More drama than an afternoon soap
You knew it was only a matter of time before Carl Icahn issued a response to the letter he received from James Wilson, Amylin’s (NASDAQ) Lead Independent Director. As Diabetic Investor reported earlier today Mr. Wilson wrote Mr. Icahn a letter which is posted below in its entirety;
“Mr. Carl C. Icahn
c/o Icahn Associates Corp.
767 Fifth Avenue, Suite 4700
New York, NY 10153
April 20, 2009
An active and open dialogue with our shareholders is and has always been a priority for Amylin’s Board of Directors and management. I appreciate the time you took to share your thoughts in phone conversations with Joe Cook and me over the past few days. In preparation for another discussion with you, we think it is important that we set the record straight regarding a number of comments you made.
· You suggest that Amylin be promptly sold to Eli Lilly and Company
You informed us that you intend to leverage your relationship with our partner Lilly to promptly attempt to sell Amylin to Lilly. Amylin’s Board and management believe that a sale of the Company today would dramatically undervalue the opportunity shareholders will have through the approval and launch of exenatide once weekly.
Further, we believe that your desire to sell Amylin is inconsistent with what you have said previously and we continue to believe that this is not the time to consider such an action.
· You stated that you would implement drastic cost cuts of an additional 30% beyond the 16% Amylin achieved in the first quarter of 2009
You stated that you would immediately cut costs by an additional 30%, and specifically mentioned areas such as insurance and logistics to accomplish these reductions. We believe additional cost cuts of 30% from our current budget would undermine our efforts to develop, prepare for and launch exenatide once weekly, which represents a major transformational opportunity for the treatment of Type 2 diabetes.
Amylin’s management and Board are committed to carefully managing costs and will continue to review opportunities to reduce expenses. As an example of this commitment, in 2008 we conducted an in-depth review of our operating expenses in a thoughtful and strategic manner. This led to a November 2008 restructuring, resulting in the reduction of 25% (340 employees) of our San Diego based workforce. These cuts were focused on administration, operations, and research and development. In the first quarter of 2009, our operating expenses declined by 16% compared to the same period in 2008, and our non-GAAP operating loss, the stated measurement of operating cash flow, declined to $19.9 million, a 55% improvement over last year. In short, our plan already has delivered substantial progress toward our stated goal of achieving positive operating cash flow by the end of 2010. Last week, we announced the implementation of ExenatideOne, an important organizational efficiency initiative with Lilly which will create an integrated co-located medical, development and commercial team for the exenatide franchise. We believe this program will result in further efficiencies and cost savings.
· You asked, “Who is Dan Bradbury?”
Finally, on our call you asked, “Who is Dan Bradbury?” Dan Bradbury is Amylin’s President and Chief Executive Officer. Dan has been our CEO since March 2007, serving as President since June 2006 and as Chief Operating Officer since June 2003. Prior to joining Amylin in 1994, Dan worked for 10 years at SmithKline Beecham Pharmaceuticals in sales and marketing positions. Dan has met with your colleague Alex Denner on a number of occasions.
Hopefully this letter provides you with additional clarity about the Company and demonstrates that the issues you have raised have been carefully considered by our Board and management. We believe that a meeting with Dan Bradbury and myself would go a long way in helping you to better understand Amylin’s business and our strategy.
We look forward to speaking with you further later in the week.
James N. Wilson
Lead Independent Director”
According to a press release issued by Mr. Icahn; "A letter received today from James N. Wilson, lead director of Amylin (Nasdaq: AMLN – News), completely misstated and mischaracterized conversations that took place between him and both Joseph Cook, Chairman of Amylin and Mr. Wilson over the weekend. A letter to these gentlemen discussing the details of these conversations will be issued shortly."
Although this letter has yet to be made public, expect Mr. Icahn to come back with all guns blazing, as the proxy fight between Amylin, Icahn and Eastbourne Capital has fallen to a new low. With Amylin at a critical juncture with LAR about to be submitted to the FDA, the company is dealing with almost as many issues as President Obama.
Not taking the proxy fight lying down Amylin has gone on the offensive. This afternoon the company sent out an email to the media which contained several analyst reports that support Amylin’s position. While Diabetic Investor can understand how Amylin feels, this unfortunately is the scenario Diabetic Investor anticipated. At a time when their attention should be squarely focused on preparing the LAR submission the company is getting distracted by this nasty proxy fight.
As Diabetic Investor stated last week after Amylin reported their earnings, with the company facing so many critical issues this is a time for strong leadership. The fact of the matter is Icahn will do whatever he sees as necessary to take control of the Board and eventually sell the company. All this banter about what management did, when they did it and how much they spent doing it is just a smoke screen. His one and only goal is gain control of the Board and sell the company to the highest bidder. Something Diabetic Investor has no problem with. Why he keeps denying what his real intentions are remains a mystery to Diabetic Investor.
Diabetic Investor sees no reason for Amylin management to get into a mud-slinging match with either Icahn or Eastbourne. The fact of the matter is should they stumble with LAR it won’t matter who controls the company as there will be nothing much left to sell. LAR is their crown jewel and they should be fully concentrating on dealing with FDA, rather than going tit for tat with Icahn.
The bottom line here is the best way for the company to help themselves, their shareholders and millions of patients, is to get LAR through the FDA and onto the market. Once that is accomplished it really won’t matter much what anyone said or wrote.