Just What Is Carl Thinking?

Just What Is Carl Thinking?

Billionaire Carl Icahn has become a believer in the diabetes market. Yesterday it was announced Icahn Capital made a new investment in Emisphere Technologies (NASDAQ:EMIS) who recently signed a deal with diabetes behemoth Novo Nordisk (NYSE:NVO) to develop an oral version of Novo’s GLP-1.

Back on July 10th Diabetic Investor wrote about the Novo – Emisphere deal stating;
 “Falling into this trap is Novo Nordisk who recently signed a deal with Emisphere Technologies (NASDAQ:EMIS) to develop an oral formulation of their GLP-1. A deal which could net Emisphere nearly $90 million. From our perspective here at Diabetic Investor, Novo is throwing good money into a bad deal. Granted the company can easily afford to make a mistake, just as they did with their attempt at inhaled insulin, the question is why make the deal at all.

 Given Emisphere’s checkered history the deal is even more suspect. For those with short memories, this is the same company who once claimed they could deliver insulin orally. Only to later discover that oral delivery of insulin isn’t that easy and what they had didn’t work. Under new management the company is now jumping on the GLP-1 bandwagon.

 Yet the Novo Emisphere deal is just the beginning as others will surly follow. Just as millions, more realistically billions, was wasted on non-invasive glucose monitoring and inhaled insulin, more money will be wasted trying to develop an oral GLP-1. Companies will claim this money isn’t being wasted just as they did with non-invasive and inhaled. They will claim that success will lead to untold riches. As day follows night the Street will buy into this conventional wisdom, just as they did with non-invasive and inhaled. Ignoring the realities that while an oral GLP-1 would be a nice thing to have, not being delivered orally will not stop the GLP-1 juggernaut.”

Carl’s investment is even more interesting when you look at his other diabetes investment in Amylin (NASDAQ:AMLN). This investment is understandable as Amylin is the leader in GLP-1 technology. Apparently Carl believes as strongly as Diabetic Investor that GLP-1 therapy has the potential to change the treatment of type 2 diabetes. Obviously he’s done his homework and sees the mega-blockbuster potential of the long-acting once-a-week version of Byetta. Being the smart man that he is, you don’t become a billionaire by chance; Carl isn’t worried about LAR’s delivery system or Liraglutide Novo’s once-daily GLP-1 that’s awaiting FDA approval.
Perhaps this is the reason he’s been increasing his stake in Amylin from 6.3 million shares to 6.8 million shares. Whereas he invested just $232,000 in Emisphere, less than a 1% stake in the company.
While Diabetic Investor certainly understands Carl’s investment in Amylin, we’re just a little confused by the Emisphere investment. Even if Emisphere and Novo are successful in developing an oral GLP-1, by no means a certainty, this effort will take years to see results. Given his history, it’s doubtful Carl will have the patience to see if oral delivery of GLP-1 is even possible. More than likely, he’s in it for the short term as shares of Emisphere will jump by having him as an investor. Carl has already made a tidy little profit as his stake in Emisphere is now worth just under $325,000.
In the end Carl will reap greater rewards with Amylin, who as everyone knows is the most valuable property in diabetes. Like Diabetic Investor, Carl sees the path for Amylin and has the clout to hit Lilly (NYSE:LLY), Amylin’s partner, with a baseball bat pushing Lilly to acquire Amylin. His profits from his Amylin stake will surly make up for any loses he might experience from the strange investment in Emisphere. Even billionaires can make a mistake.  

David Kliff
Diabetic Investor
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