It’s getting nasty out there
It’s seems appropriate that this year’s AACE meeting is being held in hot Houston, Texas. The hot weather outside the convention is indicative of what’s happening inside the center where the talk isn’t about an exciting new drug or device but how nasty things have become in the diabetes arena.
This heat wave extends thousands of miles away to beautiful San Diego, California home of Amylin Pharmaceuticals (NASDAQ:AMLN). As everyone knows Amylin is involved in a nasty proxy fight with Carl Icahn and Eastbourne Capital two of the company’s largest shareholders. Simply put Icahn and Eastbourne want to replace Amylin’s current board of directors, take control of the company and sell it off to the highest bidder. Not surprisingly the current Amylin management team and board believe they are more qualified to run the company and maximize shareholder value.
In what started as a battle of letters between the parties has now escalated into a battle of PowerPoint presentations. With the annual meeting for Amylin set for Wednesday May 27th, both sides are ramping up the rhetoric as the meeting approaches. Icahn and Eastbourne have embarked on the tried and true strategy of blaming the current Amylin team for the stock’s recent poor performance. Amylin counter punches by stating that Icahn and Eastbourne are misrepresenting the facts. As with most power struggles, which is really what the proxy fight is all about, things have gone beyond differences of business strategy. Lost in this battle is the underlying fact that whoever wins this battle will be faced with the task of picking up the shattered pieces and getting ready to launch Byetta LAR.
At the moment Diabetic Investor believes we’d have a better chance of picking the winner of this weekend’s Preakness Stakes than who will win the Amylin proxy fight. Going into the annual meeting Diabetic Investor sees Icahn/Eastbourne as the morning line favorite. Amylin is mounting a vigorous all- out campaign to maintain control which includes daily calls to shareholders of have yet to cast their votes. No matter what happens and who’s in control one thing is certain Amylin will be sold, the question really is to whom and for how much.
The Amylin situation is not the only example of just how nasty things have become in the diabetes arena. Walking the show floor here in Houston Diabetic Investor heard countless charges and counter-charges about who’s doing what to whom. The fact is market conditions have deteriorated and companies will use almost any tactic to keep market share. A perfect example of this strategy is the PQQ enzyme issue with blood glucose monitors. As Diabetic Investor wrote over the weekend the FDA is currently working with Home Diagnostics (NASDAQ:HDIX), Roche and Abbott (NYSE:ABT) to find a solution. The real question is why this is an issue at all as it effects less than 1% of the diabetes population. The answer is market leader LifeScan, a unit of Johnson and Johnson (NYSE:JNJ), has used this clout with the FDA to make it an issue.
As Diabetic Investor noted in our piece over the weekend that LifeScan meters are not impacted by the issue and that Bayer as well has changed their meters so that they too are not impacted. Sensing an opportunity LifeScan has mounted a quiet campaign that has caught the attention of the FDA. LifeScan knows full well that this really isn’t a major issue and that if they act properly the FDA could handle this issue without adversely hurting HDI, Roche and Abbott. However, they are also aware that FDA is currently afraid of their own shadow and could possibly ask their competitors to stop using the enzyme which as we indicated previously would cost all the companies time and money. Let’s face facts here when all the major players in BGM are reporting double digit sales declines it’s not all that surprising that LifeScan would as any advantage, no matter how small it may be, to gain an edge on their competition.
What worries Diabetic Investor is how the FDA will handle this situation. Will they issue a Black Box type warning for any test strip that uses this enzyme? Will they ask HDI, Roche and Abbott to recall their strips that use this enzyme? Or will they take a softer approach? Should they take a hard line approach requiring a Black Box or worse a recall, Diabetic Investor believes that once again it is the patient who will suffer. As sure as night follows day the mainstream media would pick up this story without investigating all the facts. Just as patients stopped taking their medications after the Avandia controversy Diabetic Investor can envision patients who don’t test as frequently as they should using this as just another excuse not to test their glucose levels.
While Diabetic Investor believes something should be done here as this can be a serious, even life threatening problem. We also believe that any decision made by the FDA should consider the context of the problem. Unfortunately looking at what the agency has done in the past they don’t seem to consider what impact their actions have on the patients who use these products. The blood glucose monitoring market already has enough problems and quite frankly needs this issue likes a fire needs gasoline. Let’s hope for all concerned here cooler heads prevail.