetes are treated by a PCP. Many endocrinologists are already familiar with Byetta and are anxiously awaiting LAR. As powerful as LAR will be it won’t sell itself in a market where it’s much easier to prescribe therapy options which require no education. Based on public comments made by Amylin there will be a fair amount of education required for patients moving to LAR. These education requirements will dissipate over time but in its initial form the patient will need to understand how to mix LAR prior to injection.
It should also go without stating the obvious in this environment that the acquiring company has the financial resources to get a deal done. Keep in mind that besides the cost of acquiring Amylin whoever gets the company must also work out a deal to acquire the rights to the Byetta franchise from Lilly. Given where Amylin shares stand today the first part isn’t that difficult, it’s the second part which could be problematic.
All that being said Diabetic Investor sees four possible candidates that meet these requirements; GlaxoSmithKline (NYSE:GSK), Merck (NYSE:MRK), Johnson and Johnson (NYSE:JNJ) and Novo Nordisk. Some may be surprised to Novo on our list but we actually see them as the perfect candidate for several reasons, not the least of which being they could deal a serious blow to their arch enemy Lilly. Although Roche also has a long acting GLP-1 under development at the moment their busy trying to acquire Genentech (NYSE:DNA).
The bottom line here is that Lilly remains the most logical candidate to acquire Amylin. But as we have seen in the diabetes space before just because something is logical by no means guarantees that it gets done.
